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Posted at 05:30 AM ET, 10/02/2012

For rent by owner | A landlord reflects on lessons learned

After writing nearly 10,000 words about being a D.C. landlord, this is my final column. But before I go, I will take the opportunity to tie up some loose ends and answer some questions left by commenters to my earlier columns.

In my column about landlord-tenant law, one reader took me to task for wanting to interview tenants since she argued that it is only a “financial transaction.” I disagree. A tenant’s qualifications do not distill down to simply whether they can afford the rent. A tenant lives in and cares for a valuable asset, and his or her behavior over that tenancy will affect the neighbors.  The scant amount of information on an application is hardly enough to decide on a long-term contract with a total stranger.  I think it would be foolish for me not to want to gauge that person’s suitability as a tenant through a conversation or meeting. 
Living room at Douglas Hsiao's Dupont condo (Photo by Douglas Hsiao)

And to the person who surmised that an interview was just a way for me to exercise my bigotry, I would point out that my rental history demonstrates that I’m an equal opportunity landlord. Over the years, I’ve rented the apartment to three African Americans, two Asian-Americans, seven lawyers and a couple of Republicans. A majority of the tenants were women.

In my column about condominium rules, one person commented that a lot of problems arise because landlords fail to tell their tenants about the rules.  I agree with this point entirely.  I found early in my landlord experience that misunderstandings occurred because I forgot to tell the tenants in advance about move-in fees, the carpet coverage rule, and the like.  This soured relationships with tenants from the start. That’s remedied now because I tell my tenants before the lease is signed (and sometimes even before the application) of the restrictions that will apply.  And the condominium itself now requires tenants to each get a copy of the rules, which lets the tenants know where recycling is left and when gatherings on the rooftop patio must be shut down.  Communication is the best policy. 

One commenter lamented that my fellow condominium owners perceive tenants as free riders and “problems.”  If I had more space in that column, I would have expanded more on the positive things that many of my tenants brought to the condominium.  Some tenants participated in the gardening and upkeep efforts of the condominium; many forged long-lasting friendships.  There were tenants who lived in the apartment much longer than I did, so many of them are remembered more fondly and were more valued members of the “community” than I ever was.

In my most recent column about deciding whether to sell my apartment, a few comments advised me to look into doing a “Starker” or 1031 exchange in order to defer capital gains taxes.   Already ahead of you:  I performed a 1031 exchange on another property, and based on that experience I wouldn’t recommend it to anyone, especially those who are not lawyers or accountants.  Identifying the exchange property, finding an intermediary to escrow the property, and getting all the timing and paperwork right requires knowledge and attention that most people are not capable of.   It’s hardly worth all the time and effort in order to defer a 15 percent capital gains tax.  And although there are third party 1031 exchange specialists offering ready-made solutions, their fees and expenses would eat up most of the tax savings anyway; and you could end up with an interest in a property in Enid, Okla.        
Kitchen at Douglas Hsiao's Dupont condo (Photo by Douglas Hsiao)

A comment to my very first column struck a chord with me which I would like to return to. After questioning my sanity about wanting to be a landlord, the commenter exasperatingly asked, “Is it cultural?!” This person perhaps unwittingly hit on something about me as a landlord. 

It certainly is rooted in family.  I have no doubt that the reason that I buy and hold real estate is largely because it’s what my parents did.  Although they are both academics who earned academics’ salaries, my parents held onto real estate like lions with a kill. Our first house that I have any memory of was in Chevy Chase (when Chevy Chase was still a middle class, government worker bedroom community).  When my parents went off to graduate school in the Boston area, towing my older brother and me with them, we rented and squeezed into a tiny saltbox near Harvard Square. My parents held onto and rented out their house in Chevy Chase. It never struck me as unusual that as we continued to move from rental to rental, my parents bought a two-family house to lease out in nearby Belmont. Did it seem odd that my parents owned two houses, but we didn’t live in either one?  Not really.  

For my parents, culture and upbringing played a large part.  They were born in China and lived through deprivation during World War II and the post-war period.  And then as immigrants to the U.S., they started with nothing.  And yet my teenaged father and his five siblings, after their father died suddenly and their mother was institutionalized in a tuberculosis sanitarium, somehow used paper routes and after school jobs to scrape enough money to buy a house to live in New York City.  Whereas earlier generations of Chinese tended to invest in things that were portable, such as gold coins, real estate was the treasured stake for Chinese immigrants that they planted in America.  Not surprisingly, my parents passed this on to me, and I, in turn, hope to pass on to my children.   

Finally, the numbers that tell a tale: 20, the number of people who have lived in my apartment; 6, the number of leases I’ve signed; 3, the average number of years of those tenancies; 18 and counting, my years as a D.C. landlord.    

Read more For Rent by Owner

A Colorado-based lawyer, Douglas Hsiao has rented out his Dupont Circle condo for 18 years. In his occasional column, he details his experiences as a long-distance landlord.

 

By Douglas Hsiao  |  05:30 AM ET, 10/02/2012

Tags:  landlord

 
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