Published February 2003

Often, landlords just ‘regular folk’

Generally speaking, landlords are viewed as bad guys. Residential or commercial, it’s the same black-hat type lurking around collecting rents, in the view of many.

It makes some sense, though. In our life times, more of us will be at the tenant end of a landlord/tenant relationship than the other. So we’re more likely to view landlords from the outside as an adversary to our own financial goals. Maybe deep down inside we envy landlords. After all, who wouldn’t rather be collecting rent than paying it?

It’s too bad, though. Because — and this may come as a surprise to many — most landlords are regular folk. Far from the dark image so many imagine.

Most, in fact, are not individuals with large wads of cash. They are, for the most part, partnerships or groups who have pooled cash to invest in an income property. Most of the individuals or married couples in these partnerships or, the more popular form today, limited liability companies (LLCs) have day jobs probably in similar income brackets to their tenants.

Pooling cash like this is largely done to allow investors to buy properties large enough to afford some economies of scale and make them operate passively from the investors’ standpoint.

A “managing partner” (or, for LLCs, “managing member”) is required as the primary party responsible for the group, and he or she is the one who oversees the asset, hires professional management, arranges financing and controls the checkbook from which cash flow is distributed to the partners/members.

The managing partner or managing member is usually the party with whom tenants come in contact. But more often than not, there’s a batch of pooled cash representing any number of investors behind him or her who, by design, are not visible to the tenant.

Another very popular form of ownership is to own shares in a Real Estate Investment Trust (REIT). These are often publicly traded stock shares that behave like any other traded stock, but which own income properties. By definition they are more liquid than partnership or LLC shares and that is often one attractive feature that draws investors to this vehicle.

Another attractive feature is that, like other stocks, an investor can buy in small increments. Got $500 you’d like to invest in real estate? You can buy REIT shares with a single call to your stockbroker. It’s that easy.

Owners of REIT shares, partnerships or LLCs are not “fat cat” real estate moguls or the “dirty developer” so often maligned by the uninformed in newspaper editorials and at public hearings. In fact, just like “corporate America,” most income property ownership is held by regular working people.

But, like corporate America, people seem to need to demonize somebody to battle against for their own self-interests. People generally like to put a face on whatever it is they’re up against, and the landlord is an easy chin to swing at for many. The trouble is, like corporate America, taking a swing at the landlord is, in reality, like taking a swing at the guy next to you in the espresso line.

Tom Hoban is CEO of Everett-based Coast Real Estate Services, a property management and real estate advisory company specializing in multi-family and commercial investment properties. He can be contacted by phone at 425-339-3638 or send e-mail to tomhoban@coastmgt.com.

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