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We have all heard the stories about roach-infested properties, overgrown landscaping, crime-ridden communities and beyond. Working in the real estate industry, you may have even met a few of these individuals who actually gloat and admire their abilities to manage a building while doing the least amount of work for the cheapest price.
These people are known as slumlords, and sadly, their methods are still alive and well. In fact, being a slumlord for some is actually a business model: running the property into the ground and utilizing as much depreciation as possible, not really caring what happens at the end of the property’s useful life. Although many investors have benefited from the aftermath of slumlords’ actions, in the end, more damage is done to the community and the people who have to live and work in the surrounding area.
Here are some telltale signs that you may be dealing with a slumlord.
1. Deferred Maintenance
The most tested and true sign you may be dealing with a slumlord is the property’s physical condition. Broken or boarded-up windows or doors, graffiti, trash, overgrown landscaping, broken or nonworking lights, and nonfunctional gates are several factors you want to be aware of. It’s one thing to have one or two of these items noted; it’s a whole other when the property as a whole appears drab and run-down. The lack of care is hard to ignore and is a good indicator that you may be dealing with a slumlord.
2. Untimely Or Incomplete Tenant Work Orders
Another sign to consider is how the work orders are handled with the tenants. Although laws differ throughout the country, common sense should tell you what a reasonable time frame for day-to-day work orders should be. Unless a major issue is at hand, such as heating or cooling, sewer, plumbing, roofing, or electrical, there is no justifiable reason items should not be addressed within reasonable time frames.
Orders for issues such as a running toilet, leaky sink, broken dishwasher or garbage disposal should all fall within a five-to-10-day range. Also, when the work is done, is should be fully completed with care and craftsmanship. Many slumlords are known for starting jobs and not finishing, or using the cheapest labor they can find. This typically leads to faulty work and can actually encourage the problem to get worse.
3. Unlicensed Workers
Some states are now requiring that property managers use licensed workers for all their property maintenance issues and that handymen can only work a limited number of hours if they are not licensed. Although a slumlord may not be required to follow these guidelines if they are not licensed, it’s always a good idea to determine who is doing the work around the property and if they are indeed licensed or not.
4. Cash Deals And No Leases
For slumlords, cash and limited or no leases at all are great strategies for “staying under the radar” from the IRS, as well as not being held to a binding contract. Ironically, the cash they collect does very little when a tenant without a lease decides not to pay or leaves the property in shambles after vacating. Nonetheless, the mindset of a slumlord doesn’t stop this type of behavior from happening.
5. No Respect For Tenants
Slumlords have the tendency to feel superior or show a lack of respect for their tenants. They might see addressing their tenants’ concerns is more of a privilege to the tenant than their obligation as the owner. The goal is to use and abuse tenants and do as little as possible, all the while collecting as much income as possible, while the property steadily declines. In the end, it is a receipt for disaster and has been a contributing factor to the erosion of communities.
What To Do
If you are considering buying an investment property from a slumlord, take heed. Although there could be “potential” in the numbers, some properties have established such a bad stigma through years of neglect that no amount of revitalization may be worth the return. Also, what you may be inheriting could be far worse than even the due diligence can discover. When the risk exceeds the rewards, don’t take the chance.
If you’re a current property owner and justify any of these items in your day-to-day management practice, you may want to reestablish your priorities and stop putting off the standard requirements involved in owing and running property. Once major issues start spiraling out of control, it becomes hard to catch up, but easier to let things slide.
If you’re neither an investor nor owner, but rather someone needing direction on how to combat a slumlord, your best bet is to call your local city or county and make a complaint, or call your local news station. The more pressure you put on these individuals, the less they are able to hide.