9. Why We Prefer Unheated Property

There is just one more feature which we will seek in our investment picture. That is, the arrangement under which the tenants supply their own heat. It may be unnecessary for me to expound on this, but experience has shown that this one curse in property management and the processing of com­plaints, by itself, outweighs all others combined, and by some 10 or 20 times over.

Owners have estimated that of all the complaints they re­ceive in the management of their properties, 95 per cent have to do with heat. My own experience bears this out, beyond question. I realize that there are areas, as in central New York City, where virtually all accommodations include heat sup­plied by the owner, but these are usually not the type we are seeking anyway, and they are not in our price range.

In choosing the properties in which we are going to invest, we seek those where a minimum of attention on our part will be required. We are directing our investor's eye toward a different class of property. We prefer not to own the type of property that generally includes heat or janitor service with the rent. The type (or class) of tenant who seeks the heated, janitor-serviced apartment is a different tenant from those we seek. He is much more transient, often moving to a new place each year. And he has an attitude about the owner (or the owner's representative—the janitor). This tenant expects the owner to stand by and be available 24 hours a day and 7 days a week to jump at his beck and call. If a window shade sticks, or he has dropped a washcloth into the sink, he "sends for the janitor" with the full assumption and expectation that the janitor will take care of it. He would be indignant if he were refused. The tenant we seek has no such attitude. I have spoken to some prospective tenants over the years who were consider­ing my flats. When I sensed from their conversations that they were accustomed to this type of attention and service I politely urged them to rent a heated apartment with janitor service. I confessed that my flats were for folks who would shift for them­selves. A favorite expression was "in my buildings, I give you just one thing—the key to the door, and you must do just about everything else for yourself. If there are any electric or plumb­ing repairs (except plugged drains), or roof leaks, I will attend to them. But beyond that you are on your own." I never had any trouble getting tenants. Conversely, I often had to reject an application because, even though the applicant was avowedly willing to assume the rules of my buildings, I felt that he would not be contented and permanent. It was the per­manent tenant that I wanted, and I always had plenty to choose from.

There are, of course, various types of heating equipment, and in some areas, flats of our type have no need for heating at all. But the third desired feature remains unchanged. We prefer to own buildings where the tenants furnish their own heat. There is another factor that is in our favor when we are free of this curse. The rising costs. Every so often there is a crisis of one kind or another and fuel prices soar. It is just not prac­tical to raise the rent each time the price of furnace oil rises one cent per gallon. When the tenant is paying for it, he alone is concerned. We can lease a flat to a tenant for many years, and fear no ingredient cost that will seriously cut our net (with the exception of taxes). As to taxes, we provide for this by a so-called escalator clause in long leases. It takes into account any increase in the tax bill of the building and adds a fair pro­portion of such increase to the rent automatically.

In addition to the increases in costs of fuel, let us mention the occasional strikes and other occurrences that completely shut off the supply of fuel. On these occasions the landlord is, in some states, in a very unenviable position. The law says he MUST keep the flats warm (in those buildings where he furnishes heat), ignoring the fact that he just cannot buy oil. Sometimes owners have made a hurried, if not panicky, conver­sion to coal and thus tried to keep from getting into trouble, but their position is far from easy.

Another factor inherent in the heated building is that of labor. Where coal is the fuel, there are myriad headaches at­tendant. The janitors go on strike, and the owner finds himself wielding the coal-shovel. Or there is a strike of truckdrivers, or railroad strike, maritime strike, or what have you. Any of these puts the building into an emergency.

A final misery is the matter of degree and period of heat. The norm in heating apartments is 70 to 72 degrees during the hours between 7 a.m. and 11 p.m. But there are workers who want to rise and dress before 7 and these invariably want the owner to get the apartment (which means the whole building) warm by 6 or even 5 a.m. Of course, some tenants like to stay awake and watch the late show or the late late show on TV nowadays and want the apartment warm into the wee hours too. As long as they are not paying for it, they can see no reason why they are not entitled to it.

This same headache is felt as to dates of heating. Some thin-blooded tenants want heat even in August, if there is a damp or cool day. Others protest loudly if the owner shuts the heat off on June 1.

Then there is the tenant who works in an office which is kept at 80 degrees all day. When the tenant gets home to an apartment that is 72, he or she is "freezing" and soon lets the owner know about it. It is very hard to reason with a person who is miserable with cold, even though the apartment tem­perature is right. Summing up on this point, you will find that the tenant who is paying for his heat is content with 70 when, if he were living in a heated apartment, he would be complain­ing at 75 degrees because "that living room radiator is cold." But if he were paying for it he would don a sweater on a cool September or October day rather than start up the heating system for the winter.

Thus, because of the headaches, expense, worries, night-calls, wars, strikes, labor troubles, we try to avoid property that requires us to furnish heat to the tenants. That is our third factor.

In the early years of my ownership an incident in which I almost made a fatal error may serve to exemplify an interesting point. I had just bought two three-family buildings that shared a party wall. Each tenant heated his own flat by coal furnace. So imbued with enthusiasm was I with my new purchase that I got "new owner's disease." That is, I overdid the attention to the thing. I sought out ways to "improve" or change. In this mood, I got an idea.

I called on each tenant with this proposition: I started with the statement that "you now pay $22 per month." Then I pointed out that in heating for himself the tenant shoveled coal, nursed a furnace, sifted ashes, lugged barrels out to the curb­stone for the trash wagon, and in addition, the tenant heated his own needed hot water for all purposes. I asked what the tenant spent for coal each year. "Oh, about 6 tons—$72." "Okay," said I, moving in with the clincher, "suppose I were to install a central heating system and keep your apartment warm. There would be no more work on your part, no ashes, no cold spells, perfect comfort throughout the house. And 111 charge you just what you are paying—$6 a month more on the rent. What's more, I’ll throw in constant supply of hot water too!" This tenant replied, "Raise my rent to $28? Oh, no, I couldn't afford that! Maybe $25, but that would be my limit."

I was a little groggy from this interview as I knocked on the door of another tenant in the same building. I went through the same explanation of the projected plan. I got substantially the same answer! I left the building in a haze. Of course I never made the installation and those tenants stayed in that flat at that rent for years, until the forties, when things began to rise generally.

One day I told the incident to a banker in that town. He and his father before him had acquired a thorough knowledge of the thinking of people. He grinned at me. "I hope you learned your lesson. These folks want a flat of the kind you have, and want to feel that they are paying $22 rent—and that's it—period. Don't monkey with it. You ought to have your head examined for even considering improving their lot." I did not soon forget his lesson. From then on I stuck to giving the people what the people want, not what I think they should have.

You can summarily dismiss any property that does not fulfill the two basic requirements of modest rent and decent location. As to heat, we try to buy those that are tenant-heated, if pos­sible.

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