What is Conscious Capitalism?
Investopedia states that “the term “conscious capitalism” refers to a socially responsible economic and political philosophy. The premise behind conscious capitalism is that businesses should operate ethically while they pursue profits. This means they should consider serving all stakeholders involved, including their employees, humanity, and the environment—not just their management teams and shareholders.”
Whole Foods co-founder John Mackey and marketing professor Raj Sisodia are considered leaders of the conscious capitalism movement. In their co-authored book Conscious Capitalism: Liberating the Heroic Spirit of Business, they illustrate and argue that companies should be more ethical, humane, and conscious of all stakeholders and that, by doing so, they’ll build a stronger business and a better world.
Why RealWealth Embraces Conscious Capitalism
At RealWealth, our purpose-driven culture fully embraces the conscious capitalism philosophy. We promise to strive to operate ethically and conscientiously no matter what we do. We consider all stakeholders in every decision, from our employees and members to our property teams and partners and beyond.
Real Estate Investing and Conscious Capitalism In Action
Being a landlord is a business, and when you are in business, the first rule of thumb is to make money. One way we create positive cash flow is by raising rents. But what do you do when tenants have financial struggles?
There’s no one-size-fits-all solution, but weighing the options with the “conscious capitalism” philosophy helps you make the right decision—a resolution that’s right for the landlord and fair for the tenant(s).
As an example, here are our beliefs about raising rents when tenants are struggling.
Comments/Advice from our RealWealth Leaders
“Conscious capitalism is always a timely topic, and I often hear about investors “pushing rents.” I understand that landlords need to raise the rent to cover costs and earn a living, but they must also be sensitive to tenant needs. Double-digit rent increases do not show sensitivity, and unreasonably high rents may also trigger political consequences, such as rent control. Highly restrictive rent control can be bad for everyone if the landlord can’t afford to pay for maintenance and repairs. But, I do believe in maximum allowable rent increase controls to keep bad landlords in line — like the ones that take advantage of natural disasters by jacking up the rent on tenants desperate to stay in the area or replace a home they’ve lost. A balanced landlord/tenant relationship is a better goal.” Kathy Fettke, RealWealth Co-Founder
“As a landlord, it’s best to impose smaller, incremental rent increases every year rather than wait a few years and ask for a big increase. The increased amount is very specific to the rental market, so if that market is not where you live, it’s best to confer with the property management company. One way to ease the pain of a rent increase is to update or fix something for the tenant with the increase.” Rich Fettke, RealWealth Co-Founder
“Some tenants wrongly assume that all landlords are rich. In reality, investor margins can be extremely small, particularly at the beginning. Costly repairs or a problematic tenant can leave a landlord recouping losses for several years. Landlords offer a service to tenants who agree to pay a fixed rent price instead of the variable expenses associated with homeownership. Over time, these expenses go up for landlords, so rent prices must also go up, but there is a difference between predatory rent increases and necessary market rate increases. Appropriate rent increases allow for continued quality service for tenants.” Leah Collich, RealWealth Director/Investment Counselor/Investor
“My rent increases start with the property managers. I ask them what the current maximum rate is for market rents, and then I try to find a happy medium to retain the tenant. It’s a win/win for both sides. It’s important to remember that the best tenants have options. If you try to squeeze every last dollar of rent from them, the good tenants will leave, and you’ll be stuck with the tenants that don’t have options.” Joe Torre, RealWealth Investment Counselor/Investor