Imagine, if you will, the following scenario:

You decide to rent out your home. It’s a beautiful single-family house that is arguably the best in the entire neighborhood. To be sure, the home has seen its days. But for the most part, it’s a great place to live. Unfortunately, you’re having trouble finding someone to rent out the place. One day however, a guy shows up – after coming highly recommended – signs the lease, and officially moves in as your renter.

Things appear to be fine for a while. The guy gives the impression that he will turn out to be a great tenant. But over time (oh, about eight years or so) his true colors start to show. You discover that he’s a member of pretty tough gang and that he’s been abusing and misusing the rental property. Neighbors are complaining about the noise levels and all the excessive partying. The bills haven’t been paid in months. The yard hasn’t been maintained properly. The roof is caving in. The pipes have burst and haven’t been replaced. The siding on the house is in shambles. The garage door won’t work. The grass hasn’t been cut. The flowers in the garden are all but dead. The man and his gang of friends have effectively damaged the home, almost to the point of leaving it uninhabitable. Major repairs are needed if this house is to ever return to its once-envied elegance .

Fed up with this tenant, you are left with no choice but to evict him. You replace him with an new, energetic, and impressive young man. The new tenant appears to be straight-laced, honest (for the most part), and genuinely concerned with restoring the home back to its greatness. Though there are some pretty immediate damages he could have (and perhaps should have) focused on, the new tenant starts off by doing mostly structural (and undeniably very expensive) repairs first. Arguably, the new tenant is misguided in his decision-making to work on foundational issues first. But you know where his intentions lie. You know that he is using a large amount of capital to fix problems which could conceivably save money in the long run and do wonders for improving the overall condition of the property. The problem is: in the meantime, most of the immediate problems were not adequately addressed.

As the landlord, what are you to do? Do you ride it out with your newer tenant as he attempts to improve the conditions of the house? Or do you – in your impatience – give him the boot; only to invite another member of your previous tenants’ gang to move back in?

On an unrelated note, Republicans are favored to have big wins during this year’s midterm elections.

Totally unrelated story. Totally, totally unrelated.

– ACL

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