Rentals Gone Wrong: Was It Less-Than-Stellar Location? Or Problematic Management?

by | BiggerPockets.com

Who wants to manage tenants in a bad neighborhood? You’d be surprised!

I have a few rentals in not-so-great places. To sum things up, it’s been “an experience.”

While I haven’t had a lot of trouble signing on managers for these properties, observing the ways in which they’ve handled problematic tenants has at times been a pretty big letdown.

That being said, there’s one thing I’d definitely like to pass on to investors who don’t plan to manage rental properties themselves: you need to set very clear expectations for whoever you hire to do it for you.

Here are some of the things I’ve dealt with so far.

1. The Tenants Who Had Their Car Broken Into

My, my, this was an interesting one. Two of my tenants completely deserted a property—with no warning. Their car was broken into, and apparently they didn’t feel safe.

The funny part? This particular property was in a very safe neighborhood. I lead with this because, no matter where you buy, you may run into security issues that beg a similar outcome.

Upon noticing they left, we simply cleaned up the property and rented it out again. It was definitely a headache but low on the annoyance scale compared to other tenant issues I’ve experienced or heard about.

But could this have been handled differently by the property manager, in a way that assured the tenants it was likely a one-off issue that could’ve happened anywhere? Most likely.

Related: How to Spot a Great (Not Just Good) Property Manager

thief breaking into a car using screwdriver to unlock door

2. The Drug Addict Who Trashed the Place

Honestly speaking, I think this situation was a product of the property manager’s creation. The tenant had prior evictions and recent felonies on her record, yet the property manager somehow approved her.

We ended up getting a ton of noise complaints from neighbors, in addition to other reported grievances. In general, she was a headache to deal with and all signs pointed to her using drugs.

So, what a shocker it was when, upon move out, we realized she had trashed the place!

But here’s where landlords need to tread lightly in order to avoid getting into legal trouble or wasting a lot of time and money—and so we did. Sure, we had the option to evict her many times for breaking the lease in several ways, but we chose not to act on it. It just wasn’t the best route financially speaking.

Even though we were aware of the condition of the property, when figuring out repair costs on top of eviction costs, we chose to let her ride out the remainder of the lease. To be sure, new carpets were needed (and more), and the property manager was dealt with—especially after multiple transgressions of a similar sort.

Related: 7 Advanced Tenant Screening Tips (So You’re Not Fooled by Wolves in Sheep’s Clothing)

Terrible mess after party. Trash, bottles, food, cups and clothes on floor.

3. Bugs in Brand New Spaces

Some tenants were living in a newly remodeled duplex I owned that was located in a particularly poor part of town. They discovered they had bed bugs.

The property manager ended up billing them $815 for the inspection and eradication. Obviously, the tenants weren’t happy.

On the upside, the bed bug infestation was contained to just one unit. Unfortunately, after following proper protocol and inspecting the other side of the duplex, we discovered those tenants had their own pest problem!

There was evidence of roaches in the kitchen. This prompted the property manager to charge the renter a $250 fee.

This can be an expensive business. Neither of the tenants had the money to immediately pay these fees. They’re currently on a payment plan.

And, as mentioned, this property was newly remodeled! Needless to say, discovering pests in a property like that is never fun. It’s disheartening to think it’s a problem that may persist in the future or be rediscovered upon move out, as well.

Conclusion

The thing is, bad neighborhoods may attract a certain quality of tenants. They may not have the credit score or cash to follow through with the tenant approval or lease fulfillment process.

You can try combating this by hiring high quality property managers and by partnering with sponsorship programs (Section 8, mental health hospitals, etc.). These programs may pay rent for people trying to get on their feet or something similar. Plus, they often offer decent tenants.

Investing in “C” or lower neighborhoods is overall more work, but it can also generate a higher payday. In these cases, I calculate my estimated cash flow and compare it with how much time and stress I’m willing to dedicate to the property.

If the numbers work out (achieve a desirable hourly rate), I go for it. It has worked out for me thus far, but it definitely hasn’t been worry-free.

Do you have any notable tenant stories? How do you handle problematic renters?

Leave a comment below!

About Author

Sarah P.

A longtime writer and consumer of all things related to the FIRE (financial independence retire early) movement, Sarah went from working 50+ hours a week to less than 20 thanks to her real estate investment portfolio and side passion projects. Investing since 2015, she reached financial independence in 2016 and was able to retire in 2017. Articles about her journey and information about her current projects have been published in LinkedIn, BiggerPockets, Kiplinger, and many other financial news sources. Prior to the FIRE movement, Sarah worked as a Program and Acquisitions Manager on various projects and started a successful, world-renowned non-profit organization. Today, she uses these skills as a real estate consultant to help others reach their FIRE-related goals on a regular basis.

10 Comments

    • Sarah P.

      Ali, the PM did this because it wasn’t discovered within a certain amount of time of move in. I believe it was reported about halfway into their lease, and it was outlined in their lease that they’re responsible for pests discovered after that introductory time period.

        • Katie Rogers

          You might have a case if you are keeping up with regular tenting and making sure the house is sealed inside and out, especially closets and cupboards. if not, then pests, even halfway through the lease might not be the tenant’s fault. We were longtime tenants (5 years) in certain place and in the third year we started seeing tiny cockroaches. We had no idea where they were coming from. Soon after we saw termite droppings. A pest inspection determined that the termites had provided the entrances for the cockroaches into the house. The landlord then tented the place.

  1. Dawn Vought

    @Ali Safavi @Jenny Moore – I can’t speak for the author, but we put the cost of pest control on our tenants (for our SFRs) in our lease agreement, as they would be the ones responsible for bringing them into the house, which doesn’t have bugs now. It’s a similar situation to charge them for having to unclog toilets. They are the ones causing the issue, so we have all of these things in our lease agreement.

  2. Kathryn Michaels

    My husband and I are weathering out a “incompetent PM + bad tenant” storm right now. It’s horrible! The PM never did a background check like they were supposed to, or if they did, they ignored the court records from her previous tenancy. We were able to find them pretty easily with a quick check on the state courts website. The tenant has been high maintenance since she moved in, demanding repairs but not letting contractors in to do the work… She called code enforcement, resulting in a new list of required repairs. She still won’t allow contractors in when she’s not there, even though the lease very clearly says that the landlord, PM or their agents may enter at any time (with notice when possible). She has started harassing and yelling at the upstairs neighbors in our duplex–a couple who only ever pays on time, in full, and has been NO PROBLEM at all since they moved in. Meanwhile, problem tenant downstairs has been late paying rent every month, prorated her own rent because she felt she wasn’t getting service on her complaints in a timely manner… Called code enforcement again to complain about nails in the driveway that the siding contractor must’ve left–after he replaced the siding on her unit because of her own initial call to code enforcement.

    On the PM side, they have been notoriously slow to respond to emails, calls, and maintenance requests (by the tenant and by us). They’ve not been forthcoming with updates or information, they’ve been slow to post notice when rent is late, and to top it off, they didn’t disclose that the company’s owner is engaged to their go-to maintenance contractor. Hmmm. Wonder why there were so many suggested repairs when we hired them on?

    We have filed a civil complaint for eviction for lease term violations and as soon as this tenant is gone, so is the PM. This tenant is a real gem, for sure. But SO many of the problems we’re dealing with could’ve been avoided or resolved quickly with better communication and customer service from the PM. Here’s to hoping we never have to repeat this mistake again!

  3. Denise Martinez

    Great post and feedback from everyone. I’m new to BiggerPockets and I enjoy engaging with a group of people with like experiences. My sister and I opted to self-manage our 18-unit apartment building because we wanted to be hands on owners. But we implemented the same systems property managers would use to handle everything from showings, screening, lease signing, rent payments, maintenance requests, evictions, collections, etc. Systems like Buildium, ShowMojo and National Eviction Services have saved us tons on management fees and allow us to manage the property from remote locations.

    While our property is located on the boundary between a good neighborhood and a not so great one we find managing in this way saves a lot of headaches. I think tenant screening is the most important first step and we check credit, criminal and evictions. If the system comes back with a NO, then we move on to the next one.

    Our goal, in addition to making money, was to give back to the community by providing housing for women in crisis but trying to do this ourselves was problematic. We incurred property damage, tenants skipping out on the lease, police activity, etc. We simply weren’t qualified case management professionals. We decided to partner with a non-profit that provided these services and are fortunate enough to be involved with the YWCA’s housing program for women. The Y is out tenant and they pay rent on behalf of the sub-tenant. They are also great case management professionals and their tenants are sooo much better than those we attempted to help on our own.

    Our lesson – Purchasing in a not so great neighborhood can be profitable on many levels as long as you manage it as if it’s Class A.

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