Anyone who has been in property management long enough will have a few tenant horror stories. Indeed, my dad recommends anyone getting into the business watch Pacific Heights just to scare you straight and remove any illusions you might have.
We’ve all heard of professional tenants that find a way to clog you up in the legal system and live for free for months on end. One property manager told me they spent $10,000 trying to get one guy out!
My father got sued for almost $10,000 because his maintenance tech threw out a bunch of stuff he thought was trash. Let me rephrase—it was all trash, but in Oregon, you have to store any belongings a tenant leaves behind for 30 days. And it’s hard to prove it’s all trash. The tenant also wrecked the unit, which was probably why the settlement was pretty reasonable in the end. But those damages just makes for more money wasted.
So let us begin down this frightening path of tenant horror stories and what to do about them. First, there are, broadly speaking, four types of horrible tenants, many of which overlap:
- The Destroyers
- The Non-Payers
- The Pests
- The Professional Tenant
We’ll take each one individually.
1. The Destroyers
“I have become tenant, destroyer of houses.”
I will tell you, the amount of damage one bad tenant can do to a house is truly spectacular. Furthermore, it will take a long, long time to make up for those losses with rental income. We have one turnover we’re working on now that will cost almost $10,000. And it’s on a 650 square foot house!
This tenant treated our precious home like the Russians treated Moscow when Napoleon was on their heels. His scorched-Earth policy left little recognizable in the wake of his unprecedented destruction. Here’s a set of before and after pictures you won’t see on any late-night infomercials.
It may be a bit hard to tell, but yes, the entire lower half of that door is missing.
What’s important to know about this story is that he had been accepted by our previous manager based on a lower set of criteria because he had a voucher. This is the first no-no. Just because someone’s rental payments are guaranteed doesn’t mean you want them to live in your house. This leads to the first recommendation on how to deal with these situation—namely, stop them before they start:
- Don’t rush on getting a tenant. It’s better to have an empty property than to rent to someone you don’t want. Make sure to screen, screen, and then screen some more. And be patient if need be.
- Don’t stand on principle. Don’t get caught up in long battle to try to get the money back in collections. Just keep the deposit and send the remaining bill to a bills collector. The tenants who leave properties in conditions like these rarely have the money to pay for the damages, so it’s not worth your time and energy to try and squeeze blood out of a turnip. One time a tenant stole our toilet on the way out. This petty injustice may feel like it demands reprisal, but trust me, it does not. Just move on.
- Evaluate each case independently. In this case, the house was almost immediately destroyed. So we just let the tenant stay there, as there wasn’t much more damage he could do. But if such a tenant lives in an apartment complex or you do believe there is more damage they can do, you should try to get the tenant out ASAP. For example, we had a tenant at an apartment that was such a slob, it brought cockroaches to his neighbors. In these cases, you want to try to get the tenant to leave. Consult an attorney because it’s much harder to get an eviction if a tenant isn’t behind on their rent. State laws differ, but it will certainly require a paper trail of notices and warnings. If you can get the person to leave voluntarily, perhaps with cash for keys, that is all the better.
Sometimes non-payers are deadbeats, but oftentimes they are just regular people who fell behind for whatever reason. The big thing with these tenants is to take emotion out of it. Create a system and stick to that and avoid falling prey to any sob stories. Repeat to yourself over and over, “I’m sorry, but it’s company policy.”
Our policy is that rent is due on the 1st and late on the 5th. Late fees are non-negotiable (other than extreme and proven circumstances). Seventy-two-hour notices go out on the 12th, and we begin the eviction on the 15th. Tenants are allowed one payment plan, but must meet it entirely or the eviction will proceed.
We explain this to tenants beforehand in a long lease signing and then follow through when it need be applied. So, as far as rules for these situations go:
- Create a system and follow it. Landlords need to have a backbone. Everyone has a sob story, and they will want to make their problems yours. Don’t let it happen. And don’t just wing it. Create a written system of procedures to follow.
- Screen, screen, screen. This is basically a requirement for each type of problematic tenant. We don’t accept evictions unless they are 20 plus years old, and even then, we’re not happy about it. Tenants also need to have three times the monthly rent in income and a good landlord and employer reference.
3. The Pests
These types of tenants may be either a pest to you or to their neighbors. Pests to you will call and complain about every little thing and want you to do all sorts of minor maintenance. This is one of the reasons we have an hour-long lease signing. We want to hammer in every detail about what we will and won’t do as well as what we expect from them.
Such tenants may want a new storm door or for you to replace the locks or whatever. Or they will want discounts for standard maintenance items. Or they will demand something be fixed immediately, perhaps even calling after hours because their sink is clogged up. As my brother says, “If a homeowner couldn’t get someone to fix it any quicker, then we can’t be expected to.” I would recommend other managers think that way.
Sometimes, these tenant complaints will be legitimate, but when it goes too far and they’re basically just complaining for the sake of complaining or trying to get something for free, you need to stand your ground. If you capitulate, you will only incentivize such behavior.
Other times, these tenants will cause problems with neighbors. We once took over a property where one of our inherited tenants had let two prostitutes stay with him. Apparently they got into a fight around 2:00 a.m. and one was holding the other off the third story balcony while screaming at her at the top of her lungs.
Another guy basically panhandled the other tenants every day for spare change and rides. Another had a boyfriend who broke in through a window and cut himself and ended up bleeding all over the hallway. And we’ve had several drug dealers.
A friend of mine in the business made an astute observation. There are generally two types of these tenants: 1) the ones that cause problems and 2) the ones that blend to their environment. So if the building is good, they will be good; if it is bad, they will be bad.
You need to target the first group and get rid of them as quickly as legally possible. Here are the keys:
- Screen like it’s a broken record. Always be screening, folks. Indeed, behavior is something to look for, which is why we also don’t accept violent or recent felonies and want strong landlord references.
- Use psychology. For more tips on dealing with challenging tenants, see here.
- Follow the law. Talk to your attorney about the best procedure to follow in your state. Again, it will almost certainly require a paper trail of warnings and notices. Written complaints from other tenants may be required, so be prepared to ask for these. Or if it’s a month-to-month lease, just give them a 30 day no-cause notice (if your state allows that).
4. The Professional Tenant
This monster from deep that haunts us all is the main reason we must be particularly careful to follow landlord-tenant law to the letter. These folks know how to exploit the system and are more than willing to do it.
This is the Pacific Heights scenario. Other than screening, the key thing here is to not take things into your own hands:
- Follow your system and keep emotion out. These types of tenants are basically just thieves. But they are also extremely frustrating, much more so than just someone who steals your A/C unit, because the whole thing just drags on and on. You just have to see this as a cost of business and move on, though. Getting angry will likely lead to a mistake, so just follow your procedures, be patient, and don’t take it personally. Remember, professional tenants may get a free place to stay, but they don’t get rich, which is what we’re trying to do.
- Follow the law carefully. It’s best to use an attorney here and do everything by the book. These tenants will often take advantage of small mistakes to drag things out or get concessions. Indeed, I’ve heard of attorneys who just look over eviction fillings for minor mistakes so they can contact the tenant and sue the landlord. Be careful.
The most important piece of advice, other than screening, is simply to see bad tenants as a cost of doing business. Don’t let one bad tenant turn you off from real estate or even just ruin your day. It’s just a cost. Think of it like a furnace going out. Just fix it and move on.
What’s your least favorite type of tenant? Any other usual suspects you’d add to this list?
Leave your comments below!
Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.