Rental Property Investor · Grand Rapids, MI · Member since 2016 · 262 posts · 205 votes
Hi, all. I just closed yesterday on my second SFR with inherited tenants who have been there 5 years. As of today, they have not paid rent for the month ( was due on the first). We tried getting the previous management company to handle this before closing but they just said the tenants always pay but they are always late so we should expect them to pay within a few weeks. This is definitely NOT how I want to run my business! I am really surprised that a professional management company would let their tenants slide like this for months on end. I have not met the tenants yet but I am sending them an introductory letter about us taking over ownership, reiterating the rules about rent payment and where to send their check to. I am thinking I may need to include the "notice to quit for non-payment" form with the letter. How would you guys handle this situation? I appreciate any feedback you may have for me. Thank you!
Minneapolis, MN · Member since 2013 · 2k+ posts · 1k+ votes
9y
Sounds like your format is just what's needed. I'd also personally go over and knock on the door and ask for the payment with the intro letter, don't be shy. Did you view the home before closing do you know the condition of the interior, I'd also make a appointment to do a walk thru at this time with them to condition check sheet, so moving forward you know what damages would be their fault.
I'd also get new paperwork lease, with addendum's all prepared with you as landlord on this and have them sign a new lease once you are confident they have paid, I'd probably put them on month to month. You and choose the lease terms your comfortable with. Not sure what the paperwork you signed for at closing disclosed about the lease they currently have, I would look at the lease see if it has a clause for change of ownership and see how the terms may carry over or end.
This way if you end up in court all your paperwork has you listed as landlord and it's not confusing for anyone. Also their security deposit should have transferred to you as new owner in closing or been part of the closing fee disclosure, so you show it on account for them.
Minneapolis, MN · Member since 2013 · 2k+ posts · 1k+ votes
9y
Sounds like your format is just what's needed. I'd also personally go over and knock on the door and ask for the payment with the intro letter, don't be shy. Did you view the home before closing do you know the condition of the interior, I'd also make a appointment to do a walk thru at this time with them to condition check sheet, so moving forward you know what damages would be their fault.
I'd also get new paperwork lease, with addendum's all prepared with you as landlord on this and have them sign a new lease once you are confident they have paid, I'd probably put them on month to month. You and choose the lease terms your comfortable with. Not sure what the paperwork you signed for at closing disclosed about the lease they currently have, I would look at the lease see if it has a clause for change of ownership and see how the terms may carry over or end.
This way if you end up in court all your paperwork has you listed as landlord and it's not confusing for anyone. Also their security deposit should have transferred to you as new owner in closing or been part of the closing fee disclosure, so you show it on account for them.
Rental Property Investor · Grand Rapids, MI · Member since 2016 · 262 posts · 205 votes
9y
Thanks, Deanna. I am nervous about just showing up over there. I'm highly uncomfortable with confrontations but I think you're right about going in person being the best way to do this. I heard someone say once that if you're not getting out of your comfort zone, you're not getting anywhere. I'm going to have to get comfortable with dealing with tenants at some point!
Rental Property Investor · Phoenix AZ / Kendallville, IN · Member since 2016 · 293 posts · 149 votes
9y
I think you need to get comfortable with confrontations. Unfortunately its a part of collecting rent when you are self-managing. I agree with Deanna for the next step. Its sounds like if they always pay late its time to clean house and get some new tenants.
I assume you did a walk through before you purchased the property but having the tenants there 5 years, theres a good possibility the unit will need some work if they move out. But the positive is you can up the rent.
Rental Property Investor · Grand Rapids, MI · Member since 2016 · 262 posts · 205 votes
9y
Sue the seller? Not sure what you mean. Do you mean on the grounds that they did not disclose that the tenants have been late continuously? I found that out when we did not receive any rent at closing because the tenant had not paid.
The sellers/LA tried to get me to pay them a proration of the rent when nobody had received it and we said BS, not happening. I'm pretty sure all of this was the management company's fault because the actual seller lives out of country and had never even seen the house. It's messed-up because this is supposedly a well-respected management co in the area.
Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
9y
I don't know your state but if you do pay or quit you should maybe have it documented besides the face to face by registered mail. You can hand deliver everything and tell them you are going to get this in the mail too. You want proof later that you did everything per the state process. You don't need to be mean, be nice but factual and firm. Don't let them suck you into their drama. If it comes to it use the broken record technique, just acknowledge and repeat what you are saying about the rent being due. Not sure when you can charge late fees if they are specified. In RI you have to wait until the 5th. I suspect you may be losing these tenants in December and finding new ones.
Rental Property Investor · Phoenix AZ / Kendallville, IN · Member since 2016 · 293 posts · 149 votes
9y
Well it sounds like you are able to be self-mange on site because you live there so that will expedite the process. With the lease expiring in December, you could give them notice this month which is about 60 days notice. Not sure what the landlord / tenant laws in your state but I would find out.
Not the best time to have a vacant unit in January, but it sounds like you are going to have to go in and paint, replace flooring and maybe some new appliances to get the market rate as you stated.
Another option is let the lease expire and rent them M2M until the spring, but it sounds like the tenants are used to a management company that has issues and eviction is your best choice.
I totally get the whole fear of confrontation thing! I went through the exact same situation and let things slide for a couple months until I got pissed enough to just do it. Later I learned something from one of the management books I read that helped me reframe it, perhaps it would help you as well? :)
Basically, it was talking about having to fire someone from their position. Nobody enjoys firing someone because it affects them AND their family, kids, etc. But if you don't, you only perpetuate their poor work ethic, behavior, etc. and they continue their downward spiral. A much better strategy is to give them that slap that wakes them up, hopefully see what they are doing wrong and get back on track. The same applies to bad tenant behavior. If they get away with little things here and there, it tends to bleed into other aspects of their life and you do them no favors by allowing it to slide. Sometimes we ALL need a slap in the face to wake up. Help your poor tenant wake up :)
Sacramento, CA · Member since 2014 · 513 posts · 319 votes
9y
@Jackie Botham, NOW is the time to learn the tenant landlord laws in your state and learn to use the law to your benefit. Next, review the lease and paperwork that came with the sale. It would be nice if the PM company provided payment history or any 3 day notices issued but they may have only been willing to release that to the owner. I would send your intro letter outlining where to send the rent by what date and in what form, how to place a service request and who to contact for emergencies. You have to know if they are under an existing lease or if their lease has reverted to a month to month. If they are on a month to month, then you can send them proper notice of a rent increase which will be a separate notice. In the intro letter you can mention the option to sign a new lease with increase or give 30 day notice to vacate. For the rent increase notice serve it however state law allows. Do not include the notice in the intro letter. If tenants are already late, send them a 3 day pay or quit or whatever notice is used by your state. I would do this after the intro letter. That way tenant can't say they were confused about where or whom to send rent to.
With inherited tenants, you often have to retrain them. You don't beg, bargain or coax them. They do not have a long track record with you as tenants so their is no reason to be lenient or understanding about late rent. Inherited tenants will take advantage of new property management companies and owners if allowed. If these tenants are pushed, they'll either comply by first paying late fee and eventually pay on time or they'll stonewall you and you'll have to kick them out, so prepare for that financially by contacting an experienced landlord tenant attorney.
In future purchases, always ask for leases, estoppel certificates, payment records before the deal closes. And remember, even good tenants will test you and will need to be trained.
Investor · San Francisco, CA · Member since 2015 · 306 posts · 211 votes
9y
@Jacqueline Coombs I would do the notice to quit as you mentioned asap. You can just put it in their mail box and tape it to their door with how they can pay you. You could confront, but start with that letter.
Make it semi threatening, but not offensive.
Also are they month to month? Maybe you could add new rules to the contract by giving them a 30 day advance notice. (You could check with a lawyer in your area, I'm sure they'd have rec's)
Secondly, contact the listing agent ASAP and say that this wasn't disclosed and say you want their help with this because they did not due their fair duty (moving forward at least you've learned something valuable! A contingency clause saying you want to see the seller's bank account with the payments from the tenant.)
@JR T. -- Sadly, I agree if they didn't disclose this and they knew... And, how wouldn't they since it's hitting the seller's bank account...
Investor · Philadelphia, PA · Member since 2014 · 351 posts · 80 votes
9y
Sounds like you are on the right track @Jacqueline Coombs. I also agree with @Deanna McCormick. Go over in person (If you are going to manage the property yourself), and introduce yourself.
The rent is also WAY low for the area. It's been at $740 for like 3 years. Market is $950-$1100. Their lease is up end of December.
I'd go do a face to face immediately. Hand over the intro letter and ask for the rent. Let them know that they are late and you will be assessing a late fee. (assuming that provision is in their current lease) Then raise the rent to market rates in December. If they don't like it, let them walk and put in a better tenant. (One screened by you)
Specialist · Lakewood, CO · Member since 2014 · 1k+ posts · 1k+ votes
9y
@Jacqueline Coombs I agree that you need to have the face to face as the new owner/manager. This is where you review their existing lease with them and let them know the exact fees and processes for late payment. This is the moment that you have to get your tenant on track as a good tenant. If you miss this and wait until next month you have just trained them that they can continue to be late. Go there, review the lease, provide them their pay or quit notice, do a quick "winterization inspection" to make sure everything is winter ready, then leave. If they haven't paid per the notice requirements begin the eviction. Otherwise, collect rent and be happy.
This is your moment to set the stage, don't waste it. Like children to parents, tenants tend to reflect their management. They may be a great tenant that just hasn't been taught how to be great!
Rental Property Investor · Grand Rapids, MI · Member since 2016 · 262 posts · 205 votes
9y
Update. So, after I posted the intro letter on the door the tenant called me saying she hadn't paid because she was not sure where to send rent due to the sale of the house. I told her to send it to the address given and she agreed to sending it out the next day. So, Friday comes along and no check so I call her and ask where the check is. She says she will have it for me Tuesday( tomorrow) when I go over to meet her/inspect the property. I'm already thinking I want her out because most likely, this crap will continue. Her lease is up end of December so I'm thinking I will save myself hassle of eviction and just tell her I'm not renewing her lease. That gives her plenty of notice to move per state law and then I can go in and fix up the place in Jan and rent it for market rent in Feb to a tenant screened by me!
Investor · Indianapolis, IN · Member since 2013 · 80 posts · 64 votes
9y
You also should have received any security deposits at closing so at leastyou'll be keeping it all from the sound of things. Winter rehab isn't so bad as you'll have a fresh unit ready for Spring.
We stagger our leases so the latest a unit rents is third quarter.
Get rid of the tenant and the ride should smooth out going forward. We were in a similar situation and self managing isn't too difficult. Best.
Rental Property Investor · Grand Rapids, MI · Member since 2016 · 262 posts · 205 votes
9y
What happened next was a surprise to me! Yesterday, I went over, met the tenant, did an inspection, explained to her what the rules are going forward and she ended up giving me this past month's rent in full ( including late fees) and also gave me a check for next month's rent! She also asked if she could do a direct deposit after that. This went way better than what I thought it would! So, I told her we would revert to a M2M in January with rent going up to $800/mo and that if she pays on time from here on for 3 or 4 months, I will consider having her sign another year lease. She told me she could not afford any more than $800 so she may be moving in the spring anyway but at least I won't have a vacancy in the winter! If she's a great tenant from here on, I may work with her and keep her there for awhile yet.
Thank you again, everyone! I would not have had the confidence to do this without your support!!