Seeking "Biggest Mistake/Lesson Learned" Tenant Stories
Melanie StephensPro Member
Investor · Tabernash, CO · Member since 2012 · 11 posts · 237 votesI'm always in the process of failing forward, so I'll gladly add to this convo:
TLDR? Here's the highlight:
@Melanie Stephens If you're still looking for stories, feel free to reach out and I can tell you more about my "rat house." Basically, these tenants changed the entire infrastructure of the home removing walls and they even re-did an entire master bathroom. But guess what? They forgot to completely seal the floor in the master bathroom after they took out the old flooring and put in new flooring. This is a mobile home so it's up on cinder blocks and the subfloor is wood.
Instead, they just put a new commode on top of the "hole" in the master bathroom. And my handyman suspects that's how the rats got in. To make a long story short, I hired an exterminator and he caught many, many rats in the home. Plus a skunk.
Feel free to DM if you have any questions about it. I'd be happy to discuss! :)
Hello, new to Bigger Pockets but I had a previous rental near Fort Riley KS in Manhattan (The Little Apple) Kansas basically the renters just stopped paying rent for three months before deploying which is meh. I then however found out they fraudulently had orders to deploy which were hand written to get out of the lease. Long story short I live in WA and was retiring so I took a hit selling after it sat in a stagnant market for about a year and a half. The renter eventually paid I had a very decent property management squad.
@Melanie Stephens, not a tenant lesson learned but a purchasing lesson learned. After full analysis of property... age of roof, water heater, a/c, the whole 9 - I forgot to count the number of water meters on a quadplex. Paying for the water on a quadplex is less than ideal, but a lesson learned.
~Caleb
Mine is quick: Exactly one time I abandoned a few company policies to allow a tenant to move in who gave me a sob story. And she was the ONLY tenant I have ever had who was a complete nightmare and came danger close to being evicted. Stick to your company policies.
As previously said, there is NEVER a good reason that a perspective tenant needs to move in a week or less. Of the dozens of tenants I have had in my rentals, my two evictions came from tenants that wanted to move in less than a week (one stated they were living in a hotel and the other stated she was getting divorced). Both had to be evicted for non-payment of rent.
Now, if anyone asked to move in less than a week, I tell them we are not interested.
Ogden Utah,( 1995) bought a 5 plex , Re hab went very smoothly, cost, quickness, and turned out very nice with good high rents, Here comes the buyer , above 800 credit score, solid employment, down payment.
Very great, got all the units occupied prior to the Buyers offer. One of the Tenants starting doing drugs, selling drugs, selling other bad , bad stuff. What do you do? They are 2 weeks late on second rent, i have a solid buyer on my hock, Help. My father said give them "Cash to leave". I thought he was crazy.
I told tenants that I would give them $300 cash if they were out by Monday morning and $400 if they cleaned it.
Druggies love cash!!!!!
They moved out and cleaned it and yes I gave them the money. It did close and I made $56,000 K profit.
I did the work (Re hab ) with my crew.
Chow
@Will Fraser - I really appreciated your message. I could feel the passion in which you typed those words. Great advice. Especially that second point about tenants who "NEED" to move in the next day. Definitely I red flag.
Hi Melanie,
A good lesson we learned several years ago was about getting properties delivered vacant. If you intend on managing a building or buying a building that is coming vacant as a part of escrow, double check that it is ACTUALLY VACANT before you close or take over the units.
It seems like common sense but you'd be surprised at what agents will tell you to get you to close. Only trust your own two eyes!
We were buying a duplex in Los Angeles that was to be delivered vacant per the seller. The units were occupied by the seller and his daughter. A couple days before the close of escrow I swung by the property and saw the seller was gone from his unit but there were still belongings in the second unit. When we brought this up to the agent, he said not to worry and they are the seller's daughter, they know they have to go, and will be gone in the next day or two.
Being inexperienced, I took his word and closed the deal. After the closing, I showed up with my crew to change the locks only to be greeted by the sellers daughter who claims she was unaware of the sale and is not leaving!
Along with all the legal action that took place, we also had to pay extra money to the seller's daughter to leave, physically move her out, and find her a new place. We did all this which took precious time and money to solve.
Needless to say we always triple check a property will be vacant before closing escrow now or hold back significant money until it is.
Always, Always be weary of a tenant that finds your listing and states, "I want the property, I want to move in this weekend, I have deposit and first months rent" You will usually get these from tenants who have just been removed from their previous property. Just complete your due diligence and put them through the process, the application, the screening, and don't fall for the, they have the money they must be legit.
- Never, ever, ever, cave on a tenant's sob story if it means reducing rent/they miss payments. Empathize, but follow your contract. Same concept as the guy who tries to buy your car with "I can get you $200 today and pick it up and I swear I'll bring you the other $8,000 on Friday!" Never happens. Had a great deal for a buy-and-hold SFR get destroyed and not pay for months which went from 5 digits in the black to break-even/in the red. Had significant tenant damages due to neglect and tenant non-payment.
- The gut feeling you have on a prospective tenant is usually right, if they are downright obnoxious at first, they will be for the next 1-10 years. Had one that made some ridiculous requests during the prospect period and continued to be a headache, asking for things FAR outside the scope of a landlord regularly and taking up hours of time on the phone. Not worth the rent.
Screening... screening... screening! Had a tenant for 5 years. The couple was generally a pretty good tenant. The wife was very hard-working and honest. The husband perhaps less motivated in life. Got behind on rent once for 2 months but got caught up. They separated and he moved out. She started dating someone else unbeknownst to me. On morning of St Patrick’s Day of 2015, I get a call from a neighbor that my house was on the news. The husband had come back wearing a bullet proof vest with the apparent intention to kill the boyfriend. The boyfriend had already left for work and the wife almost escaped. But he tackled her in the front yard and dragged her back into the house. Her screams alerted the neighbors who called the police. By the time I got the call, he was holding her hostage upstairs in the bathroom and the swat team had surrounded the house. They drilled holes in the walls, put blasting compound on the front door and had managed to get a robot into the house to deliver a cell phone because his cell service was not good. I went to the fire station nearby and drew floor plans and locations of furniture, etc. for the police. After about 7 hours she talked her way out and he let her go but stayed behind. About 10 hours in, the police started firing tear gas into the house, blowing windows out. The husband attempted to shoot himself in the chest (around the bullet proof vest) and managed to partially paralyze himself... but he lived. To put it mildly, the house was pretty much destroyed, between 5 years if deferred maintenance and the hostage situation. My wife and I made the decision to repair and sell the house because we felt it had too much bad mojo. Insurance paid the tear gas cleanup and we rehabbed it. It took us about 4 months and sold in less than a week. We walked away with about $160k in our pockets but we more than earned every penny of it. We learned after the fact that the husband had a pretty extensive criminal record... mostly drug related. He is serving 30+ years and will be in his 70s when he is released. Thankfully, the day ended better than it might have given that there was no loss of life. We now do much more rigorous screening, charge higher deposits, are more selective and fairly patient in the search for good tenants. We interview them, call past landlord references, have them authorize a credit report, do criminal background checks. And once we find good tenants, we take really good care of them. We are now starting to report rental payment history to credit bureaus as well and the tenants know that up front. Our turnover rate is low. We also have learned the value of having relationships with our neighbors. You can learn a lot about problems with a property with those relationships.
We have a few pictures of before and after the remodel on our instagram.
My biggest mistake was renting to close friends. Although, they were great people and paid their rent on time... later on they both lost their income and unfortunately, I was in no position to help them by discounting rent or postponing rent. I had to draw a hard line in the sand and gently request that they move out. It destroyed our years of friendship.
My biggest mistake was renting to close friends. Although, they were great people and paid their rent on time... later on they both lost their income and unfortunately, I was in no position to help them by discounting rent or postponing rent. I had to draw a hard line in the sand and gently request that they move out. It destroyed our years of friendship.
That's a big one Klint. Been there done that, don't recommend it. Only thing I'd ever rent to a friend is insured equipment or something I don't mind losing haha.
Adding on to the advise of in-person speaking to potential tenants and screen, screen, screen. I always keep my ears and "vibes" open for the "woe is me" tenant. Beware the WIM tenant! There life is always "bad luck", they don't see the relation between their own bad acts and their "bad luck", because nothing is ever their fault. These personality types were some of my worst tenants, before I learned to look out for it.
I wouldn't call this my biggest mistake, but it was one of them related to this advice. I was still a newbie landlord at the time and, although I checked landlord references and income/job sources, I didn't do more formal background checks. I do now, in large part because of these particular tenants. Looking back, I'm pretty sure they gave me a friend's name for their current landlord. They were self-employed, so I asked to see their last year's tax return. Pretty sure they faked that also.
They were moving in within one week of their application, so I hadn't collected any money yet. On move-in day, they had the first month's rent, but only half the security deposit and would give me the other half within two weeks after they got the previous one back. Mistake number one (or probably more like #3, lol), NEVER let someone move-in without the FULL first month's rent and security deposit.
The WIM excuses started with the rent for month #2. Long story short, at no point in time did they ever pay anything more toward their SD. And starting with month #2, they were never paid in full for whatever rent was due. They only lived there for 4 months. Did a no notice "midnight move-out", still owing me $300 in prior rent with their next month's rent due the next day. On top of that, left so much damage that totaled over $1,500. And they were only there for 4 months for goodness sake!
With prospective tenants, I ask some typical questions...especially why they are moving from their current place...but also try to establish a rapport with some unrelated small talk. A complaint here or there, either in general or about their current rental, is one thing and understandable. But if the majority of the conversation is a litany of complaints and "woe is me" stories, I avoid.
After reading all the replys I am not sure I want to be a landlord. That said I only had to deal with 2 evictions in 20 years. The second one was a mistake by the so called professional manager I had hired, who never checked on anything. The reason I know is I called on the previous land lord, who confirmed all my worries: major drug issues, destroying the property eviction etc. He also said I was the first one to call! I would like to add another word of caution about being a landlord in certain areas. Ask some real estate professionals if they have rentals there. If not ask for the reason. When I first moved to the Sierra foothills of California I bought a nice rental house on 2 acres, fixed it up and rented it. within months I found out the problem was in this area nobody was serious about paying rent. During the eviction process I also found out the police was on first name base with my tenants! One reason for the attitude was the police hired officers with prior bankruptcies. All the realtors had their rental properties in other counties!
There is a huge difference between renting houses and renting apartments that are smaller and I can probably name 50 things about apartments that will change your mind about the horror stories of renting.
Homes are usually 2 to 3 times larger than an apartment. You usually have large yards that can require thousands of dollars to clean and put back together. You usually have fences to repair, trees and shrubs to maintain and a 1 or 2 car garage. I own several homes and when a tenant lives in the home for only one year I often have to paint every wall inside the house, replace carpets, clean the garage, clean the yard, trim the trees and shrubs, clean the windows, repair plumbing and the cost is $6,000 to $12,000. For one house, just to do what was described took two worker 13 days working 14-hour days and the cost was $32,000 because in 3 years the tenants destroyed the kitchen cabinets, counter tops, carpets, linoleum, cracked 3 bathroom sink bowls, damaged the kitchen sink porcelain and destroyed the refrigerator and stove.
For apartments, the average cost to clean and paint is usually less then $2,000 and the work is completed in 3 to 5 days. There is no comparison between an apartment and a house when it comes to the amount of physical work and costs.
I've been in real estate 55+ years and I love dealing with tenants both good and bad. I enjoy taking tenants to court because defending small claims lawsuits makes me stay sharp because it keeps me up-to-date on laws and it forces me to make sure I have solid lease agreements and abide by the laws when dealing with tenants.
When you finally learn what properties to stay away from, how to crunch the numbers and how to stretch out your numbers over a 10, 20 and 30-year period you have better insights as to how rich you will be vs. how miserable you are when dealing with tenants. I love to have problems with tenants because very time a tenant moves or gets evicted I make tens of thousands of dollars because I increase the rent and that increases the value of the property.
Just yesterday, a tenant gave me a notice to move and I will raise the rent for the apartment from $1100 to $1500. That is a $4800 annual increase and $48,000 more I earn in 10 years. Add the Gross Multiplier $4800 per year x 13 Gross Multiplier and the value of my property increased by $62,400 + $48,000 in 10 years means when my tenant gave me a notice to move I just made $110,400 plus add 4% rent increases for the 1-year period and the Gross Multiplier kicks in plus the additional rental income and when the tenant gave me a notice to move I made about $250,000 in 10 years. CAN'T DO THAT WITH A HOUSE and it is no wonder I love bad tenants. When I take a tenant to court it is not because I want the back rents. It is because I want the $250,000.
Don't be short sighted, or you will be miserable!!! Stay away from large single-family homes unless the number indicate you will make huge profits and that is almost impossible unless the value of the house appreciates, significantly.
@Beliria Sims I don't believe the questions are as important as the opportunity to spend a few moments getting an impression from the person. Usually the information you get is not the direct answer to the questions you ask but in the information they reveal when you let them speak for a while.
It's always great to ask about someone's motivation for moving. How urgent is it? Did they live with a slumlord (or is that just the story they tell)? How serious are they about moving?
Are they going to reveal something about their attitude towards rules and authority figures? Tenants can have very valid complaints but there are some who complain about everything or get defensive when asked to follow the rules and respect their neighbors.
I believe the best approach is to build up some rapport with them first so they feel comfortable, let their guard down, and then are more likely to be honest with you.
@Wale Lawal visiting their current home is a great idea. I heard about that one on one of the BP podcast episodes with an investor in D.C. who exclusively rents 4 bedroom houses to voucher tenants.
This is a long shot , but it is a step in the right direction:https://www.marketwatch.com/st...