Landlord rights in regards to Military lease early termination

[Corey M.]

I purchased my 1st investment property from REI Nation last year and a major selling point to me was that the average tenant staying for ~5.5 years. This morning, after ~1.5 years, I was informed my tenant is terminating the lease early, without penalty, because of a military transfer. I looked in the lease agreement and there is no language to support this move. However, there is apparently a federal law allowing for military transfers without penalty. I wish I was aware of this up front, as I would've thought twice about renting to someone who is likely to be relocated during the lease term.

Re-leasing the unit is going to require me to make any necessary repairs and pay one month's rent to the management company for finding a new tenant. In short, this early termination is likely going to wipe out my cash flow for the first year-and-a-half of the lease. It's a huge bummer to have both repair and re-leasing expenses this quickly.

As a landlord, what are my rights here?

- REI is saying the tenant is only responsible for this month's rent, but in my brief googling, it appears they are also responsible for next month's. Is that correct?

- To prevent this in the future, is it within my landlord rights to tell the management company to only lease to a civilian? I want to support the military, but also don't want to lose money on this investment, which will happen if I keep putting in tenants who are likely to get transfers.

I'm sure there are seasoned landlords who knew about this rule, but it had never been brought up to me; I was a little blindsided by the financial hit. Some of it may be recouped by a higher rental fee for a new lease, but it doesn't look like rental prices have increased significantly in the area.

@Chris Clothier, would you mind weighing in?

[Kim Meredith Hampton]

Actually the average tenancy for our leases as of the end of 2021 was 18-24 months, so actually you did pretty good. This year we have noticed a lot more staying a little longer because it’s so expensive to move, and they simply can’t find anything cheaper. 

Military are protected for penalties, but I always ask for a copy of the transfer to make sure it’s real. As far as the date of payment, when did they give notice, and is your termination dates a calendar month or calendar days? makes a difference in how and when they pay until 

[Corey M.]

Quote from @Kim Meredith Hampton:

Actually the average tenancy for our leases as of the end of 2021 was 18-24 months, so actually you did pretty good. This year we have noticed a lot more staying a little longer because it’s so expensive to move, and they simply can’t find anything cheaper. 

Military are protected for penalties, but I always ask for a copy of the transfer to make sure it’s real. As far as the date of payment, when did they give notice, and is your termination dates a calendar month or calendar days? makes a difference in how and when they pay until 

I don't think I did very well considering the average tenant stay is ~5.5 years under this company. I understand that some companies only get 18-24 months, but that is not the average with REI. But an average is just that, and it looks like I just had bad luck. I got a copy of the transfer order and it appears to be real, but I also don't see a law in Oklahoma that prevents me from refusing to rent to military personnel in the future. The government should really step in and make sure landlords get paid in the event that an active service member gets relocated. Seems like it has two major repercussions: 1) Landlords won't want to rent to the military for risk of leases getting broken 2) Landlords bearing the burden of any repairs and new leasing fees when a service member is relocated.

[Scott Trench]

I think the issue here is with your underwriting. No way should a turnover event every 18 months wipe out your cash flow. That's way too tight. I would model in 5-10% vacancy into your projection model (using the BP Rental property calculator). I don't think I've ever run a report on a rental property that assumes less than 5% vacancy, and usually up it to 10% for good measure. One month of vacancy every 18 months is about 5% vacancy (and 1st months rent paid to a property manager is 1 month rent - so paying this every 18 months is equivalent to a month's vacancy). 

You haven't even had vacancy yet. It's possible your PM company places a tenant right away and you don't have vacancy - just the placement fee, which is standard across most PM companies I've worked with. If that's the case, then you will be towards the "Good" end of normal vacancy.

Next, military communities are notoriously good for landlords, because of the steady flow of tenants, and many servicemen receive Basic Allowance for Housing (BAH) which means that they are highly likely to be good on rent. That's a plus, not a minus, for a rental market in my view. 

Lastly, I'd also be very careful about indicating that you have a problem renting out to folks in the military. We want these people to stick their neck out for us and the free world. We are going to make life harder for enlisted men who are highly likely to pay on time when they get orders for a new duty station or deployment? 

If this deal gets wiped out by this turnover event, then the deal was likely too tight and required nearly perfect conditions to be successful. I'd be stricter about the underwriting requirements, and get more of a buffer on the next one. We need a margin of safety in these deals that can account for these types of events.

[JD Martin]

I don't know anything about REI but your manager should be releasing without penalty to you if less than one year. Just like a genuine military transfer is protected without penalty to the service member. Assuming we're talking one year leases here.

As a US Navy veteran, I think your idea of only renting to civilians sucks and is completely against the spirit of what that law was intended to protect. I rented plenty of apartments when I was in the military and getting transferred whenever they needed/wanted me somewhere else was just part of it. If your investment plan includes counting on tenants staying for 5 1/2 years, you need a new plan. Our average tenant - non military - stays about 3 years. Some longer, some shorter. Any repairs should be coming out of the deposit - service members aren't allowed to damage the place scot-free.

[Ross M.]

I'm not a landlord (yet), but I can give you a veteran's perspective.

I recall the requirement being 30-days notice with official orders. The military life is notorious for bringing major unexpected life changes with short notice. Servicemembers do their best to honor any and all commitments, but they swore an oath to the Constitution, not to their landlords.

Ask yourself if you really want to discriminate against a group that could very well be your best pool of tenants. Like @Scott Trench says above, look at it like an opportunity. An average residency is an average, not a minimum. Figure out what you can do better as the investor in terms of your cash flow.

[Corey M.]

To be clear, I would never want to discriminate against anyone. My dad is also a military vet. This was a turnkey property with 5% vacancy in the calculations. But turning over every 18 months is not supposed to be the norm in this deal, but I do understand the 5.5 years is only an average. The price of the house was top of market - which will end up being fine because of last year's appreciation - but the cash flow is only a couple hundred dollars per month. Insurance coverage has also increased. The margins are thin. It's a very hands off investment, but it is an investment. 

I agree that active military are good renters in terms of paying and doing so on-time, but what stops a landlord in a military town from having to turn over a house several times in a year? Every time the house needs to be turned over, I have to pay the management company an entire month's worth of rent for re-leasing plus make any repairs needed after the last tenant vacated. That could easily run in the $2700-$3k range. And it could be much more if the place can't be immediately rented.

As a landlord, I have to choose the best investment opportunity. Eventually, I need to have enough to retire. It just seems like landlords are carrying a pretty big risk in this scenario. If the government is allowing outs for military moves, they should also account for the landlord's costs, particularly if it's breaking a lease, which is what's happening in my case.

[Patricia Steiner]

I really don't know where to start so the best place is with the money.  

Federal Law:  30 days notice to terminate; provide landlord orders of deployment for a duration of more than 90 days and/or relocation greater than 35 miles. 

Just is...

And, "military tenants" are not a protected class according to the Fair Housing Act.  You don't have to rent to them for fear of this happening again but quite frankly, don't you want the best tenant?  Stability with a poor tenant is a whole lot of not good so the better play may be is to keep your property in good shape always.  Do quarterly inspections, don't over-improve, and require your tenants to have Renter's Insurance as well as a security deposit.

Every time  you rent a property is an opportunity to review market rental prices and increase your rent.  I want my tenants to stay the lease term but if they have to bolt early to keep the country and our citizens safe, I'm good.  I would hope you would be too...

[Wayne Bolen]

Sounds like you're making a lot of assumptions on something that hasn't happened yet. Are you setting aside money for repairs and capex? Any repairs should ideally come from the deposit. You're also assuming this could happen multiple times per year, which should not be the case. Duty stations are 2-3 years, sometimes longer. Aside from deployments (which are much less common than they were 10 years ago), you should have plenty of a great experiences renting to military personnel.

[Rodney Sums]

Quote from @Corey M.:

I purchased my 1st investment property from REI Nation last year and a major selling point to me was that the average tenant staying for ~5.5 years. This morning, after ~1.5 years, I was informed my tenant is terminating the lease early, without penalty, because of a military transfer. I looked in the lease agreement and there is no language to support this move. However, there is apparently a federal law allowing for military transfers without penalty. I wish I was aware of this up front, as I would've thought twice about renting to someone who is likely to be relocated during the lease term.

Re-leasing the unit is going to require me to make any necessary repairs and pay one month's rent to the management company for finding a new tenant. In short, this early termination is likely going to wipe out my cash flow for the first year-and-a-half of the lease. It's a huge bummer to have both repair and re-leasing expenses this quickly.

As a landlord, what are my rights here?

- REI is saying the tenant is only responsible for this month's rent, but in my brief googling, it appears they are also responsible for next month's. Is that correct?

- To prevent this in the future, is it within my landlord rights to tell the management company to only lease to a civilian? I want to support the military, but also don't want to lose money on this investment, which will happen if I keep putting in tenants who are likely to get transfers.

I'm sure there are seasoned landlords who knew about this rule, but it had never been brought up to me; I was a little blindsided by the financial hit. Some of it may be recouped by a higher rental fee for a new lease, but it doesn't look like rental prices have increased significantly in the area.

@Chris Clothier, would you mind weighing in?

You need to self manage.  I doubt a reputable property manager will screen military applicants for you.  This would risk them having a reputation of "discriminating against vets" with lots of google reviews about it. 

I also recommend you reconsider having this attitude.  No landlord likes vacancies and unexpected turnovers.  

  Military personnel already put themselves at risk at the direction of millionaires and billionaires with great salaries, housing, healthcare, and security.   How selfish is that for civilians to reap the benefits of their sacrifices while trying to avoid renting to them?

[Russell Brazil]

1) 30 days notice for military tenant receiving a PCS

2) Nearly every state does not allow you to discriminate against military renters

3) Ive got to wonder if landlording is for you if you would let this bother you what so ever. You are going to encounter much more hardship in landlording than this

[Corey M.]

Quote from @Wayne Bolen:

Sounds like you're making a lot of assumptions on something that hasn't happened yet. Are you setting aside money for repairs and capex? Any repairs should ideally come from the deposit. You're also assuming this could happen multiple times per year, which should not be the case. Duty stations are 2-3 years, sometimes longer. Aside from deployments (which are much less common than they were 10 years ago), you should have plenty of a great experiences renting to military personnel.

Yes, I have 5% set aside for vacancy and 4% for repairs. This is the recommended amount that REI Nation puts in their pro formas, and it reflects the typical expenses based on the 1000s of properties they have under management. While the house can hopefully be rented again swiftly, the bigger costs are a combination of a re-lease fee and turnover, and there's no way around those. I made my decision to buy based on the average length of stay being 5.5 years. If I'm turning these properties over every 18 months instead of of every 66, those re-lease and turnover costs could run $10k+ instead of around $3k, severely lowering my return.

I understand this is a controversial post because it involves the military, but I was completely unaware that leases could be broken without penalty. Of course I want those who keep our country and citizens safe to have places to live, but I also want to be able to afford a place to live when I get older. These rentals are part of my retirement planning. The flaw here seems to be that the US government doesn't pick up the landlord's tab for a broken military lease, and - like it or not - that incentivizes landlords to rent to civilians with good credit scores.

I'm sort of reticent to continue this chain because I don't want to sound callous, but I do worry that I vastly over-estimated my return in this area.

[Corey M.]

Quote from @JD Martin:

I don't know anything about REI but your manager should be releasing without penalty to you if less than one year. Just like a genuine military transfer is protected without penalty to the service member. Assuming we're talking one year leases here.

As a US Navy veteran, I think your idea of only renting to civilians sucks and is completely against the spirit of what that law was intended to protect. I rented plenty of apartments when I was in the military and getting transferred whenever they needed/wanted me somewhere else was just part of it. If your investment plan includes counting on tenants staying for 5 1/2 years, you need a new plan. Our average tenant - non military - stays about 3 years. Some longer, some shorter. Any repairs should be coming out of the deposit - service members aren't allowed to damage the place scot-free.

It's a two year lease, so I don't think REI is going to be giving me anything.

[Corey M.]

Quote from @Russell Brazil:

1) 30 days notice for military tenant receiving a PCS

2) Nearly every state does not allow you to discriminate against military renters

3) Ive got to wonder if landlording is for you if you would let this bother you what so ever. You are going to encounter much more hardship in landlording than this

Sure, I'll face many hardships. Not denying that. But based on the data given to me, it did not factor in a turnover rate that would be much higher than the company's norm if there are military occupants. There's nothing I can do about it now, just going to have to take the hit. I do think the government should cover the landlord's expenses when someone breaks a lease due to a military move or deployment. I have to believe there are many landlords, whether they vocalize it or not, who would be concerned about regular turnover. But I'm new and willing to admit I could be totally wrong.

[Corey M.]

Quote from @Rodney Sums:

Quote from @Corey M.:

I purchased my 1st investment property from REI Nation last year and a major selling point to me was that the average tenant staying for ~5.5 years. This morning, after ~1.5 years, I was informed my tenant is terminating the lease early, without penalty, because of a military transfer. I looked in the lease agreement and there is no language to support this move. However, there is apparently a federal law allowing for military transfers without penalty. I wish I was aware of this up front, as I would've thought twice about renting to someone who is likely to be relocated during the lease term.

Re-leasing the unit is going to require me to make any necessary repairs and pay one month's rent to the management company for finding a new tenant. In short, this early termination is likely going to wipe out my cash flow for the first year-and-a-half of the lease. It's a huge bummer to have both repair and re-leasing expenses this quickly.

As a landlord, what are my rights here?

- REI is saying the tenant is only responsible for this month's rent, but in my brief googling, it appears they are also responsible for next month's. Is that correct?

- To prevent this in the future, is it within my landlord rights to tell the management company to only lease to a civilian? I want to support the military, but also don't want to lose money on this investment, which will happen if I keep putting in tenants who are likely to get transfers.

I'm sure there are seasoned landlords who knew about this rule, but it had never been brought up to me; I was a little blindsided by the financial hit. Some of it may be recouped by a higher rental fee for a new lease, but it doesn't look like rental prices have increased significantly in the area.

@Chris Clothier, would you mind weighing in?

You need to self manage.  I doubt a reputable property manager will screen military applicants for you.  This would risk them having a reputation of "discriminating against vets" with lots of google reviews about it. 

I also recommend you reconsider having this attitude.  No landlord likes vacancies and unexpected turnovers.  

  Military personnel already put themselves at risk at the direction of millionaires and billionaires with great salaries, housing, healthcare, and security.   How selfish is that for civilians to reap the benefits of their sacrifices while trying to avoid renting to them?

Not all landlords are millionaires or billionaires. I am not. Ultimately, I made this investment to ensure I have housing and can put food on the table when I'm older. And I want the same for our military. I appreciate their sacrifices, but on a more macro level, if I'm bringing this up, there must be other landlords who quietly think it to themselves (and think twice before renting to the military). This could be easily resolved if the government just covered the landlord's costs in the event of an early lease termination.

[Wayne Bolen]

Quote from @Corey M.:

Quote from @Wayne Bolen:

Sounds like you're making a lot of assumptions on something that hasn't happened yet. Are you setting aside money for repairs and capex? Any repairs should ideally come from the deposit. You're also assuming this could happen multiple times per year, which should not be the case. Duty stations are 2-3 years, sometimes longer. Aside from deployments (which are much less common than they were 10 years ago), you should have plenty of a great experiences renting to military personnel.

Yes, I have 5% set aside for vacancy and 4% for repairs. This is the recommended amount that REI Nation puts in their pro formas, and it reflects the typical expenses based on the 1000s of properties they have under management. While the house can hopefully be rented again swiftly, the bigger costs are a combination of a re-lease fee and turnover, and there's no way around those. I made my decision to buy based on the average length of stay being 5.5 years. If I'm turning these properties over every 18 months instead of of every 66, those re-lease and turnover costs could run $10k+ instead of around $3k, severely lowering my return.

I understand this is a controversial post because it involves the military, but I was completely unaware that leases could be broken without penalty. Of course I want those who keep our country and citizens safe to have places to live, but I also want to be able to afford a place to live when I get older. These rentals are part of my retirement planning. The flaw here seems to be that the US government doesn't pick up the landlord's tab for a broken military lease, and - like it or not - that incentivizes landlords to rent to civilians with good credit scores.

I'm sort of reticent to continue this chain because I don't want to sound callous, but I do worry that I vastly over-estimated my return in this area.

 It sounds like their pro-forma is against their entire "portfolio" vs your particular area. 

[JD Martin]

Quote from @Corey M.:

Quote from @JD Martin:

I don't know anything about REI but your manager should be releasing without penalty to you if less than one year. Just like a genuine military transfer is protected without penalty to the service member. Assuming we're talking one year leases here.

As a US Navy veteran, I think your idea of only renting to civilians sucks and is completely against the spirit of what that law was intended to protect. I rented plenty of apartments when I was in the military and getting transferred whenever they needed/wanted me somewhere else was just part of it. If your investment plan includes counting on tenants staying for 5 1/2 years, you need a new plan. Our average tenant - non military - stays about 3 years. Some longer, some shorter. Any repairs should be coming out of the deposit - service members aren't allowed to damage the place scot-free.

It's a two year lease, so I don't think REI is going to be giving me anything.

 My basic suggestion is that if you've set aside 5% for vacancy, then you should have been covered easily for 18 months. 8% vacancy is one month out of every year, so if you set aside 10% for two years then your one month of vacancy is covered. As far as management fees, maybe your model underestimated what they would be. 

[Joel Allen]

@Corey M.
I’ve found that military renters are overwhelmingly great tenants that who pay on time and take good care of the place.  

Don’t let this one instance change your investing strategy...it may have been an anomaly.  In fact, a Rand Corporation study of active duty Air Force members found that the average tour length (length of time in one location) is 53 months for enlisted Airmen and 34 months for officers.  I imagine the other military branches are fairly similar.

It’s worth getting to know the specifics of your nearby military base.  As an example, some bases host large 1-year schools for military members.  So, those students will likely only be at the military base for a year before moving on.  Understanding these nuances about your specific location can help better manage your expectations about average length of tenancy.

Source:  https://www.airforcemag.com/ai...

[Corey M.]

Quote from @Joel Allen:

@Corey M.
I’ve found that military renters are overwhelmingly great tenants that who pay on time and take good care of the place.  

Don’t let this one instance change your investing strategy...it may have been an anomaly.  In fact, a Rand Corporation study of active duty Air Force members found that the average tour length (length of time in one location) is 53 months for enlisted Airmen and 34 months for officers.  I imagine the other military branches are fairly similar.

It’s worth getting to know the specifics of your nearby military base.  As an example, some bases host large 1-year schools for military members.  So, those students will likely only be at the military base for a year before moving on.  Understanding these nuances about your specific location can help better manage your expectations about average length of tenancy.

Source:  https://www.airforcemag.com/ai...

 That's a good tip. I will look into that. Thank you.

[Russell Brazil]

Quote from @Corey M.:

Quote from @Russell Brazil:

1) 30 days notice for military tenant receiving a PCS

2) Nearly every state does not allow you to discriminate against military renters

3) Ive got to wonder if landlording is for you if you would let this bother you what so ever. You are going to encounter much more hardship in landlording than this

Sure, I'll face many hardships. Not denying that. But based on the data given to me, it did not factor in a turnover rate that would be much higher than the company's norm if there are military occupants. There's nothing I can do about it now, just going to have to take the hit. I do think the government should cover the landlord's expenses when someone breaks a lease due to a military move or deployment. I have to believe there are many landlords, whether they vocalize it or not, who would be concerned about regular turnover. But I'm new and willing to admit I could be totally wrong.

 A turnover every 18 months with 1 month vacant in between is a 5% vacancy rate. With just your very 1st tenant, you are already performing to the vacancy rate you actually planned for.

[Account Closed]

Quote from @Corey M.:

I purchased my 1st investment property from REI Nation last year and a major selling point to me was that the average tenant staying for ~5.5 years. This morning, after ~1.5 years, I was informed my tenant is terminating the lease early, without penalty, because of a military transfer. I looked in the lease agreement and there is no language to support this move. However, there is apparently a federal law allowing for military transfers without penalty. I wish I was aware of this up front, as I would've thought twice about renting to someone who is likely to be relocated during the lease term.

Re-leasing the unit is going to require me to make any necessary repairs and pay one month's rent to the management company for finding a new tenant. In short, this early termination is likely going to wipe out my cash flow for the first year-and-a-half of the lease. It's a huge bummer to have both repair and re-leasing expenses this quickly.

As a landlord, what are my rights here?

- REI is saying the tenant is only responsible for this month's rent, but in my brief googling, it appears they are also responsible for next month's. Is that correct?

- To prevent this in the future, is it within my landlord rights to tell the management company to only lease to a civilian? I want to support the military, but also don't want to lose money on this investment, which will happen if I keep putting in tenants who are likely to get transfers.

I'm sure there are seasoned landlords who knew about this rule, but it had never been brought up to me; I was a little blindsided by the financial hit. Some of it may be recouped by a higher rental fee for a new lease, but it doesn't look like rental prices have increased significantly in the area.

@Chris Clothier, would you mind weighing in?

 Your problem is not the tenant. It is believing Pro Formas. 5% Vacancy doesn't mean each and every year its exactly 5%. But even on average it going to cost much more than 5% of rent annually. 18 mo average occupancy is a fair assumption. Then add in 1 month vacancy and 1 month leasing cost. So the cost is 2 months rent every 18 months. Add that make ready costs on average 1000/turn. Then for a property with 1000 rent you are looking at 3000$ every 18 months or 18% for vacancy costs. Not 5%. The problem is no turnkey provider will be able to sell anything with the real numbers. And 5.5 years is highly unlikely to be a typical tenancy.

[James Hamling]

Quote from @Corey M.:

Quote from @Rodney Sums:

Quote from @Corey M.:

I purchased my 1st investment property from REI Nation last year and a major selling point to me was that the average tenant staying for ~5.5 years. This morning, after ~1.5 years, I was informed my tenant is terminating the lease early, without penalty, because of a military transfer. I looked in the lease agreement and there is no language to support this move. However, there is apparently a federal law allowing for military transfers without penalty. I wish I was aware of this up front, as I would've thought twice about renting to someone who is likely to be relocated during the lease term.

Re-leasing the unit is going to require me to make any necessary repairs and pay one month's rent to the management company for finding a new tenant. In short, this early termination is likely going to wipe out my cash flow for the first year-and-a-half of the lease. It's a huge bummer to have both repair and re-leasing expenses this quickly.

As a landlord, what are my rights here?

- REI is saying the tenant is only responsible for this month's rent, but in my brief googling, it appears they are also responsible for next month's. Is that correct?

- To prevent this in the future, is it within my landlord rights to tell the management company to only lease to a civilian? I want to support the military, but also don't want to lose money on this investment, which will happen if I keep putting in tenants who are likely to get transfers.

I'm sure there are seasoned landlords who knew about this rule, but it had never been brought up to me; I was a little blindsided by the financial hit. Some of it may be recouped by a higher rental fee for a new lease, but it doesn't look like rental prices have increased significantly in the area.

@Chris Clothier, would you mind weighing in?

You need to self manage.  I doubt a reputable property manager will screen military applicants for you.  This would risk them having a reputation of "discriminating against vets" with lots of google reviews about it. 

I also recommend you reconsider having this attitude.  No landlord likes vacancies and unexpected turnovers.  

  Military personnel already put themselves at risk at the direction of millionaires and billionaires with great salaries, housing, healthcare, and security.   How selfish is that for civilians to reap the benefits of their sacrifices while trying to avoid renting to them?

Not all landlords are millionaires or billionaires. I am not. Ultimately, I made this investment to ensure I have housing and can put food on the table when I'm older. And I want the same for our military. I appreciate their sacrifices, but on a more macro level, if I'm bringing this up, there must be other landlords who quietly think it to themselves (and think twice before renting to the military). This could be easily resolved if the government just covered the landlord's costs in the event of an early lease termination.

 No. No, no, no, no, no. 

This is a "You" problem Corey, flat out. The excuses are just that excuses, and I think you know that and are just scrambling for ways to cover that, to lie to self. 

It's obviously ridiculous to EXPECT that a property has no maintenance at all, nothing breaks, nothing wears out, nothing at all for 4+ years, I don't even expect that in new construction units, it's why warranties exist, very literally. And to expect a tenant is at minimum 4yrs+ right out the gate, if not 5, is beyond bonkers. HOPE, sure, fine, hope away, but expect, no, I don't believe anyone is that clueless. 

I also notice a statement complaining that "now I am going to have to make repairs" meaning you KNOW there is defective/broken things, to an extent that nobody else will lease it without being repaired, and you intentionally neglected it and the tenant living in such, that is morally corrupt and illegal in many if not most places, add on fact of doing such to active duty service member I think is despicable.   

No, I don't see many, several or even any others thinking the same. I find that an excuse to justify actions and thoughts on such. 

What I do believe many others think is exactly what I am saying here, possibly with a few expletives in addition. 

As an added note of thought on this, I won't work with anyone who ever mutters something in manner that you stated, I am being serious. It does not matter how much $ you have or offer, not a chance, it get's a person in the "Dead-2-Me" file. I won't do business, associate, even acknowledge such a person. I know I am not alone in this, which means more loss of $$$$ from the manner of thinking. 

If you approached this differently the results could have been wildly different. Did you think about talking to your tenant and asking if he knows anyone else who would be decent and interested in taking over there lease? I have not experienced a single duty station that doesn't have a long list of people ready to jump on a decent place double-time. No vacancy time, no tenant placement fee required, just a modification of lease holder. Done. 

The summary is you screwed up in your investing and expectations, and are seeking to take it out on another. If they told you average lease terms were 88 months would you have blindly taken that as the gospel? Or done some D.D. to find what market averages were in that properties location? 

[Corey M.]

Quote from @James Hamling:

Quote from @Corey M.:

Quote from @Rodney Sums:

Quote from @Corey M.:

I purchased my 1st investment property from REI Nation last year and a major selling point to me was that the average tenant staying for ~5.5 years. This morning, after ~1.5 years, I was informed my tenant is terminating the lease early, without penalty, because of a military transfer. I looked in the lease agreement and there is no language to support this move. However, there is apparently a federal law allowing for military transfers without penalty. I wish I was aware of this up front, as I would've thought twice about renting to someone who is likely to be relocated during the lease term.

Re-leasing the unit is going to require me to make any necessary repairs and pay one month's rent to the management company for finding a new tenant. In short, this early termination is likely going to wipe out my cash flow for the first year-and-a-half of the lease. It's a huge bummer to have both repair and re-leasing expenses this quickly.

As a landlord, what are my rights here?

- REI is saying the tenant is only responsible for this month's rent, but in my brief googling, it appears they are also responsible for next month's. Is that correct?

- To prevent this in the future, is it within my landlord rights to tell the management company to only lease to a civilian? I want to support the military, but also don't want to lose money on this investment, which will happen if I keep putting in tenants who are likely to get transfers.

I'm sure there are seasoned landlords who knew about this rule, but it had never been brought up to me; I was a little blindsided by the financial hit. Some of it may be recouped by a higher rental fee for a new lease, but it doesn't look like rental prices have increased significantly in the area.

@Chris Clothier, would you mind weighing in?

You need to self manage.  I doubt a reputable property manager will screen military applicants for you.  This would risk them having a reputation of "discriminating against vets" with lots of google reviews about it. 

I also recommend you reconsider having this attitude.  No landlord likes vacancies and unexpected turnovers.  

  Military personnel already put themselves at risk at the direction of millionaires and billionaires with great salaries, housing, healthcare, and security.   How selfish is that for civilians to reap the benefits of their sacrifices while trying to avoid renting to them?

Not all landlords are millionaires or billionaires. I am not. Ultimately, I made this investment to ensure I have housing and can put food on the table when I'm older. And I want the same for our military. I appreciate their sacrifices, but on a more macro level, if I'm bringing this up, there must be other landlords who quietly think it to themselves (and think twice before renting to the military). This could be easily resolved if the government just covered the landlord's costs in the event of an early lease termination.

 No. No, no, no, no, no. 

This is a "You" problem Corey, flat out. The excuses are just that excuses, and I think you know that and are just scrambling for ways to cover that, to lie to self. 

It's obviously ridiculous to EXPECT that a property has no maintenance at all, nothing breaks, nothing wears out, nothing at all for 4+ years, I don't even expect that in new construction units, it's why warranties exist, very literally. And to expect a tenant is at minimum 4yrs+ right out the gate, if not 5, is beyond bonkers. HOPE, sure, fine, hope away, but expect, no, I don't believe anyone is that clueless. 

I also notice a statement complaining that "now I am going to have to make repairs" meaning you KNOW there is defective/broken things, to an extent that nobody else will lease it without being repaired, and you intentionally neglected it and the tenant living in such, that is morally corrupt and illegal in many if not most places, add on fact of doing such to active duty service member I think is despicable.   

No, I don't see many, several or even any others thinking the same. I find that an excuse to justify actions and thoughts on such. 

What I do believe many others think is exactly what I am saying here, possibly with a few expletives in addition. 

As an added note of thought on this, I won't work with anyone who ever mutters something in manner that you stated, I am being serious. It does not matter how much $ you have or offer, not a chance, it get's a person in the "Dead-2-Me" file. I won't do business, associate, even acknowledge such a person. I know I am not alone in this, which means more loss of $$$$ from the manner of thinking. 

If you approached this differently the results could have been wildly different. Did you think about talking to your tenant and asking if he knows anyone else who would be decent and interested in taking over there lease? I have not experienced a single duty station that doesn't have a long list of people ready to jump on a decent place double-time. No vacancy time, no tenant placement fee required, just a modification of lease holder. Done. 

The summary is you screwed up in your investing and expectations, and are seeking to take it out on another. If they told you average lease terms were 88 months would you have blindly taken that as the gospel? Or done some D.D. to find what market averages were in that properties location? 

You seem very combative given that I explained the situation pretty clearly. You don't have to worry about putting me on a "dead to me" list because I wouldn't hire you anyway.

As I explained, there was a pro-forma from the turnkey company I used. This company has one of the best reputations in this space. The pro forma outlined the expected vacancies and maintenance, which amounted to 5 and 4 percent, respectively. Yes, there will need to be repairs whenever there is turnover. And no, that doesn't mean I knowingly left a house in disrepair. Actually, quite the opposite. But thank you for calling me "morally corrupt" when I provided completely renovated housing to someone for 18 months.

While there was no guarantee someone would stay for 5.5 years, that has been the norm in this company's portfolio. Turning over the house every 18 months is not what is expected in this investment, though it obviously could (and did) happen. 

As an investor, I'm trying to maximize my return. I didn't make any mistakes in my calculations. All I said was that I didn't know that military personnel could cut a lease short, and that it's odd the government doesn't compensate the landlord in this situation. 

You're making broad and ignorant accusations. There is nothing wrong with the house. I've never even seen it in person. It was purchased and renovated by REI Nation, who has a great reputation. There likely aren't any major repairs unless the tenant did something I'm unaware of. It was thoroughly inspected when I purchased it and it hasn't had any issues. But anytime someone moves out, there's going to be cosmetic work to be done. And every time the house needs to be re-leased, it costs a month's rent. It is not *bonkers* to expect someone to stay in the place for 5+ years since that is the norm under REI, largely because they have top notch management that keeps tenants happy.

You need to take a deep breath before writing in a public forum with such vitriol. I'm an investor who closely read the pro formas and am experiencing someone breaking the first lease I've ever had mid-term. I apologize if I am not an expert in everything real estate, but I have a full time job and hired a turnkey company because I wanted a passive investment.

I have no doubt the place will be rented again quickly. My concern was simply that I am paying a re-leasing fee and for any cosmetic repairs every time someone moves out, and I was expecting a tenant to stay longer than 18 months since they signed a 24 month lease. And because the portfolio norm is 5.5 years, it was surprising to have it cut this short. 

[Corey M.]

Quote from @Account Closed:

Quote from @Corey M.:

I purchased my 1st investment property from REI Nation last year and a major selling point to me was that the average tenant staying for ~5.5 years. This morning, after ~1.5 years, I was informed my tenant is terminating the lease early, without penalty, because of a military transfer. I looked in the lease agreement and there is no language to support this move. However, there is apparently a federal law allowing for military transfers without penalty. I wish I was aware of this up front, as I would've thought twice about renting to someone who is likely to be relocated during the lease term.

Re-leasing the unit is going to require me to make any necessary repairs and pay one month's rent to the management company for finding a new tenant. In short, this early termination is likely going to wipe out my cash flow for the first year-and-a-half of the lease. It's a huge bummer to have both repair and re-leasing expenses this quickly.

As a landlord, what are my rights here?

- REI is saying the tenant is only responsible for this month's rent, but in my brief googling, it appears they are also responsible for next month's. Is that correct?

- To prevent this in the future, is it within my landlord rights to tell the management company to only lease to a civilian? I want to support the military, but also don't want to lose money on this investment, which will happen if I keep putting in tenants who are likely to get transfers.

I'm sure there are seasoned landlords who knew about this rule, but it had never been brought up to me; I was a little blindsided by the financial hit. Some of it may be recouped by a higher rental fee for a new lease, but it doesn't look like rental prices have increased significantly in the area.

@Chris Clothier, would you mind weighing in?

 Your problem is not the tenant. It is believing Pro Formas. 5% Vacancy doesn't mean each and every year its exactly 5%. But even on average it going to cost much more than 5% of rent annually. 18 mo average occupancy is a fair assumption. Then add in 1 month vacancy and 1 month leasing cost. So the cost is 2 months rent every 18 months. Add that make ready costs on average 1000/turn. Then for a property with 1000 rent you are looking at 3000$ every 18 months or 18% for vacancy costs. Not 5%. The problem is no turnkey provider will be able to sell anything with the real numbers. And 5.5 years is highly unlikely to be a typical tenancy.

I don't agree with "no turnkey provider will be able to sell anything with real numbers." REI has plenty of happy investors who will attest to the long tenant stays. And while any individual unit can churn quicker, the point of having them sign a two year lease was to ensure a guaranteed two year's pay. Typically, if a tenant leaves early, there is still a fiduciary duty for the tenant. Again, totally understand there is a military exemption, but it is surprising that the landlord isn't compensated as I'm the one dealing with the financial consequences.

[Joe Norman]

Quote from @Patricia Steiner:

And, "military tenants" are not a protected class according to the Fair Housing Act.  

This is correct from a Federal fair housing level, but many states (including Maryland) do include Source of Income as a protected class. While this was intended to prevent landlords from denying voucher tenants, the broader effect is that landlords can not consider a tenant's occupation at all - including whether or not one is active duty military.

[Theresa Harris]

With any tenant, they can leave mid lease.  Look at it as an opportunity to get rents up to market value and move forward.