Slow Paying tenants - thinking about just selling the place.

Acworth, GA · Member since 2017 · 51 posts · 22 votes

I have a 2BR/2.5BA townhouse that I have had the same tenants in for a little over two years. They've been late on the rent forever, and have slowly been slipping further and further behind. I am just not seeing any progress toward getting caught up so my options are to terminate them living there (they're on month-to-month now because I did not resign another lease) or I am considering selling the townhouse to be done with them and free up the equity. Curious to hear some thoughts input from the hive mind? I bought the townhouse in June 2019 for $158k. It is worth approximately $250k - $260k (Zillow at $262k). Rent is currently at $1725/mo. Thoughts?

1 Reply

86 views

Most Popular Reply

Colleen F.Pro Member

Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes

@Duane Gunkler Give a notice to quit as of x date per your state law. Confirm they will be gone. Concurrently file for eviction. Don't play with it. They won't catch up and they won't pay no matter what they promise.

7 Reply

See this reply in the discussion

34 Replies

Jump to latestLatest

Sort by

Bonnie LowPro Member
Lender · Asheville, NC · Member since 2016 · 1k+ posts · 1k+ votes
3y
I have to second what @Noah Bacon said - it's tempting to pull out that equity but it's difficult to find cash flowing deals right now so I'd be inclined to first get your back rent up to date and second serve your current tenants notice that you're terminating the lease. There's no reason to put up with late payments and certainly not consistently late payments. I don't know where your townhouse is, but if you're wanting to generate more cash flow, you might consider renting it out as an MTR to travelers. You will likely generate 1.5x your current long term rents (though check your specific market to see what similar properties are going for on Furnished Finder). You'd have the cost of fully furnishing the unit, but a 2/2.5 is actually a very attractive unit configuration for traveling medical professionals and digital nomads so long as it isn't prohibited if you're in an HOA. Good luck to you!
[email protected]
1 Reply
Eric FernwoodBusiness Member
Realtor · Las Vegas, NV · Member since 2014 · 1k+ posts · 1k+ votes
3y
Hello @Duane Gunkler,

Based on your post, you are self managing. I wrote an article a while back on seven ways to fail in real estate investing. One of the seven ways is self management. No matter how much you think you can save by managing your own property, you will lose a lot more.

I self management viable? Under the right conditions, yes. For example, I had a client who wanted to self manage the three properties they purchased from us. I talked them into letting the property manager we work with manage them for the first year.

At the end of the first year, two of the tenants were reliable and the client took over management. The third tenant was unreliable and they left it with the property manager who replaced the unreliable tenat. The second tenant was reliable and they took over management at the end of the year.

We have delivered hundreds of investment properties and dealt with thousands of sellers in the process. One consistent pattern I have noticed is that when people sell properties with tenants, it is usually due to poor tenant performance. Almost every time, the cause of poor performance was self-management.

I you would like to learn how to to select a good property manager, let me know. Spoiler alert: You probably can’t afford a property manager with a good Yelp review.
[email protected]702-358-8884
FERNWOOD Team, KW VIP Realty520 Reviews
Website View Page
0 Reply
Bridgette Freeman
Real Estate Broker · Mcdonough, GA · Member since 2016 · 9 posts · 5 votes
2y
Humm I agree with Noah. The other viable option is to secure a Property Management company. An owner just signed with us recently with a tenant 6 mos behind that she could not get out. We got involved and she was gone in less than 20 days. It makes a difference. There's a much better return on your money versus not paying a property manager and not getting paid.
1 Reply
Darwin Beloate
Member since 2018 · 6 posts · 0 votes
2y
Duane - You posted your situation four months ago.... Curious as to what you decided to do.
0 Reply
Duane GunklerPro Member
OP
Acworth, GA · Member since 2017 · 51 posts · 22 votes
2y
Quote from @Darwin Beloate:

Duane - You posted your situation four months ago.... Curious as to what you decided to do.
I sent a notice to quit and let them know that I want to be empathetic to their situation, but I needed them to get current or I’d have to move forward with eviction process. They are now back current on rent, but will be on a pretty tight leash.
0 Reply
Darwin Beloate
Member since 2018 · 6 posts · 0 votes
2y
Good for you! Glad that the situation has improved!
0 Reply
Chris Rich
Property Manager · Orlando, FL · Member since 2023 · 109 posts · 64 votes
2y
Quote from @Duane Gunkler:

I have a 2BR/2.5BA townhouse that I have had the same tenants in for a little over two years. They've been late on the rent forever, and have slowly been slipping further and further behind. I am just not seeing any progress toward getting caught up so my options are to terminate them living there (they're on month-to-month now because I did not resign another lease) or I am considering selling the townhouse to be done with them and free up the equity. Curious to hear some thoughts input from the hive mind? I bought the townhouse in June 2019 for $158k. It is worth approximately $250k - $260k (Zillow at $262k). Rent is currently at $1725/mo. Thoughts?
In my experience, when I have self-managing landlords come to us because they're running into this issue you are having, the tenants will cooperate at first, and then either stop paying and move out, or have to be evicted. Some tenants are used to routinely paying late and take advantage of self-managing landlords. The hard part is once you let them start paying late without penalty, they continue to do so.

I'm not sure selling solely because of a bad tenant is the best idea. I highly doubt you would be able to replicate the same type of cash flow scenario currently. I'd have a "come to Jesus" meeting with the tenants, and if they don't shape up, evict and find new tenants.

1 Reply
Duane GunklerPro Member
OP
Acworth, GA · Member since 2017 · 51 posts · 22 votes
2y
Quote from @Chris Rich:

Quote from @Duane Gunkler:

I have a 2BR/2.5BA townhouse that I have had the same tenants in for a little over two years. They've been late on the rent forever, and have slowly been slipping further and further behind. I am just not seeing any progress toward getting caught up so my options are to terminate them living there (they're on month-to-month now because I did not resign another lease) or I am considering selling the townhouse to be done with them and free up the equity. Curious to hear some thoughts input from the hive mind? I bought the townhouse in June 2019 for $158k. It is worth approximately $250k - $260k (Zillow at $262k). Rent is currently at $1725/mo. Thoughts?
In my experience, when I have self-managing landlords come to us because they're running into this issue you are having, the tenants will cooperate at first, and then either stop paying and move out, or have to be evicted. Some tenants are used to routinely paying late and take advantage of self-managing landlords. The hard part is once you let them start paying late without penalty, they continue to do so.

I'm not sure selling solely because of a bad tenant is the best idea. I highly doubt you would be able to replicate the same type of cash flow scenario currently. I'd have a "come to Jesus" meeting with the tenants, and if they don't shape up, evict and find new tenants.

I agree. They will be on a very short leash moving forward. I tried to be empathetic for as long as I could but it had reached a breaking point. There were some other extenuating circumstances that had me considering selling, but that was NOT the ideal path I wanted to take. Thankfully I have resolved those and no longer need to free up the equity in that property.
1 Reply
Alecia LovelessPro Member
Member since 2019 · 3k+ posts · 2k+ votes
2y
@Duane Gunkler If your market is like my market you won’t find anything that cash flows better with just $100,000 for a down payment if you sell the property.
With both prices and interest rates being up I’m not sure you can find a better deal. Hire an eviction attorney and get the process going.
Write off the fact that you won’t be able to get your two months lost rent and learn from this. If you don’t think you can do better next time you can probably hire a good property manager for less than your lost $3500 rent money.
0 Reply

Join the conversationCreate a free account to reply, vote on answers and follow this thread.