When to overlook tenant problems

Question

I have some tenants I am considering kicking my out. They’re really great people, they’re clean, their dogs are well behaved but they just informed me that they had 3 people living there for 4 months. They have only been in the unit 6. I purchased the house in 2021 that was built in 1860…it’s cosmetically well done but I’ve struggled to keep a renter for more than 12 months. It’s drafty/quirky in a neighborhood that attracts young people. Because it’s at 2.8% interest, it’s my most profitable rental ($650 cash flow per month). I’m over there often - frozen pipes, backed up garbage disposal, a perpetual ant issue that all tenants have faced…but I really think the neighborhood is appreciating and constantly struggle with selling. These tenants have expressed a desire to stay long term and have been much more forgiving of the house’s quirks than anyone else. Also they’ve paid on time, but when do you say enough is enough and sell the property from under them? Maybe raise their rent? Maybe give them a warning on keeping people there? Would that encourage them to be dishonest in the future? How would you handle this one?

Chris Seveney · Answer

When determining what to do with a property, I would never consider the tenants. What I mean by that is if I need to sell my property and it is in my best interest, I will sell it. Tenants have a lease and new owner must abide by it

regarding these tenants - sounds like you are turning a blind eye but just remember give them an inch and they will take a mile.

Colleen F. · Answer

@Melissa Stanley if the extra people are gone just change the code and speak with tenant, they probably learned their lesson if they want the code changed.  not sure if it has a quirky layout, some old houses do but maybe it needs a few behind the wall fixes (frozen pipes) and garbage disposal removal  will solve backups. If its profitable fix those.  less maintenence calls will likely decrease turnover.

Unless you had tenant caused frozen pipes that is a different issue.

James Wise · Answer

All things considered doesn't sound like you've got a tenant problem at all. In regards to raising the rent, if the market has already told you it's hard to keep a tenant there longer than 12 months I don't see why you're thinking about raising rent on a the property when you've presumably got someone in there at the max rent. Increasing the rent in this situation sounds pretty stupid.

As for selling the house, that's got nothing to do with the tenants. If you want to sell it, sell it. What they think about it is irrelevant.

Chase C Henderson · Answer

Melissa,

I think some of the details can help make your decision. How did you find out about this additional occupants? Did they come forward, just a little late or did you find out during an inspection. Does the unit support that many people? I.e if its a 400 sq ft studio, that a problem that needs addressed. If its a 3 bd house, well its a smaller problem. Did you let them know when they moved in that if anyone else moves in they need to tell you? If yes, this is a problem, if no then set the boundary moving forward. Finally, I think the greatest factor is what type of property/tenants do you lease to? If they are work force, then a strong hand can be beneficial, if they are working professionals like nurses and they moved a coworker in, id be a little less concerned.

In my experience it is always best to be up front with tenants, let them know this third person needs to go through the application process if they are going to live there, (assuming its not a child). Let them know they will be charged an normal application for that person. It's not just for your protection but theirs. You should do a background and credit check and more. That way the existing/original tenant know that their new roommate isn't a safety hazard or liability.

*** Side bar love to see Dayton investor on here and glad to see you have such strong cash flow on this deal!! Way to find a good project!

Chase C Henderson · Answer

In regards to selling I think you need to look at a couple things.

1. Will loosing this Cash Flow Negatively Affect yourself and your families way of life?

2. Is dealing with the tenant issues negatively affecting your or your family health/relationships? ( My favorite representation of this fact is if someone said I will give you a million dollars tax free, but you die tomorrow would you take it? This scenario says to me, my/your health is more important then any cashflow or positive return)

3. Where are you going to invest your proceeds? If you are happy healthy and netting lets say a 10% cash on cash return on cash flow. where are you going to invest your proceeds of the sale? Does that place net the returns you want or need to meet your specific goals? Nothing wrong with a 4% CD if your sitting on a IRA and 62. Idk your situation, have a plan, don't just sell something you like for a small frustration and regret it later

In regards to the tenant,

I would if; you haven't already reiterate the policy to the tenant moving forward. Also, we charge $75.00 to "rekey" a unit for our workforce units, so maybe this is something you look at in the future as a we will reprogram the lock, but it will cost a fee (whatever you think is enough to make a point, but enough that they can afford). Also, generally, when we move people in, we tell them they need to notify us for these reasons if the occupancy changes "Saftey- i.e if the fire marshal calls me a 1 in the morning asking how many people are inside I can give them another, Legal- We as landlord are required to report our occupants to the City, this allows them to solve any occupancy disputes and keep our communities safe and final protect you then tenant- so if a roommate comes in and damages the place, you won't be held fully responsible for the damages, they will be held responsible too as we all know if someone doesn't have skin in the game they are more likely to make  a mess of things"

In whole, the extra tenant issue is not something I would loose a paying, well kept tenant over. Unless, that extra occupant did something worth removing them over. I understand the situation as a whole and the upkeep of the unit has been burdensome, but just my thoughts.

When to overlook tenant problems

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