New Landlord issues

10 Replies

Hi all, 

I am about to close on my first multifamily (a 4 unit property this Friday) and become a brand new landlord. I am looking forward to it but im also apprehensive. I have read just about every blog on BP related to landlording and am reading books on it also.

My question is regarding kicking people out or potentially evicting them. All my tenants are month to month right now (all come with building) and the only open unit is the owners unit. However the owners unit is a 4 bedroom/2 bath which is way too much space for just me and my fiancee. Also i can get about 2k a month for that unit in my market (compared to 850-1k or so for the rest of my units).

Because of that i would like to move into one of the 1 bed/1 bath units that is currently occupied. Since the tenant is month to month I learned i can just tell them i am not renewing their lease and they have to be out by the end of June (working with my lawyer to give them the notice). However even though i know this needs to be done i am still apprehensive of doing it (i have been told im too nice to people). The guy is a hoarder also (could barely walk through the apartment) so he probably should be kicked out anyway.

I just wanted to get some advice on how you guys deal with having to kick people out and so forth. I know its necessary but it doesn't make it easier.

Thanks

First off... congrats on your income property! It sounds amazing!

I should preface this with the typical chatter about not being a lawyer and not being qualified to give legal advice... so there it is.

As a landlord, kindness is a double-edged sword. I, like you, am a good natured person and hate hurting anyone's feelings. I believe in being nice and kind and the world will reward that.

At the same time... you are now a business and you have to think like one. Your idea of taking residence in a smaller unit and maximizing your income is great. Is there one particular reason that this tenant is the one you are choosing to not renew with?

One option available to you is to ask all tenants to sign 1 year leases and sometimes the tenants will weed themselves out. Of course, you run the risk of everyone leaving. If you're open to residing in other units, I would talk honestly and openly to the tenants. Maybe one is willing to move... especially if you offer them their last month for free. Sure, you lose a few bucks on the short end, but gain more than enough on the back end by leasing the larger unit.

Lots of options for you. State law will dictate the notice you are required to give and you can use some of that kindness to make the move easier on a tenant if you choose to.

Again, I would recommend trying to lock them in to annual leases if you can. That ensures 12 months of income and decreases the chances of losing money to vacancies. It also doesn't hurt to offer a small reduction $25 a month or so, if they'd sign an 18 month lease... that way you can stagger some of your leases and not have all of them up for expiration at the same time (if everyone moves out, you are in a world of hurt!).

Hope this has helped in some way. 

@Seth Nadreau

Thanks for the response. I chose that tenant to kick out for two reasons. First of all he is a hoarder. I asked for him to clean up the apartment as part of the contract conditions after the first walkthrough a month ago. Just did the final walkthrough today and it is still in shambles (paper everywhere and can barely walk around in there). Im currently talking to my lawyer to see what the best course of action is against the seller. Secondly my fiance prefers a top unit (the two top units are a 1 bed and 2 bed and the 2 bed makes more money so i want to rent that out)

I plan on having all the tenants switch to yearly leases (they dont have a choice on that matter cause my insurance is more expensive if they are month to month). All of their rents are 20-40% below market so they are going up (they knew previous owner and she had owned the building for over 20 years). The guy i want to kick out pays 625 on a 1 bed that is running 875-1K in my market.

The good thing is that i factored all this in and can afford to pay for the building indefinitely if i have no tenants (great w2 job) so i have leeway if they leave and can take the time to get a quality tenant (even though its not ideal for cashflow if they do because i want to buy more property).

@Nnabuenyi Anigbogu , congratulations on the new property AND having an attorney to help you get through the legalities of all this. And you found BP, which will help you the rest of the way.

I always recommend everyone read anything @Eric D. has ever written. He is a fair but tough landlord, and has taken a horrible complex and turned it around to a wonderful one, simply by putting rules in place and enforcing those rules.

I like @Seth Nadreau 's advice to talk to them all. But first, find out how they qualified for the original leases. Decide how you want to qualify tenants, income 3x rent, credit score above 650, no pets, etc. and then apply those criteria to the current tenants. If they don't pass, I would give them notice that you are not renewing their lease. Since they are already currently living in the property, I would pay for those yourself, rather than asking them to pay for a background check to live in a place they are already living. 

If they do pass your background check, tell them you are increasing rent, effective 1-2 months out. Month to month leases in my state require 30 days notice for any change.

As for the hoarder, you have already glimpsed how he treats your property, and how he responds to your requests. Get him out as soon as you can. He will be nothing but trouble. Prepare for trouble getting him out, so you aren't blindsided when you go to take possession on the date he is to be out, and he is still there with all his stuff.

But hey, you will get to learn how to do an eviction! 

Good luck! Keep us posted.

Mindy Jensen, Real Estate Agent in CO (#FA100049656)

@Mindy Jensen

 Thanks Mindy!

I would give the person at least 60 days to move out.  You may find that keeping them there, and moving into a different unit would be more cost effective.  There may be a lot of work to do in that Hoarder unit.  A hoarder will never leave on their own, and generally are low maintenance.

Find the weakest link, and get rid of them.  Who has the lowest income?  Who pays late the most?  Who has the most complaints?  Who smokes? Who has a lease coming due and may move anyway?

First of all, being the landlord/owner and living in the complex is a recipe for headaches. Add to the fire you are nice- well, I think you will loose your shirt and your mind..

Get a third party property management company to hand all the tenants. You are one of them-a tenant.. You can filter to the PM who you want to not-renue and who you what to renew as well as keep an eye on the property.. Plus, the PM company should be up to date on all the rules and regulations, as well as they are the "bad guys" when you have to evict or even worse, set-out. You will have piece of mind and no calls and no drama.

@Nnabuenyi Anigbogu I think you are on the right track. Seems like you have everything under control, and I know it sucks to kick somebody out of one of your units. However, as a landlord, you must....MUST operate as a business. There were times when someone wouldn't pay the rent and they would come to me with a sob story and my response to them was, "Hey, I have to eat too!" Of course that didn't work, but the eviction process did. With that said, use your common sense, or business sense to determine when you should be nice, and when to stand firm and adhere to your business principles. 

Here is what you can do as sort of a measuring stick to determine what level of kindness you should display. Write out all your business principles in a contract format, or a check list. Then sign it, and review it when you need to make these decisions. Do not compromise your integrity. All the other advise in this post is very sound.  OH and CONGRATS! on your deal. 

@Nnabuenyi Anigbogu

I would work very closely with your attorney for the eviction process. You are in Chicago which means Cook County. I think we have the slowest eviction process in the country. No Joke. Last I heard the Cook County Sheriff was 18 month behind on evictions.

I would start with giving all the tenants you want to leave proper notice for the month-month arrangement they are on now.

If after proper notice they don't leave in about 60 days (because it takes time to pack and find a new place), I would seriously consider Cash for Keys. As a Landlord it is like nails against a chalk board but it will ultimately save you time and money, especially in cook county.

Just based on what I'm hearing here (i.e., there may be other issues you haven't mentioned, like "I can't stand Hoarder Dude and I would get an ulcer if I had to walk past his door every day.").....

Give notice to a different tenant and move into one of the  other units. leave the hoarder in there and raise his rent. You'll make more money on his unit to recoup your eventual reno costs. He has no real choice but to pay it - he's on month-to-month, and his lifestyle/mental illness/whatever will prevent him from going elsewhere.

If you evict him right away, there's likely to be a lot to do to that unit, and you're going to have to lay out quite a bit of money on it. Raise his rent substantially - like $200/mo - and leave him there for awhile, and you'll recoup some of those repair costs via increased rent.

I am a remodeler who has renovated some hoarder homes. (In fact, this one goes on the market today - the most challenging project I've ever taken on. Here's the listing.) Hoarders can create anywhere from a little damage to lots of damage to a suite. Systems can deteriorate because they can't get to them. But if he's been there for awhile, things aren't likely to get that much worse, so you might as well recoup some of your reno costs.

Originally posted by @Nnabuenyi Anigbogu :  Something that we do when it's time for a month to month tenant to leave is we help them find their next property.  It's like cash for keys but goes one step further.  This works if the tenant is a good paying tenant & you have to have a gentle touch.  It takes a little more work but it's less costly and faster than the eviction process.  It lets's the tenant know you have some compassion.

Thank you all for all the advice. I am considering all my options and will make a decision on the best route to take.

By the way I just officially CLOSED this Deal. Time for the fun part.

As for the tenants there are 3 of them. 1 i like and 2 i would not mind getting rid off.

tenant 1 - pays like clockwork and unit is extremely clean. I will have to raise his rent though cause its 250-350 below market
Tenant 2 - older lady with multiple cats (i think 3) whose house is almost a cat shrine. I am going with a no pet policy so would eventually like to get her out but at least she pays on time all the time. Need to raise her rent too.
Tenant 3 - The hoarder. Pays like clock work but unit is like navigating an obstacle course . He is the only one with a sec deposit. Would love to get him out ASAP. Also his rent is 300 below market. His unit is the most outdated (10 yrs) so i want to live in that one so i can slowly update it myself before i move out next year.

I am thinking of combining a couple of suggestions given such as cash for keys and pricing the tenant out by increase the rents to market rate. If i can price them out that would be ideal. I can also see what i can do in terms of helping the hoarder find a new place.

Thanks again for all the suggestions.

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