Delinquent tenant isn't following through on payment arrangements

Delinquent tenant isn't following through on payment arrangements

Real Estate Investor · Orlando, FL · Member since 2016 · 8 posts · 1 vote

I have a tenant that hasn't paid rent on time since the first month of their lease. Rent is due on the first with no grace period. We extended the due date until the 7th with no late fee to help out. The tenant still paid late and began making partial payments with no advance notice.  I notified the tenant that no more partial payments would be accepted after their rent check bounced. Last month I served a 3 day notice and they paid on the 4th day but still owe 2 months of late fees and the bounced check fee. I spoke with the tenant in person to discuss the problem and come up with a resolution.  He claimed to have lost his job but had started a new one and will be fine soon. We arranged (not in writing) for them to pay half the rent twice a month without including past due fees for the next 3 months and then we will re-evaluate the past due fees at that time. The tenants were very happy about that arrangement. Now this month comes and he didn't pay the first half of the rent on the agreed date, which was Aug. 26th. The second half of the rent was to be payed on the 9th. Today,  Sept.  2nd, he I put a money order in my mailbox for part of the first half of the rent and said he would pay the rest on the 9th. My fear is that on the 9th I will only receive part of the remaining rent and then unpaid rent may start to roll over each month.  I thought I nipped it in the bud last month with the 3 day notice and the in-person discussion but I guess not. My instinct is to refuse the partial payment and give them another 3 day notice on the 8th which includes all past due late fees. I've been through an eviction before. It cost us thousands of dollars and the vengeful tenants trashed the house to the point that we should have pressed charges on them. 

I don't want to evict these tenants anymore than they want to be evicted. This is a large family house that could sit empty until May or June, when school lets out again. I don't know what to do.  I want them to know I'm serious and not afraid to evict them but I also want to keep them in the house until the spring at least if I can. Any suggestions? 

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Rental Property Investor · Phoenix/Lima, Arizona/OH · Member since 2012 · 4k+ posts · 4k+ votes
10y

Evict and be done :)

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  • Investor · Hyattsville, MD · Member since 2012 · 822 posts · 441 votes
    10y

    The problem is you've forgiven payment of the late fees, which has not taught the tenant that there are consequences for late rent. When they have not paid the bounced check fee and associated late fees, that means they are not current with their rent and still is considered delinquent. Now you are offering an amnesty of paying late fees for the next three months, which doesn't create a path where they can catch up. You'll still be in the same situation of them having to pay the late fees and bounced check fees at that time I don't expect anything to change based on this arrangement. You're just delaying the pain and pressure of having to address these outstanding fees.

    How about you have a frank talk with your tenants in person and tell them that you will not be accepting partial rent and the full rent and all prior late fees are due at this time. Tell them you have a mortgage to pay and the bank doesn't accept the same excuses used by the tenants when payment is late and you can't pay. The bank will just foreclose. If they lost their job, their ability to pay future rent or late fees is still going to be unlikely. There is not much of a point in being flexible with a tenant with no source of income. Their claims of a new income source does not appear genuine. If they don't appear likely to become current in a few days, I would encourage them to move out within a certain timeframe like 2 weeks without fear of legal consequences and be firm about the consequences. Tell them that your eviction attorney is very good at what they do and that it is last resort. If all else fails, have your attorney begin eviction process. waiting until spring does not appear like you'll be in a better position 6 months from now.

    also take a look at these resources on non-payment of rent:

    https://www.biggerpockets.com/renewsblog/2014/01/2...

    https://www.biggerpockets.com/renewsblog/2012/12/0...

  • Investor · Milwaukee, WI · Member since 2014 · 811 posts · 420 votes
    10y
    I'd get them out asap. They are just going to continue to play games with you and get further and further behind. Maybe see if they will leave voluntarily. Unlikely but you can try. I don't know Orlando but I can't imagine that you won't be able to rent it until next May
  • Property Manager · Orlando Kissimmee, Daytona Beach & Cocoa Beach · Member since 2016 · 331 posts · 166 votes
    10y

    @Christina Dunn Are you owner/ landlord? When property manager is involve, things go differently. By using software, you generate the notices, you complete detailed screening, and they tenants take you more serious. If you the owner, they know that  no one is above you. I had tenant like this once. She gave me 50% of the rent. I told her that  homeowner will not accept it, and we both will lose the contract: I , management contract, and she, leasing contract. Perhaps you should try to put this stress on property managers' shoulders.

  • Rental Property Investor · Phoenix/Lima, Arizona/OH · Member since 2012 · 4k+ posts · 4k+ votes
    10y

    Evict and be done :)

  • Real Estate Investor · Orlando, FL · Member since 2016 · 8 posts · 1 vote
    10y

    @Jeff Bridges thank you so much.  Your input is very helpful.  I am going to utilize the links you sent me.

  • Real Estate Investor · Orlando, FL · Member since 2016 · 8 posts · 1 vote
    10y

    @Darren Budahn I agree with you that they are going to continue to play games. The problem is the only time this house was empty during the winter months it stayed empty for 5 months which caused a lot of debt for us as it's an expensive house. As it is, it doesn't really create much income but I'm trying to hold on to it for my children. We also have a second rental house that didn't get rented before school started due to some mold we found during cleaning. That house stayed empty the entire year. Fortunately that one has a low mortgage so it didn't kill us. But you can see my fear. The rental market has changed since then so I'm hopeful that it won't sit empty that long.

  • Real Estate Investor · Orlando, FL · Member since 2016 · 8 posts · 1 vote
    10y

    @Valentina Naumenko My husband and I are the owners.  I don't want to hire a management company because I really love managing the property myself and my goal is to obtain more rental properties.  I feel like I'm good at it.  I'm respectful to the tenants but I am also not shy about enforcing the lease.  I do credit and background checks. This house is also in an upscale guard gated community that requires their own background check be done and they must approve the tenant before I can rent to them. I do most of my communication in writing on official looking forms that are very to the point. All noticed are sent certified with return receipt. I spoke with these tenants in person because I needed to get a feel for whether they were actually trying or if they were looking for a free ride until they got evicted.  They are a couple in their 40s with no children in the home so I don't have that guilt to worry about. They were referred by the last tenants I had who were absolutely wonderful.  They did have questionable credit but blamed it on divorces. But I've rented many times to questionable credit without incident.  The house is expensive and income had to be fairly high.  

    Although I will still manage the property I have listened to your advise and from now on I will post as a manager instead of an owner.  My last name is different from my husband's so they don't write their checks to me anyway. Thank you for your help. 

  • Real Estate Investor · Orlando, FL · Member since 2016 · 8 posts · 1 vote
    10y

    @Ben Leybovich Thank you.  You may be right! 

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Christina Dunn  if your houses are sitting vacant that long your rent is way too high.. lower the rent get someone in.. I see this often.. someone thinks the rent should be 1200 and it sits for a few months when in fact if they lowered the rent to 1100 it gets rented..  3 X 1200 = 3600/100 = 36 months  takes you 36 months of rent to get back what you lost.. get aggressive with the rental amount get it rented and that will keep it rented

    I am about out of the rental game personally. but my way of managing is probably unique but when I put someone in at a little under market I NEVER raise rent. this has kept tenants in my few remaining homes for over 7 years in one case.  that conistant cash flow is how you make it.. no turn over cost no angry tenant trashing the place.. so on and so forth.. the fair market rent is probably 200 a month more than what I charge now.. but really its just small dollars in the big scope of things.

    @Ben Leybovich my Tesla  has a Vin # and is being assembled LOL.. I like to say I did not buy a car I ordered one.. I also went with the S and a pretty stock one.. I did not want to pop the big dollars in case I don't like it.. but I think it will be cool ride.  In my work a day world here in PDX I simply don't drive more than 200 miles in a day.. so thinking the cheapest one will be fine.. I did upgrade the leather and went with the full auto pilot.. being a pilot I dig that ... of course being a pilot and having George going wonky on me a few times over the years I will watch it like a hawk.. :)

  • Los Angeles, CA · Member since 2016 · 160 posts · 21 votes
    10y
    Christina Dunn Hi Christina, I was wondering why you keep getting stuck with these kinds of tenants. Is it the neighborhood? Are there things that you are missing in your screening process?
  • Rental Property Investor · Phoenix/Lima, Arizona/OH · Member since 2012 · 4k+ posts · 4k+ votes
    10y
    Originally posted by @Jay Hinrichs:

    @Christina Dunn  if your houses are sitting vacant that long your rent is way too high.. lower the rent get someone in.. I see this often.. someone thinks the rent should be 1200 and it sits for a few months when in fact if they lowered the rent to 1100 it gets rented..  3 X 1200 = 3600/100 = 36 months  takes you 36 months of rent to get back what you lost.. get aggressive with the rental amount get it rented and that will keep it rented

    I am about out of the rental game personally. but my way of managing is probably unique but when I put someone in at a little under market I NEVER raise rent. this has kept tenants in my few remaining homes for over 7 years in one case.  that conistant cash flow is how you make it.. no turn over cost no angry tenant trashing the place.. so on and so forth.. the fair market rent is probably 200 a month more than what I charge now.. but really its just small dollars in the big scope of things.

    @Ben Leybovich my Tesla  has a Vin # and is being assembled LOL.. I like to say I did not buy a car I ordered one.. I also went with the S and a pretty stock one.. I did not want to pop the big dollars in case I don't like it.. but I think it will be cool ride.  In my work a day world here in PDX I simply don't drive more than 200 miles in a day.. so thinking the cheapest one will be fine.. I did upgrade the leather and went with the full auto pilot.. being a pilot I dig that ... of course being a pilot and having George going wonky on me a few times over the years I will watch it like a hawk.. :)

     Christina - lower your rent :) I tend to never raise rent as well, on good tenants. Economic losses are a big, big drag - more than most realize...

    Jay - I think you've made a good decision. I think X is overly complex and under-engineered in some ways. You'll be very happy with an S. 

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Ben Leybovich we have a MB  SUV so it would also be like buying another SUV... the S replaces my Hyundai  LOL... I buy a new car every two years on average my wife keeps hers about 4 to 5.. we always buy brand new.. this keeps the car companies happy and many folks employeed we are doing our best to help the economy

  • Rental Property Investor · Phoenix/Lima, Arizona/OH · Member since 2012 · 4k+ posts · 4k+ votes
    10y
    Originally posted by @Jay Hinrichs:

    @Ben Leybovich we have a MB  SUV so it would also be like buying another SUV... the S replaces my Hyundai  LOL... I buy a new car every two years on average my wife keeps hers about 4 to 5.. we always buy brand new.. this keeps the car companies happy and many folks employeed we are doing our best to help the economy

     Hahaha - I love the way you think, as always! 

  • Member since 2016 · 13k+ posts · 12k+ votes
    10y

    @Christina Dunn

    You may enjoy managing your own properties but you clearly are not cut out for it, most of the statements you make are contrary to the approach and attitude a business  landlord and you contradict your own statements on policy. A good landlord does not allow tenant to violate the lease which is what you are allowing your tenant to do by not paying rent as the lease states. You want your tenants to know you are serious and not afraid to evict but you are afraid to evict and they already know it by you not enforcing the rules. 90% of tenant problems are caused by landlords mismanagement of their business and in your case you would be farther ahead to have a strict PM take over your property.  

  • San Jose, CA · Member since 2015 · 4k+ posts · 3k+ votes
    10y

    @Christina Dunn I have to agree with @Thomas S.  You lowered your standards with this tenant, simply because they were friends of your good tenant even though their credit was bad.  Referrals are lovely, because you don't have to advertise.  I loved them.  But, you still have to qualify them.  Sometimes really good tenants have flaky friends they want to help out, as you learned.

    Also, if you can't rent your units for half a year to a year, you're not a good manager.  Obviously, I'm being blunt here.  But, if any landlord told you their PM couldn't get their unit rented for 6 months to a year, what would you say about that manager?

    And, some more truth - keeping the property for your children is a bad idea.  Take it from a mother who has a kid who would be happy to sell my house but never live in it (if I still had it LOL).  It would be cheaper for you to pay for a fat life insurance policy for them.

    I don't know your rental market, but if the normal market there is such that you can't get a unit rented for 6 months to a year, it's time to sell it and at a loss if necessary.

  • Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes
    10y

    "I really love managing the property myself and my goal is to obtain more rental properties. I feel like I'm good at it."

    Your track record here would suggest otherwise. Long vacancy, bad tenants and going into debt to hold on to rental property for your kids does not sound like a well managed rental business to me.

    Sometimes you have to admit you are not good at something and either get good at it yourself or hire someone who is.

  • SILVER SPRING, MD - Maryland · Member since 2015 · 77 posts · 43 votes
    10y
    Christina Dunn Something is wrong somewhere in the process if you have 2 houses and one has previously sat empty for 5 months and another was previously empty for a year. Insufficient advertising, too high of a price, tenant screening, horrible property, etc. I'm not saying this to be mean, but something is wrong in how you lease up that needs to be fixed because that shouldn't be occurring. It's costing you a lot of money and forcing you to lower your standards in situations like this. I'm a newer landlord like you and have taken a few months to rent each of my two properties the first time and I can point to several reasons why that occurred on each one and what I would do differently the next time. Take a look at your process. Maybe get a referral from a local investor you trust about someone good who can help you with tenant placement. Let them do the next tenant placement and see what they are doing and take notes. After that you can decide if you like their help or want to do it yourself again.
  • Rich N.Pro Member
    Investor · Haverhill, MA · Member since 2015 · 761 posts · 328 votes
    10y

    @Christina Dunn

    As for the tenant, you can not set up a payment plan with no bite behind it.  Once your friendly plan is not complied with, you need to follow your state's laws and go to court for either a formal payment plan or eviction.

    As for the vacancy timeline, 5 months or 1 year seems ways out of line.  I think most of us gets it done within the month or two.  Where are you posting it? Do you provide succinct highlight points and inside pics? Are you pricing for regular long term tenants or annual flips with college kids?   Are you asking for too much upfront?

    For example: I would post "new fridge" or "freshly painted"  but I would not post "8 year old carpet".

    For example: I list a 3 bedroom for long term working professionals or families at $2200 even though nearby area can get up to 2500 a month for college kids.

    For example: You want $2K for F, L, and Sec Dep = $6K.....is that standard for your area? How are others posting their units?  I have at times gone to $2K, $2K and $1K (for sec dep) = $5K and gotten great long term tenants.

  • Corby GoadeBusiness Member
    Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
    10y

    @Christina Dunn, there's some good advice above, but given your situation, I'd start serving them notices immediately. I have great tenants right now, but I've also had tenants like the ones you described. I tell everyone before they sign a lease that if rent is a day late, they will be served a three day notice, company policy. If there's a rare payment issue that they have, they need to discuss it with me before rent is late. I serve notices, not as the first step to eviction (although it is that) but more to show they tenants that I am serious and professional.

    I'd open an LLC, have some cards made up and have your tenants pay the LLC- you can have the income pass through to you personally and it won't make your taxes any more complicated, but it'll make you look significantly more professional. You and you husband work for that company and are simply landlords representing the owner. Make life so much easier. Best of luck!

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