Inherited Tenant Problems at my first property- need advice!
Hi, I just bought my first rental property 2 weeks ago (I'm in Maryland), and I'm feeling a little overwhelmed with my inherited tenants- any advice would be greatly appreciated!
The property is a 3-unit building. 2 of the units came occupied, 1 was vacant. After purchasing the property on the 12th, the seller was supposed to send me prorated rents for July. I received a check for 1 tenant's rent, along with a note indicating the other tenant had not yet paid. The seller told me before the sale that this tenant had been there 5 years and always paid on time, and in the Estoppel agreement, it was indicated that he had paid July rent on July 5, which was not true. I knocked on the tenant's door to address this issue, and found out there was more to the story than the seller had told me (surprise, surprise.)
It turns out, the original tenants were the current tenant's parents. They lived there for 5 years and paid on time. At some point, they had let their son, who was homeless, move into the common laundry area in the basement. A few months ago, they moved out, and the son moved into their apartment and took over the payments. There was never a written lease. This tenant only makes $1200/month and the rent is $710 (which is also under market). He clearly cannot afford the apartment, but he's convinced he can afford it, even thought he missed last month's rent because he was apparently in the hospital, or something. Also, I ran a background check and found a court date coming up soon, which I asked him about. Apparently the police searched his apartment and found a crack pipe? He claims that he's a recovering addict and the pipe was "old". These tenants also never paid a security deposit.
Before I found out about the crack pipe and some of the other issues, I had told him that I would waive July's rent if he agreed to sign a biweekly lease with auto-pay on his paydays, starting August 4, and the rent would be raised to $380 biweekly. I told him he'd need the first 2 weeks rent, plus a security deposit, and that he'd need to pay $250 on August 1 with the remainder on the 4th, at which point he could sign the lease. I regret telling him that... I'm new to this, and I know I made a mistake. I was trying to work with him because I didn't want another vacancy right now while I'm renovating the 3rd apartment, and I also don't want him to cause problems if I try to get him to leave.
Anyway, I'm just wondering if any more experienced landlords have advice on what the best course of action would be from here. I have not taken any money from him yet. If he doesn't pay me the $250 tomorrow, do I give him a notice to pay or vacate, or a different type of notice since we never even had a lease? If he does have the money, can I back out of what I told him and tell him he needs to leave? Should I try cash for keys, and if so, how much time should I give him, and how much cash? Thanks for taking the time to read, sorry for the long-winded explanation :)
I didn't need to read the whole thing. Just evict him.
Start the eviction process asap! This will only get worse. If you let this go on, he will either end up skipping out or you will have to evict him.
Originally posted by @Gabriel G.:
Originally posted by @Sue K.:If you just want some fast money out of the seller, what you could do is first contact the seller asking for a settlement amount, which they'll probably ignore, then after you've done the request for money (which is required), you can then file a claim in small claims court.
Or, hire an attorney to scare them into paying you some money, but that will probably cost you more money.
What ever happened to just talking to the seller first? Not to pick on you Sue but court should be the last resort and from the words that you used, it sounds quite like a shakedown. Yes, the situation does suck and lots of blame to go around but I think that good ole conflict resolution deserves a chance.
The seller lied and conspired with the former tenant to create fraudulent documents, to trick the buyer into buying something other than what they were actually agreeing on. She could get out of the sale altogether, as there was no actual meeting of the minds. She thought she was buying a property with this set of facts, which weren't true, etc.
At any rate, I don't see any point in trying to talk nicely to this thief.
And yes, it's a shake-down LOL. But, a really cheap one. This type of tactic has worked for me in the past - just using small claims court. What usually happens is, they freak out when they get served, then contact you, all of a sudden becoming more rational about working something out.
If they don't, then when the judge sends you out into the hall to work things out, they'll usually deal there. And, you're out of pocket less than $100, which the other party reimburses you if you win - if you ever even end up in front of the judge.
It's a way to get somebody's attention and get them to work out a deal. Works way better with someone like this seller, in my experience, than asking them nicely. When the court document says they're being sued for the max allowed by the small claims court, for out of pocket losses due to fraudulent estoppel documents in a real estate transaction, I would put money on it, that that person is going to be calling wanting to work something out, rather than explain that to a judge.
In fact, I think you should also include the former tenants in the small claims suit. And when they all start calling you, tell them you'll let it go if they get this bad tenant and all of his stuff out of there by next week.
And by the way, you don't have to be correct in how you word your small claims court action, or even put the correct amount. Small claims court is for lay people who don't know what they're doing. So, what I'd do, is find out the max you can sue for, say $5,000 or $10,000, and put "and any punitive damages the court finds appropriate," and put that and the max amount as the amount you're suing for, and list the former tenants and the seller LOL. Seriously, nothing bad could happen to you for doing this. And I bet they work together to get that guy out of there pronto for you. It's strategy that usually works, and is cheap.
And worst case scenario, you spend $100 on court fees and the judge says you don't have a case. There's nothing for the seller to counter-sue you for. But, odds are, they'll at minimum, help you get that guy out.
As to the tenant having a ton of stuff - not your problem. It's amazing how when you stick to your deadline, they do end up gone by then. Either you call 1-800-GOT-JUNK, or he moves it all out himself. But, his moving problems aren't your problem. And I bet, if you serve them with a small claims suit, they'll probably help pay to move him and his stuff.
Hi Emily, First, congratulations on your new investment. You've got a bunch of great advice. Just adding my two cents. First, eviction standards are different in each county. I would call the attorney that met with your REIA and introduce yourself and ask about rates. You should also check to see if there are any limits to how much you can raise your rent, your proposed increase may not be feasible. You may not need him for this but you may need him someday and it is always a good thing to know a good lawyer.
Your goal is to get the tenant out and get a good tenant in. Go and talk with him again. Tell him that he owes July and August rent and that you will file an eviction if necessary but that if he moves out (and leaves the place so that someone else can move in quickly) by [Choose a reasonable date 2 or 3 weeks away] you will not file an eviction and will work out a payment plan with him so that he can pay what he owes $25/$50 a week.
Evictions are not fun and are time-consuming. You have an unvetted, inherited tenant, who (if they did pay) would be paying under market rent. Go talk with him and create a win/win. Best, Teresa
Oh, and another consideration (sorry to be so long-winded), is that this guy is homeless. And he's not above sleeping in the laundry room. He thinks of that place as "home," so I would expect him to be an ongoing problem, breaking in and sleeping in or on the property. I really don't know how to avoid that or what to do about it. Maybe someone else here has dealt with getting and keeping homeless people off a property.
Emily McCabe I recently purchased a 4-plex which caters to the lower income tenant class. For several months I dealt with various scenarios, which all added stress and uncertainty to my already busy life.
I then read the BiggerPockets book on managing rental properties and it changed my entire outlook on landlording. Brandon and his wife share their experiences dealing with tenants throughout their career and helped me gain a ton of knowledge that would have taken years, added stress and countless dollars to attain.
The biggest takeaway that I found is that you need to start implementing policies and procedures into your business now to make these types of (unavoidable) situations easier to deal with in the future.
After implementing their suggestions it's been smooth sailing for the past two months!
As new landlords, I highly recommend that you and your husband read the book to help get on the same page for the path forward.
Best of luck!
We had a very similar situation a couple years ago. Bad tenants inherited from a sketchy seller.
I would offer him cash for keys (don't give him the cash until he vacates however) and if that doesn't work, leave him with a pay or vacate notice. I hate the concept of cash for keys because he would be getting away with not paying rent...but lots of people just don't care about evictions on their records and you have to protect yourself.
Talk to an eviction lawyer before you do anything though. As a landlord, you have to do everything by the book so you have a rock solid case if you end up in court.
I'm sorry you're going through this, it's stressful for sure!
Buying a building with inherited tenants also can be a problem from the lead paint perspective in Maryland. I am hoping your building is lead free.
No brainer!!! Cash for keys or start eviction process asap. Cut your losses early. Good luck.
How did it turn out?
I'm about to go through a very similar situation. Just bought my first rental property and one of the inherited tenants isn't paying rent.
Thanks
Bill
Hi @Gabriel G. and everyone on this thread. I found this post by an internet search. I am working on putting a wholesaling deal together. After his aunt passed away the seller inherited 2 properties (single-family townhomes) with tenants in them. He has a lease for one and not the other but both tenants say they were previously on a month-to-month lease. He wants to Sell them and let the new owner deal with removing tenants. I read he has to offer the tenants a chance to buy. Does anyone know how I advise before I go under contract for his properties?