Flipper/Rehabber · Nashville, TN · Member since 2015 · 11 posts · 8 votes
Hi everyone.
So, I've had my 4-plex for about 8 months now and had no issues with collecting rent for the first 6 months.. Then.. One tenant started to pay a little bit late because of some issues she was going through financially.. But then suddenly, in July... ALL 4 TENANTS went delinquent.. paying more than 3 weeks late the last two months.
Has this ever happened to anyone else? What should I do? This is my first ever investment and I'm looking for some advice.
Tampa, FL · Member since 2017 · 240 posts · 153 votes
9y
Consider this good news, but be careful about evicting them all at the same time. I would go to great lengths to make sure that they don't damage the property.
Option 2 is to deal with the late payments, and then when their lease is over soon, tell them you wont renew their leases.
Bloomington, IN · Member since 2017 · 53 posts · 37 votes
9y
I would ask the PM what is up first thing. Are the tenants paying you directly or is it coming through the PM company? If it is the second option it sounds more likely to me that the PM company is having issues than 4 tenants suddenly deciding to all stop paying you at once. It's probably also a lot less painful to replace a PM than 4 tenants all at once.
Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes
9y
@Kyle Krason So one question that I'd throw out there is if the current PM that you're using was the source of the tenants. If they did (i.e. you carried over the same property management company from the original owner) it's an indictment of the property management company. If you found the property management company and inherited the tenants from the previous owner (completely possible since you've owned it 9 months) it's harder to completely through your property manager under the bus.
For whatever it's worth most properties go through some form of stabilization during the first year. When there's a new owner and/or a new property manager they think there's going to be rent-raises, they think they might get evicted, they don't want to sign new leases with your terms, etc. Not to mention you never know what weird side agreement(s) the previous owners had with their tenants. Believe me, you don't hear about it from the owners during escrow, you hear about it from the tenants after escrow has closed.
I do think @Deanna McCormick has the most prudent advice here: book a plane ticket. You could have a tenant mutiny for any number of reasons. In fact, I think I'd argue that you should HOPE that these are just inherited tenants that just can't afford the rent. The previous owner tenant-stuffed with substandard tenants to sell an occupied building. It happens (see above: stabilization) and the best thing for you to do would be to evict all of them and put your tenants in there.
So, in short, maybe the PM is great maybe the PM is awful. You'll only know after your get another PM in there and see (or don't see) the results. But I'd say that these stabilization issues are par for the course. You just have some suspicious timing on your hands.
Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes
9y
I agree that if the PM is the same one that found and placed these tenants then that is worse. However, if the tenants are 3 weeks late and the PM has not already issued each and every one of them the proper notices required to initiate the eviction process, then by all means, you need to throw the PM right under the bus. Each and every time I've made excuses for my PM about how it is really not their fault, and I should give them a second chance ... each and every single time I've done this, I've come to later regret it. If you think it may be time to fire your PM, then DO IT and DO IT NOW. Trust me, these type of issues don't tend to get better over time, even if you sit down and have a conversation with an warning/ultimatum.
Licensed Real Estate Broker · Albany, NY · Member since 2017 · 29 posts · 5 votes
9y
Hi, just a couple questions; What reason did your PM give you for the every tenant not having rent on time? Everyone has a story... what were the four stories? What does your lease stipulate for late rent? Did you enforce whatever consequences there may be when the first tenant was late, the first time.
My best advice is you have to enforce the lease and make sure your manager is enforcing the lease too.
It's your business, your investment, you need to respect it so other respect it too.
In the military we called this a coordinated attack.
You're a new investor ...they sensed this and you don't live onsite and are managing the property yourself ....and yes your tenants talked to each other.
Now is the time to be firm and better late than never.
Go over with the tenants the expectations as set forth in the lease as to when rent is due and what the penalties are for being implemented and be firm.
One tenant will possibly try to "test you".... and if they do you need to follow the local laws regarding g eviction ...otherwise they will run all over you.
Real Estate Broker · Cleveland, OH · Member since 2017 · 719 posts · 658 votes
9y
You need to find another PM.
Training the tenants - is the key to successful rental business.
PM has to be strict with your tenants - this is the relationship business and something is wrong with their relationship, which is not good for your money.
Late fees might not cover the delay in your payments (mortgage, taxes etc), and it's really not the best time of the year to start evictions, especially all of them.
Sorry for all that mess :(
I'd also check on the management company - they supposedo have separate trust account just for your rentals. If tenants don't pay with direct deposits but different forms of payment (cash, money orders), the management company might not deposit it on time.
I'd verify that they bill late fees to tenants up to the date the money is deposited to your trust account with them - it will make them more disciplined, too.
philadelphia, PA · Member since 2017 · 52 posts · 12 votes
9y
first I would go out to see property, stroll up the street, run into tenants and strike up conversation, if they don't recognize you , you might learn a lot, maybe even mention you are looking to rent in area, 2 PM is not doing his/her job period, if you have to even go there, expectations are not inline somewhere, It might be a good time to screen your own tenants , if they make good and was a misunderstanding you maybe able to save it, or 3 rent is not making its way to you on time.....
Investor · Aurora, CO · Member since 2016 · 114 posts · 112 votes
9y
@Kyle Krason, when I was a rookie investor, this happen to me in a duplex that I owned. I was living in one side of the duplex, and then when my job was relocated to a different area, I found the first person that I could qualify as a tenant to move in and start paying my rent. I was the PM. Literally within 3 mos afterwards, long time tenant in the other side stopped paying, and new tenant went delinquent within 60 days of moving in. I took partial payments from both for 2 months before they both stopped paying entirely. I contacted a local eviction attorney who suggested I should have filed an eviction immediately (3 days after the rents were past due was his suggestion), so I finally did.
Much to my chagrin, the tenant laws in Oakland CA are very pro-tenant, and new tenant fought for 8 MONTHS! Tenant # 2 moved out on their own after 2 months, but only after leaving about 3K worth of damage to the property. Out $11000 for the whole charade. What do you think that did to my cash flow for the year? Lucky I was in a bull REI market and was able to sell at a substantial profit.
This was a very very hard lesson to learn, and like @James Wise stated above, your best course of action now is to file eviction notices for these tenants ASAP, and wish for the best with the proceedings. Additionally, I am sure your lease has some clause in it where it outlines the ramifications of non-payment of rent, you have to stick to that.
Otherwise, the school of hard knocks is waiting to teach us a lesson.
Durham, NC · Member since 2014 · 104 posts · 68 votes
9y
I'm in the minority here, but I would tell you to do nothing. As long as they are paying you in full, with late fees included, around 2-3 weeks late, and even if they did this every month, I would be fine with it.
I own right at 25 properties, and about 6-7 of them are usually between 5 days to 25 days late each month. I don't mind, as I am not chomping at the bit to get the rent at the first of the month and I actually like getting that extra 5% in late fees. It is some nice extra cash flow.
THus, if they pay each month a few weeks late, what is the difference than paying on the 1st each month? Nothing, except you are making more $ by accepting payment a few weeks later.
That said, once a tenant goes more than 30 days or 1 full month late, my entire situation and experience will change with them. But, I have only had that happen maybe 1 or 2 times in the last 5-6 years.
Wholesaler · Henrietta, NY · Member since 2016 · 58 posts · 27 votes
9y
I echo the group consensus. 1 day late... send a friendly reminder and look for clarification. If you get radio silence be ready to serve notice. Obviously take care to mind your state/local laws in regards to eviction, but it sure does sound like your tenants may have been talking...