Rookie mistakes with 1st tenants; where to go from here?

24 Replies

Sorry in advance for the novel

I bought my 1st rental property on aug 28.  It was a duplex and in september I converted it into a triplex.  The property came with tenants living in 1 unit month to month and the owners living in the other unit.  

Unit #1: the sellers asked me if i wanted to keep the tenants.  they had just moved in in july and had not been screened.  The seller offered to kick them out for me. He seemed eager to do it. the seller admitted that he just wanted someone in there to be collecting something while the property was on the market so he wasn't too picky about who it was.  He said that they never left the property during showings like they were asked and that they were late on their august rent.  I said, 'no don't kick them out. it's their home, my house.  I'll give them a chance to stay.'  What a kind fool I am!

I met them to go over the lease contract (which i downloaded from bp for $49) explaining that rent will be increased beginning in november, the security deposit and the month to month nature of it.  They begged me not to have a security deposit or to get it from the previous owner, give them til dec for rent to go up instead of nov and to work with them on the sept 1 rent because he had a job but no transportation and needed to fix his car.  I gave in on the dec rent increase, the no security deposit but held firm on the rent due in full on sept 1.  It worked, he paid in time, in full, and not with cash. He would get the sec deposit back from the seller, i stayed out of that but i had no sec deposit.  He fixed his car, got a job that pays better and paid october rent in full and early. Wow!  He explained to me he was addicted to meth 9 years ago and has been clean since '09.  I congratulated him on overcoming adversity.  We had a little moment.

I have done/am doing significant work on improving this unit.  I have installed an egress window, covered open wires, installed a fire detector/extinguisher, tiled the area around the stove and provided access to a washer and dryer (hooked up to cold water only). I've spent about $3000 in improvements to justify a significant upcoming rate increase going from $700 to $950 in dec, not nov. 

Last night the female tenant in this unit calls me in a panic.  she doesn't know where her bf is (my other tenant).  He wont call her back.  She was distraught and wanted me to come over.  I came over and her bags were packed.  she said, "let me hide this with you.  I don't want him to take my stuff.  I've had that happen before and I think he's been stealing things from me.  I said, "you have access to the laundry room attached to my unit and the storage shed. If I were concerned like you I would hide it there.  you have the keys for that."  she was barely coherent, distraught, stumbling all over the place, just a mess.  I thought she was on drugs, but i'm not sure.  she said he was hanging with seedy people, he had accused her of doing drugs, he was stealing her stuff, and accusing her wrongly of cheating.  "He won't call me back."  He then called her back. They had an argument that I eventually left the room for.  I've had arguments in relationships but this was more than an argument, to me anyway.  It resulted in him saying, "I'm stuck on the highway, I ran out of gas." The nice guy I am I offered to drive her to him and take my gas can and fill up his car.  I am the landlord of the freakin year!  11:00 last night I drove 60 minutes to fill up his car because, "he knew the gas light was on but thought I could get home."  Funny thing, once we got ready to leave she said, I'll just leave my suitcase here.  I can explain it to him.  she is also acting calm and not high.  I don't know if this lady is on drugs or has massive anxiety, probably both.  I didn't see any drugs or paraphernalia in her unit.  I know he is tested regularly for drugs at his job.  We finally get there and they are 2 peas in a pod.  they were about to start ww3 30 minutes ago but now there are PDA's as i'm filling up his gas tank.  

He calls me this morning to thank me but also to question me as to what I was doing at his unit with his gf.  I stalled then explained that I was showing his gf how to use the washing machine.  in the argument the night before on the phone she said I was there and he was not happy about that.  she said I was only there to show where this new washer was and how to use it.  She certainly did not tell him the truth, that I was there because she had called me in distress worried sick that he was perhaps using again.  So I continued with the lie.  Now I think he may suspect me of relations with his gf.  WTF!  He can't prove it but he may suspect it.  she kept saying the night before how jealous he was and that he suspected her of cheating.  I guess I should have never replied to her distress call.  I should have let the seller kick them out like he wanted to.

Unit #2:  It's an airbnb and it's really nice.  This unit has been profitable and awesome.  absolutely no issues!

Unit #3:  I live in unit 3.  It's rough but I'm cool with that.  It's a 2 bed 1 bath, no kitchen, with a rough in for a kitchen in one of the bedrooms.  I live in the roughed in bedroom and if I move out the plan is to convert that to a kitchen on my own time and market it as a 1 bed unit.  I am renting out the 2nd bedroom so I have a roommate.  

This guy is weird but he has a decent job and can pay.  got him from craigslist.  I said I could do a month to month lease if he prefer but i have drafted a 6 month lease here for us to sign if you are ok with that.  If you do want to ever leave or make changes you need to communicate with me and let me know. I had him sign a 6 month lease andI did not require a background check because it's a roommate so it can't be that bad, right?  

First month, oct, he was late on rent.  He begged me to charge only a lesser amount for the late fee and he would pay all of nov by oct 15.  I said I don't care if he pays nov early and I'm not trying to get rich on late fees.  pay me for oct on your next paycheck and just pay me November by nov 1st, but I won't stop you from paying early if you want to.  

He pays October when he said he would and pays half, not all, of November on oct 15.  I give him receipts and he gives me a $20 bill just for being such a great guy.  What a kind fool I am!

2 weeks ago he asks if his buddy who is moving to Denver can crash at the house while he finds an apt.  I say the lease states that he cannot have anyone else sleeping in that bedroom for more than 10 nights a month.  I said this friend could stay in the airbnb unit if it's not rented but the nightly prices might be a bit high.  I may be able to offer a lower nightly rate though if there is low demand. 

there has not been low demand. This guy flew in 4 days ago and has been sleeping in the bedroom with my tenant.  ok, whatever, progressive society, great.  but the lease says you can't be here longer than 10 days.  I was not told he was coming over, it just happened. the new guy asks me 2 days ago, "thanks a lot man. it's really nice to let me stay here.  it's great that you don't have a lease or anything."  I say, "we do in fact have a 6 month lease and as I've told your buddy you can't stay there for more than 10 days.  If you plan on staying there longer please let me know and I may be able to amend the lease.  Tonight the friend says, "I think we might be moving.  We may be gone next week."  I say, "I said I can be flexible with the lease and the month but I can't have vacancy in november.  do you guys plan on paying rent on the first?"  He says, "well, I thought we gave you half of November."  I said I need to sleep on this situation but I may need to collect all of november.  I told him that I legally can require them to stay here for the full 6 months.  The rent is $600, he has paid $250 for November plus $20 for being a good guy.  I have collected a $100 security deposit from him.

Honestly I thought landlording would be easier.  I now know that I was a wonderful tenant when I was renting.  If I get property #2 I will either do an airbnb or hire a property management company.  

I know I have made mistakes here and most of these problems are preventable.  I would greatly appreciate advice from you professionals because as you can see I am quite the amateur.  

Take the money and shut the door behind this mess as it leaves your property. You lost money on this deal. At least he didn't go upstairs to the bathroom, close the popup drain, stuff a rag down the bathroom lavatory drain overflow hole, and turn on the water just before he left in the middle of the night.

Next time, you'll be better prepared. You'll learn how to screen tenants here with the BP community. You'll have a better lease. I hope this convinces you to start researching the eviction procedure in your county, so you'll at least have the start of preparation for that eventuality.

One thing, though...you make all kinds of relationship value judgments when it comes to your tenants' relationship(s) in your post. What's it to you? They're either money or a hole in your pocket. Where is the value in figuring out who's taking it and who's giving it to whom? Don't you have anything better to do? The fact that you were all up in their business like that is straight-up creepy. You want this kind of drama, put your tenant's rent into dollar bills and ask strippers down at the club to tell you their life stories.

I can recall 3 local murders committed by tenants in private homes...one was over 5 years ago but the victim was the owners small daughter. Screen. Need I say more?

Originally posted by @Brad Sicoli :

Sorry in advance for the novel

I bought my 1st rental property on aug 28.  It was a duplex and in september I converted it into a triplex.  The property came with tenants living in 1 unit month to month and the owners living in the other unit.  

Unit #1: the sellers asked me if i wanted to keep the tenants.  they had just moved in in july and had not been screened.  The seller offered to kick them out for me. He seemed eager to do it. the seller admitted that he just wanted someone in there to be collecting something while the property was on the market so he wasn't too picky about who it was.  He said that they never left the property during showings like they were asked and that they were late on their august rent.  I said, 'no don't kick them out. it's their home, my house.  I'll give them a chance to stay.'  What a kind fool I am!

I met them to go over the lease contract (which i downloaded from bp for $49) explaining that rent will be increased beginning in november, the security deposit and the month to month nature of it.  They begged me not to have a security deposit or to get it from the previous owner, give them til dec for rent to go up instead of nov and to work with them on the sept 1 rent because he had a job but no transportation and needed to fix his car.  I gave in on the dec rent increase, the no security deposit but held firm on the rent due in full on sept 1.  It worked, he paid in time, in full, and not with cash. He would get the sec deposit back from the seller, i stayed out of that but i had no sec deposit.  He fixed his car, got a job that pays better and paid october rent in full and early. Wow!  He explained to me he was addicted to meth 9 years ago and has been clean since '09.  I congratulated him on overcoming adversity.  We had a little moment.

I have done/am doing significant work on improving this unit.  I have installed an egress window, covered open wires, installed a fire detector/extinguisher, tiled the area around the stove and provided access to a washer and dryer (hooked up to cold water only). I've spent about $3000 in improvements to justify a significant upcoming rate increase going from $700 to $950 in dec, not nov. 

Last night the female tenant in this unit calls me in a panic.  she doesn't know where her bf is (my other tenant).  He wont call her back.  She was distraught and wanted me to come over.  I came over and her bags were packed.  she said, "let me hide this with you.  I don't want him to take my stuff.  I've had that happen before and I think he's been stealing things from me.  I said, "you have access to the laundry room attached to my unit and the storage shed. If I were concerned like you I would hide it there.  you have the keys for that."  she was barely coherent, distraught, stumbling all over the place, just a mess.  I thought she was on drugs, but i'm not sure.  she said he was hanging with seedy people, he had accused her of doing drugs, he was stealing her stuff, and accusing her wrongly of cheating.  "He won't call me back."  He then called her back. They had an argument that I eventually left the room for.  I've had arguments in relationships but this was more than an argument, to me anyway.  It resulted in him saying, "I'm stuck on the highway, I ran out of gas." The nice guy I am I offered to drive her to him and take my gas can and fill up his car.  I am the landlord of the freakin year!  11:00 last night I drove 60 minutes to fill up his car because, "he knew the gas light was on but thought I could get home."  Funny thing, once we got ready to leave she said, I'll just leave my suitcase here.  I can explain it to him.  she is also acting calm and not high.  I don't know if this lady is on drugs or has massive anxiety, probably both.  I didn't see any drugs or paraphernalia in her unit.  I know he is tested regularly for drugs at his job.  We finally get there and they are 2 peas in a pod.  they were about to start ww3 30 minutes ago but now there are PDA's as i'm filling up his gas tank.  

He calls me this morning to thank me but also to question me as to what I was doing at his unit with his gf.  I stalled then explained that I was showing his gf how to use the washing machine.  in the argument the night before on the phone she said I was there and he was not happy about that.  she said I was only there to show where this new washer was and how to use it.  She certainly did not tell him the truth, that I was there because she had called me in distress worried sick that he was perhaps using again.  So I continued with the lie.  Now I think he may suspect me of relations with his gf.  WTF!  He can't prove it but he may suspect it.  she kept saying the night before how jealous he was and that he suspected her of cheating.  I guess I should have never replied to her distress call.  I should have let the seller kick them out like he wanted to.

Unit #2:  It's an airbnb and it's really nice.  This unit has been profitable and awesome.  absolutely no issues!

Unit #3:  I live in unit 3.  It's rough but I'm cool with that.  It's a 2 bed 1 bath, no kitchen, with a rough in for a kitchen in one of the bedrooms.  I live in the roughed in bedroom and if I move out the plan is to convert that to a kitchen on my own time and market it as a 1 bed unit.  I am renting out the 2nd bedroom so I have a roommate.  

This guy is weird but he has a decent job and can pay.  got him from craigslist.  I said I could do a month to month lease if he prefer but i have drafted a 6 month lease here for us to sign if you are ok with that.  If you do want to ever leave or make changes you need to communicate with me and let me know. I had him sign a 6 month lease andI did not require a background check because it's a roommate so it can't be that bad, right?  

First month, oct, he was late on rent.  He begged me to charge only a lesser amount for the late fee and he would pay all of nov by oct 15.  I said I don't care if he pays nov early and I'm not trying to get rich on late fees.  pay me for oct on your next paycheck and just pay me November by nov 1st, but I won't stop you from paying early if you want to.  

He pays October when he said he would and pays half, not all, of November on oct 15.  I give him receipts and he gives me a $20 bill just for being such a great guy.  What a kind fool I am!

2 weeks ago he asks if his buddy who is moving to Denver can crash at the house while he finds an apt.  I say the lease states that he cannot have anyone else sleeping in that bedroom for more than 10 nights a month.  I said this friend could stay in the airbnb unit if it's not rented but the nightly prices might be a bit high.  I may be able to offer a lower nightly rate though if there is low demand. 

there has not been low demand. This guy flew in 4 days ago and has been sleeping in the bedroom with my tenant.  ok, whatever, progressive society, great.  but the lease says you can't be here longer than 10 days.  I was not told he was coming over, it just happened. the new guy asks me 2 days ago, "thanks a lot man. it's really nice to let me stay here.  it's great that you don't have a lease or anything."  I say, "we do in fact have a 6 month lease and as I've told your buddy you can't stay there for more than 10 days.  If you plan on staying there longer please let me know and I may be able to amend the lease.  Tonight the friend says, "I think we might be moving.  We may be gone next week."  I say, "I said I can be flexible with the lease and the month but I can't have vacancy in november.  do you guys plan on paying rent on the first?"  He says, "well, I thought we gave you half of November."  I said I need to sleep on this situation but I may need to collect all of november.  I told him that I legally can require them to stay here for the full 6 months.  The rent is $600, he has paid $250 for November plus $20 for being a good guy.  I have collected a $100 security deposit from him.

Honestly I thought landlording would be easier.  I now know that I was a wonderful tenant when I was renting.  If I get property #2 I will either do an airbnb or hire a property management company.  

I know I have made mistakes here and most of these problems are preventable.  I would greatly appreciate advice from you professionals because as you can see I am quite the amateur.  

Thanks for being candid about your situation. A few chuckles with my morning cup of tea too. As far as advice, I wouldn't know where to begin. Seems you have a knack for communicating with all kinds. Writing skills too. Maybe you're destiny is in writing and your experiences with tenants will be the fodder for your novels.

Seriously, you are in for a ride unless you learn best practices for this industry. You have several pieces here.... rehabbing (hands on construction work), landlording (long term tenants), hosting (short term guests), and home sharing (housemates). If you're doing all four at once, with the same property, you may be insane or headed that way. This is crazy.

We have an Airbnb and it takes a different mentality to keep it going, as that's being in the hospitality industry. You might want to let go of that idea, unless hosting is your passion and you know how to do it well.

For landlording.... get to reading some tried and true books, like "Landlording on Autopilot" by Mike Butler, or "Landlording" by Leigh Robinson. Glean as much as you can from the podcasts, forums, blogs, and articles here on Bigger Pockets. Find yourself a great local mentor too, who understands your market and the Landlord-Tenant laws for your jurisdiction.

You'll need some good screening tools and a great rental agreement that you can enforce. Sounds like you have some negotiation skills and are able to navigate street mentality, so that might be to your advantage.... at least to keep you afloat for now. Non-traditional set ups and saving challenging tenancies takes work. You're skating on some thin ice here, so know your risks. Also, get and maintain adequate insurance, including an umbrella policy. Good luck!

Your tenants in Unit #1 sound like a good source of entertainment. I'm not sure if you should add a surcharge for helping them out, or if they should charge you a participation fee in their drama. All of life's a stage :-)

Check out SmartMove for screening - if they pass your criteria, credit cost of service to 1st month. It's worth that for a solid tenant. Ask for (& call) last 2 landlords, plus personal references.
Be consistent and ask specifics.

As far as airbnb, sounds like it's going well - look at the numbers and perhaps offer your unit's second room as another option there. Get a solid tenant and stabilize your investment.
Run it like a business and you'll be fine. As others suggested, educate yourself and you will grow, putting these learning experiences behind you. Good luck!

You tell us that you went to your tenant unit at night because his partner wants you to come as she was distraught, then you tell your tenant that you went there to talk about washing machine. 

You need to rethink your job as a landlord. This is not a white lie. Someone could get hurt over this if you keep on landlording like this for 20 years.

About your being a nice guy, maybe check the book: "no more Mr Nice guy", they explain that rewarding bad behavior will get you more of the same and make everyone feel bad in the end.

Well, it seems that you are positioned to re-start with a clean slate at least. If I were you, I’d thank the gods the early departure of the unscreened, problematic roommate and lust that bedroom with Airbnb. Since you’re already hosting, extending that to your unit can’t be that much more work, and you’re bound to get what you were collecting from the roommate in a fraction of the month. I just wouldn’t offer ate longer than 3 weeks to avoid problems.

I would also give 30-days notice to the junkie tenants and be firm. (Again, thank god you only have a month-to-month contract with them). Get them out! That’s a bomb waiting to explode and the longer you wait the more difficult, dramatic, and expensive that situation will become. I hope you’re given yourself enough margin to allow yourself a couple of months of vacancy. In any case, it’s just a matter of time before they stop paying rent. You’re seeing a ton of red flags, so take action ASAP or live with the terrible outcomes this is sure to provide.

Thank you all for the input. Units #1 and #3 have entrances that can be hard to find and I work long hours and am not always home so airbnb on these units is problematic.

I will let the roommate leave but keep his $100 deposit. I will use smart move on his replacement.

Unit #1 is fine for now. I think it may be a bombshell in the future but if there are any more distress calls or a hint of anything illegal I'll call the cops and kick them out. I'm not getting involved anymore. I think I'll explain these ground rules with them tomorrow. Any more distress calls and I call the cops. I don't think I can or should just kick them out because they are dramatic.

I am not cut out to manage a property. I love the numbers and process of finding a place and anticipating growth. I love the airbnb stuff and furnishing a place. But I'm too nice to manage so I'll hire someone for that.

Fortunately the numbers make sense. The airbnb is more than covering the mortgage and I know my prices there are too low.

Best of luck in your endeavors. I think it is great you are realizing your strengths and weaknesses and then building a business around that. Good luck!

I don't know how to give advice without sounding insulting. You have to screen your tenants. Educate yourself on how to run your rentals like a business and not a welfare program or you will lose tons of money and destroy your desire for real estate investing.

I was just reading a book with the quote that went something like, “Experience is what we call mistakes we’ve learned from.”

It sounds like you’ve learned you’re the kind of guy that needs a buffer between him and his tenants. That’s not a bad thing it’s just a thing you know about yourself now.

If you’re the type to do self assessments and self improvement, you may want to contemplate why you feel you have to solve the problems of people you have no personal relationship with; why you have to come off as the good guy to yourself. Sounds like there may be some lack of healthy boundaries that working on would help you develop into being a better landlord.

Learn from it.. You realize you made a mistake which is the first start..
Never get too involve with personal matters, big no no for landlords.
As a landlord all you care about from tenant is getting rent on time, property is maintained by tenant. If you were the first call from GF that tenant went missing it sounds like you are too friendly w tenants don’t do that :)
Don’t get discourage by the length of your post it shows you will learn from it.
You should consider a PM, a good PM will guide you through process but I have to warn you there are also bad PMs so you might need to go thru a few before you find a good fit..
Start eviction process and find a good lawyer, with those types of tenants cash for keys have a high success rate you might want to consider..

Wow, not a fun experience. I have a bit of advice and I'll keep it simple. If you want more detail, feel free to ask.

-The MOST important thing you can do as a landlord is screen properly. If you buy a property and the current tenants don't meet your criteria, inform them that they will be moving out as soon as the lease ends.

-Do not ever negotiate rent amounts or deadlines with tenants. You can be kind, but you need to be firm.

-Don't ever get involved in your tenants personal problems in any way. No good can come of this.

-Especially if you live in one of the units- I'd set up an property management LLC and present myself as the onsite rep of the owner. You need that layer of separation. If things go bad or you need to increase rent or whatever, you are just the bearer of bad news. It keeps it cleaner and you can remove the personal aspect.

Best of luck.

You need to check with Littleton City if it is legal to do multi-family conversion without a construction permit.

In CA you inherit tenants like it or not. Even if they do not have a written lease they can stay on until the judge approves the eviction.  Here it can take 6 mon to 1 year to get on a court case. 

It sounds like you are not experienced yet to know the legal part of the lease, permit and can get turned in by these people if they catch on.  It is better to turn these properties to a professional property manager who carries high insurance coverage. In the mean time act stay low key like another tenant.

I agree with @Nathan G. - I currently don't have any properties as of yet and education on becoming a landlord is very crucial as an early investor who will be house hacking for the 1st couple of years. Mistake #1 (emotions) Mistake #2 (Flexibility). 

They were major red flags in the beginning in which you overlooked:

1.)  They just moved and weren't screened (Properly)

2.) The Seller was  eager to kicked them out (Major Red flags, why is that?)

3.) They never left the property during showings like they were asked (not being cooperative)

4.) Late on Rent

5.) No Security Deposit (Damage Property here I come)

I might be wrong here but I don't think I am far off but I do want to thank you for posting this as I am learning the do's and dont's of Landlording. 

You should do whatever you can to retain these tenants, you seem to be an happily involved in their drama and you would probably be bored without them around.

This seems too wild to be true. One item from your "story" not addressed by the above comments which your agents should have covered is the security deposit for the tenants you inherited. There should have estoppel statements for the existing tenants. If the previous landlord collected a security deposit, that should have been credited to you at closing.

On the outside chance this is true, I'll add one more comment. If you approach hiring a property manager in the same manner as you have in finding tenants, you will be in a far worse situation in very short order. Finding and managing tenants is difficult but you should know finding a good pm is 10x more challenging. 

you could move in with tenants in apt 1 and rent  yours out.

1st download landlord tenant laws for your state.

2nd join a landlord association in your city if possible.

3rd get a message machine. don't call back if not emergency, if they need help they can call 911,, if it's not a leaky toilet..

4th put some money in savings.. your gonna need it. 

This and this alone makes me rethink House hacking.

There are so many red flags where do I begin. The Gf wants you to hide her stuff to avoid possible theft, you went to deliver (an hour drive mind you!!) the GF to the BF, you filled his car on gas and this doesn’t take in to account the lack of payments happening left and right. You need to get control of the wheel before this ship sinks.

I had a similar scenario happen to me last month, The GF and BF were breaking up and the GF told me this after meeting them the first day. My exact words were “I don’t want to get or be put in the middle of anything. All I want is the unit to be kept in its current condition and I need the rents to pay the mortgage”. The last thing I want is to get involved in their personal life, as you are now attuned to, the Post-methhead BF now thinks you’re doing something with his GF, guess who's unit is going to get the toilet concreted or a war zone of a unit given back to them and to make matters worse you have no security deposits to buffer some of these costs if they happen. 

I will go out of my way to be rude or to remove myself from any personal conversation, not my chair not my problem. This is a business not Real World Littleton, Colorado

Brad, 

You need to start treating this like a business and not like you are babysitting  them.  Do not budget on your agreements or your contracts.  If you give a little they will keep pushing to take more and more.  If the couple is late or causing you head act kick them out.  Sounds like there is high demand based on your Airbnb.  

ALWAYS get a security deposit. You can not give tenants slack otherwise they will see you as soft on your contracts and their commitments.  Be fair but it sounds like you are allowing them to step all over you.

I hope you a screening your tenants/roomates.  For me I always need to make sure they have a credit score of above 700 or 750, check that they have bank accounts, view their last three pay stubs, get reference from their past 2 land lords, get two personal references and 1 job info/number (to confirm employment).

You need to tighten up the ship otherwise it is going to be that much closer to sinking. Good luck.

Thank you for your thoughts. I got a real estate license before I bought this house so I was my own real estate agent. i did not include the estoppel. Will never do that again.

I'll find a property manager. Thanks

@Brad Sicoli did you purchase this property in your personal name?

@Brad Sicoli Great post! It's easy to see that you probably realized all of the things that you were doing wrong as they were happening, but have too big of a heart to do what you know you needed to. Perhaps Land-lording isn't for you? It certainly isn't for me. I'm glad to pay property management in order for me not to deal with these headaches.  I suppose it just depends on what kind of quality of life you want, and how much you value your time. And hopefully you do value it, as it is our most important asset. 

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