Evict Tenant Over $75?

14 Replies

I have two (soon to be three) turnkey SFRs in Memphis, TN. My first house has great tenants who always pay on time, make 5x the monthly rent, etc. Dual income, two small children. My second house has a single mother, more like 3x monthly rent, one income She has been renting from this TK provider for two years and has supposedly never been late. When another investor sold the house she was previously living in, they moved her into my newly purchased house at the time. For the first couple months, she paid on time and in full. For the last couple months, she‘s been consistently coming up short. First $32, then $144, then caught up, now $74, etc. I have been emailing and spoke with the TK provider over the phone to try to get a better sense of what‘s going on and to explore options. They tell me she gets daily emails/weekly phone calls about the shortages and they‘re doing everything they can to collect. They were not able to provide details as to WHY she‘s late (and even if they could, it could be made up anyway by the tenant). They assured me she is being charged late fees, but when she makes a payment all of it goes toward unpaid rent first, late fees last. The PM agreement allows them to keep late fees as part of their compensation for collections and I‘m fine with that. The question is whether or not it makes sense to start the eviction process. From a personal standpoint, I don‘t want to evict someone over “only $74,“ but I realize it can be a slippery slope and I don‘t want that to turn into $740. From a financial standpoint, if I start the eviction process now, it will cost me more than what‘s owed (assuming that balance doesn‘t grow). It will also likely leave me with a vacant house in the winter which will probably be difficult to fill. Her lease is up at the end of March. I‘m thinking of continuing to monitor the balancd closely (I requested the PM provide weekly updates on the outstanding balance, which they have) and as long as it doesn‘t grow too much, give her a chance to get caught up. If this continues every month, maybe just not renew her lease in the spring (as it will be much easier to move someone in that time of year). That way, she‘s not evicted in winter and I‘m not stuck with an empty house. What do you guys think?

I personally would not evict over $74.00. Once it gets up to half a months rent then I would worry. Do you have a large security deposit? If you do then I would wait this out a little longer. The vacancy and turnover costs will be much higher than $74.00

First, if you let emotion get involved, you're in the wrong business.  That may sound harsh, even mean, but it isn't.  

Second, this isn't about "just $75".  It's about a series of lates forming a pattern.  You can't also form a pattern of acceptance of this will burn you right out of business.

Third, if you want to make this work, you have to solve the problem.  Eviction may be the correct step, but (and this may seem to go against #1) you need to find her a place she can afford.  Clearly, she can't afford this property, and like many people, has bitten off more than she can chew.  That isn't your fault, but you can be the solution.  Just find her a place to move to she can afford...as part of the eviction.

This way, you can do what you "need to do", and at the same time you can do what you "want to do".

@Joe Villeneuve Is it really up to me to “find her a place she can afford?” Maybe the TK provider can do that in the spring if/when I don’t renew her lease (assuming no eviction before then).

I don't have time nor should the management company have time to carry someone else's monkey. I'd keep things simple, have a lease agreement, and follow it. No decision fatigue, no stress. There are lots of compliant residents.

your issue is not one of money, its one of priorities. your tenant no longer prioritizes rent, because you have allowed your agent to deliver the message that rent does not need to come first. when the tenant knows her roof is on the line, she will let other bills fall to the side in favor of rent. inform your management company that they should not be accepting partial rent. if rent is not paid, they deliver a 5 day notice to pay or vacate and then begin eviction.

if you want to be nice, you can offer to let her out of the lease now so you can get a new tenant in before winter starts.

@Mark S. How long can this be sustained ( her being late every month ) youcant run business like this worried if you’ll get paid or not . The person obviously can’t afford to stay there and should be persuaded to leave . Ideally without an eviction . Through ypur pm Humanly get her to leave and reason with her this can’t continue on . It oughta be Face to face not emails . Find a way to allow her to move on . It’s hurting you AND her to stay
Originally posted by @Mark S. :
@Joe Villeneuve Is it really up to me to “find her a place she can afford?” Maybe the TK provider can do that in the spring if/when I don’t renew her lease (assuming no eviction before then).

 By "you" I meant your group...not you personally.  In this case, it would be the TK provider...depending on what your agreement was with them.  If they provided the TK to you, and they are no longer a part of the deal, then it would fall in your lap to find a replacement (your option).  If you are a partner with the TK, and they are the "boots on the ground", then your TK partner "can" (it's still an option) find the replacement.

While almost everyone here claimed they wanted to keep emotions out of their decisions, they were always included.

I would have to review the lease, management contract, and local eviction process to be sure, BUT I doubt it would be a good financial decision to start an eviction.

I do agree with @Joe Villeneuve if she is an otherwise good tenant it might be a good idea to put her in a cheaper unit.

@Mark S. How much time is left on the lease? How long will it take and how much money will an eviction cost? If the money spent to evict is greater than the potential loss of keeping the tenant through the lease, keep the tenant in and dont renew. I think that you'll find it a better business decision to ride out the short payments and not renew than it would be to go through the eviction process.
Originally posted by @Jason D. :
@Mark S. How much time is left on the lease? How long will it take and how much money will an eviction cost? If the money spent to evict is greater than the potential loss of keeping the tenant through the lease, keep the tenant in and dont renew. I think that you'll find it a better business decision to ride out the short payments and not renew than it would be to go through the eviction process.

 Jason,

I think you’re right and that’s what I’m leaning towards, but I definitely see the others’ points too about allowing bad habits to develop.  Lease runs through the end of March.  It would cost me at least $200 to start the eviction process.  If I do that, then I run the risk of her stopping payment completely, trashing the place, etc. and it’s probably not worth it over $74.   I am considering contacting PM to see if there are other qualified tenants that might be able to rent this property and find her another, lower priced home.  

It is not a good sign and there is a fair chance tenant will continue to fall further behind, especially when it gets to holiday time. I agree with @Andrew B.  that your PM should not accept partial payment next month - ie: they need to be fully caught up, past balance, late fee, current rent, otherwise I'd move forward with trying to get them out, first through reason (PM let them out and find a cheaper place for them), or eviction if that falls on deaf ears.

Originally posted by @Mark S. :
I have two (soon to be three) turnkey SFRs in Memphis, TN.

My first house has great tenants who always pay on time, make 5x the monthly rent, etc. Dual income, two small children.

My second house has a single mother, more like 3x monthly rent, one income She has been renting from this TK provider for two years and has supposedly never been late. When another investor sold the house she was previously living in, they moved her into my newly purchased house at the time. For the first couple months, she paid on time and in full. For the last couple months, she‘s been consistently coming up short. First $32, then $144, then caught up, now $74, etc. I have been emailing and spoke with the TK provider over the phone to try to get a better sense of what‘s going on and to explore options. They tell me she gets daily emails/weekly phone calls about the shortages and they‘re doing everything they can to collect. They were not able to provide details as to WHY she‘s late (and even if they could, it could be made up anyway by the tenant). They assured me she is being charged late fees, but when she makes a payment all of it goes toward unpaid rent first, late fees last. The PM agreement allows them to keep late fees as part of their compensation for collections and I‘m fine with that. The question is whether or not it makes sense to start the eviction process. From a personal standpoint, I don‘t want to evict someone over “only $74,“ but I realize it can be a slippery slope and I don‘t want that to turn into $740. From a financial standpoint, if I start the eviction process now, it will cost me more than what‘s owed (assuming that balance doesn‘t grow). It will also likely leave me with a vacant house in the winter which will probably be difficult to fill. Her lease is up at the end of March. I‘m thinking of continuing to monitor the balancd closely (I requested the PM provide weekly updates on the outstanding balance, which they have) and as long as it doesn‘t grow too much, give her a chance to get caught up. If this continues every month, maybe just not renew her lease in the spring (as it will be much easier to move someone in that time of year). That way, she‘s not evicted in winter and I‘m not stuck with an empty house. What do you guys think?

 A pattern is starting to emerge. What you need to do is instruct the management company not to accept partial payments from this tenant. If you accept a partial payment you cannot evict the tenant for the remainder that is owed by them for that pay period.

Next month if the tenant attempts to pay anything other than what is owed the management company needs to give it back to her and explain to her that partial payments are not acceptable. If payment isn't made in full by x date (with full late fees included) she will be automatically evicted. That should be their blanket policy for all of their tenants really. Need to eliminate this useless and time consuming back and fourth nonsense. 

You cannot get involved in the tenant's drama. Outline the rules in a firm way, most tenants seeing that they have no other option will comply. In a small number of those cases you may loose a bit of money evicting someone that would have otherwise paid most of the rent but it will pencil out to a higher profit margin over the long term.

After further communication with the PM, it turns out the $75 I saw on the weekly PM report as a shortage is actually the late fee owes to the PM. The tenant has already paid the September rent in full. I think my decision will be to not renew the lease next spring if any further late payments are made. In the meantime, heading into winter, even though it is a PITA, as long as the majority of rent is paid and the rest caught up in a timely fashion, I think the risk of not accepting partial payments and proceeding with eviction is “riskier” than letting this continue (at least in the short term). If it were a multi-year lease, I’d probably feel differently.