My Very First Tenant Payment Issue!

General Landlording & Rental Properties
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My Very First Tenant Payment Issue!

Ben Sears
Flipper/Rehabber · Farmville, VA · Member since 2018 · 280 posts · 171 votes

I've encountered my first payment issue with a tenant. For what it's worth, I'm not here to ask for advice but to simply share my experience in hopes that it helps someone else.

I purchased a SFH in September of last year with a tenant already in place. She lives with her two teenage children and has been an absolute rock star. Payments arrive on time, the house is spotless each time I visit, and I rarely hear from her. I've made some upgrades to the property after raising her rent slightly (despite the fact that it's still far under market value). So I get a phone call today from my tenant who wants me to stop by for a short meeting. She's very slim on details during the phone conversation, but I agree to meet her this afternoon. When I arrive, she wastes no time in telling me that she and her son have had a fight and he has decided to move out. Come to find out, it would appear that they are splitting the bills with him paying the majority of the rent. This has obviously left her high and dry this month for rent (which is due today).

Now my "regular" job is a firefighter/paramedic in a very "not so great" part of the city, so I'm intimately familiar with not bs'ing around with people in order to get them to do what you need them to do. I very politely, yet firmly restated the lease agreement. I told her that we allow a five day grace period and that the full rent would be due by next Friday (I gave her this weekend since everything will be closed for an impending snow storm). I made some helpful suggestions on how to pay her rent and told her to keep me in the loop next week. I very respectfully thanked her for being honest and upfront with her phone call and that it goes a long way in our conversation. I am hopeful that she makes rent as I would love to keep her. However, I won't have an issue replacing her and raising the rent again.

I need to credit Brandon Turner's "The Book on Managing Rental Properties". I'm 3/4 of the way through this book and it really assisted in pointing me in the right direction. It made me think of the consequences of forgiving rent payments and late fees, as well as how to respectfully deal with your tenants. I highly encourage any new landlords to invest in this book as it will truly pay for itself 100x.

I'll continue to update next week as our saga unfolds. Have a great weekend!

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Thomas S.
Member since 2016 · 13k+ posts · 12k+ votes
7y

I know you do not need advice but...….. you need to immediately issue the pay or quit notice to begin the process to evict. It is all about time and you need to cover your butt. Hopefully she will leave voluntarily but if not you risk losing more money by not sticking to the codes.

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  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    7y

    I know you do not need advice but...….. you need to immediately issue the pay or quit notice to begin the process to evict. It is all about time and you need to cover your butt. Hopefully she will leave voluntarily but if not you risk losing more money by not sticking to the codes.

    6Reply
  • Ben Sears
    OP
    Flipper/Rehabber · Farmville, VA · Member since 2018 · 280 posts · 171 votes
    7y

    Thanks Thomas. I’m always open for suggestions from more experienced investors. I’m hopeful that it all works out. 

    0Reply
  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    7y

    "I’m hopeful that it all works out."

    That business approach is how novice landlords end up 3,4,5 months behind in rent and never collect.

    6Reply
  • Mary M.
    Rental Property Investor · Portland OR · Member since 2018 · 2k+ posts · 3k+ votes
    7y

    Maybe suggest she get a roommate (which needs to pass screening, etc) 

    I always try to help my tenants figure stuff out when life happens. I hope it works out for all 

    1Reply
  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    7y
    Originally posted by @Mary M.:

    Maybe suggest she get a roommate (which needs to pass screening, etc) 

    I always try to help my tenants figure stuff out when life happens. I hope it works out for all 

     I never try to help my tenants "figure stuff out". Their lives are none of my business. We have a business arrangement - I provide good housing and they pay for it, on time, every time. What kind of commerce system would we have if every purveyor of goods and services tried helping their customers "figure stuff out"? Imagine the plumber providing services, the customer telling him he can't pay, and the two of them brainstorming how the customer can come up with money to pay the plumber? 

    This is where, hard as it sounds, more people need to listen to @Thomas S than not. Trying to help your tenants figure out their responsibilities is a quick trip to insolvency for the business owner.

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  • Mary M.
    Rental Property Investor · Portland OR · Member since 2018 · 2k+ posts · 3k+ votes
    7y

    @JD 

    @JD Martin not sure about you, but I absolutely have had vendors help me “figure stuff out” , and while I agree that tenants have their own lives that I dont want to be involved in, if they come to me with an issue, as above, I would do they best I could to help them - if they were looking for help. 

    They way I see it - it is better for me if a good tenant sticks around. Not only do I not have to worry about flipping the unit , renting it out, lost income, etc etc, but that tenant will say great things about me if anyone asks, and sometimes if they dont!   And in this day and age of online comments, this matters. 

    4Reply
  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    7y
    Originally posted by @Mary M.:

    @JD 

    @JD Martin not sure about you, but I absolutely have had vendors help me “figure stuff out” , and while I agree that tenants have their own lives that I dont want to be involved in, if they come to me with an issue, as above, I would do they best I could to help them - if they were looking for help. 

    They way I see it - it is better for me if a good tenant sticks around. Not only do I not have to worry about flipping the unit , renting it out, lost income, etc etc, but that tenant will say great things about me if anyone asks, and sometimes if they dont!   And in this day and age of online comments, this matters. 

     I've never had vendors help me "figure stuff out" because I've never visited my problems on those I do business with; I'm not married to the plumber or the landlord. They're not my counselor or my spiritual adviser; I'm fairly certain that most people I do business with have plenty of their own problems without having to "figure out" how to help a virtual stranger figure out their money problems. 

    As for tenants saying great things, my tenants have always said great things about me and I've had a number of referrals come to me from ex-tenants. They didn't tell their friends and relatives that I was a great guy who helped them with their money problems; they told them I kept a good property, maintained well, was responsive to requests, and charged a fair price. I don't want anyone telling their friends "Oh, go see this guy - if you run short of money, he'll sit down with you and help you figure out how you can get more money and let you pay over time". 

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  • Mary M.
    Rental Property Investor · Portland OR · Member since 2018 · 2k+ posts · 3k+ votes
    7y

      @JD Martin   

    when my mom was dying I was on my phone with the family a lot. So much that the bill, when it came was over $1,000. I was shocked...  and unfortunately at that time (2010)  i was self employed and 1,000 was a lot for me to pay without planning ahead. So I called the phone company and let them know I needed a payment plan. They asked casually why my calling activity was so much more than normal (just small talk) and i told them my mom was dying etc.   do you know, without me asking, they wrote off the ENTIRE bill? 

    I have not forgot that random act of kindness. I payit forward when I can. 

    Also, fwiw, I did not suggest helping a tenant pay over time.  My suggestion above was that a roommate might be a good suggestion so the tenant pays the rent on time. 

    6Reply
  • Robert Biggerstaff
    Contractor · Pensacola, FL · Member since 2018 · 303 posts · 240 votes
    7y

    I would highly suggest going ahead and serve in the three day notice and getting the evection process started. For every day you wait that’s another day that you’ve lost money. Being a landlord is a business it’s not a charity you’re not the Red Cross

    2Reply
  • Denise Pauzano
    Investor · Philadelphia, PA · Member since 2015 · 62 posts · 9 votes
    7y

    @Thomas S. Any issues with evicting in the winter months? I hear that can be a challenge in some states.

    0Reply
  • Kenneth GarrettPro Member
    Investor · Florida Panhandle/Illinois · Member since 2016 · 4k+ posts · 3k+ votes
    7y

    My two cents.  When your a small landlord with a hand full of units there is nothing wrong with compassion for a tenant.  A slow paying tenant actually puts more money in your pocket with late fees.  Landlords with many units cannot take that approach.  You in that case most likely are not self managing so the rule is the rule.  If there late a notice is provided to them.  This is a people business and there is nothing wrong with working with people.  

    A great tenant who has run into a tough situation temporarily what’s the harm in working with them.  You as the landlord hold the cards.  Whatever your state law requires as far notices you should follow.  In my state it’s 5 days.  If I give them 10 days to cure what’s 5 days to keep a good tenant.  The cost to replace a tenant is probably two months rent to make repairs, paint etc.  You can always be hard nosed about things, but in my opinion there are other options.

    2Reply
  • Rob Gribben
    Bel Air, MD · Member since 2014 · 119 posts · 36 votes
    7y

    @Kenneth Garrett

    I agree, there's a fine line you walk with being a push over and letting tenants take advantage, and having some compassion in the name of keeping a good tenant.  Someone who keeps the place clean, and has a good history of payments, is someone that you want to try and keep around if you can.  

    If the tenant had a short rental history with you and/or has some other issues, then yes you should take a hard stance and explain the agreed upon payment terms.  If they fail to live up to those terms, then you either try to get them to move out on their own, or you begin the eviction process.  In most cases, you really do have to be firm about payment terms, or tenants will take advantage.  However, in some cases its worth putting some effort toward keeping good tenants in place.  

    I setup my leases so that they go month to month (with 30 days notice) after the initial 1 or 2 year lease period.   That gives them the flexibility to move if needed, without signing a longer term lease, but more importantly, gives me the latitude to end the rental agreement if there are issues like payments, maintenance, etc.  

    1Reply
  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    7y
    Originally posted by @Mary M.:

      @JD Martin   

    when my mom was dying I was on my phone with the family a lot. So much that the bill, when it came was over $1,000. I was shocked...  and unfortunately at that time (2010)  i was self employed and 1,000 was a lot for me to pay without planning ahead. So I called the phone company and let them know I needed a payment plan. They asked casually why my calling activity was so much more than normal (just small talk) and i told them my mom was dying etc.   do you know, without me asking, they wrote off the ENTIRE bill? 

    I have not forgot that random act of kindness. I payit forward when I can. 

    Also, fwiw, I did not suggest helping a tenant pay over time.  My suggestion above was that a roommate might be a good suggestion so the tenant pays the rent on time. 

     I'm sorry for the loss of your mother. Losing anyone is difficult, much less a parent. I hope her suffering was as little as possible.

    As for your $1000 phone bill, that really amounts to nothing more than poor planning on your part. We have had unlimited talk and text for a nominal cost for well over a decade, so there isn't any reason you shouldn't have had a $100 phone bill instead of a $1000 phone bill. What you see as 'kindness' I see as someone allowing an irresponsible customer to walk away from their responsibility. Did you ever pay them back when you got more  money later? Did you report the waiver on your taxes? The phone company should have sent you a 1099-C. 

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  • Mary M.
    Rental Property Investor · Portland OR · Member since 2018 · 2k+ posts · 3k+ votes
    7y

    @JD 

    @JD Martin when your parent gets ill and dies within about 6 weeks you dont think about things like phone plans.

    As for paying it back - i have recommended this company to everyone, stayed with them for a decade and I also pay it forward by extending a helping hand (and cash) to those that need help. 

    I can only hope you dont ever have a situation arise that you are unprepared for. 

    2Reply
  • Jim K.
    Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
    7y

    @Mary M.

    SO WHAT'S THE PHONE COMPANY???

    :)

    0Reply
  • Mary M.
    Rental Property Investor · Portland OR · Member since 2018 · 2k+ posts · 3k+ votes
    7y

    @Jim K. AT&T :) 

    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @JD Martin:
    Originally posted by @Mary M.:

    Maybe suggest she get a roommate (which needs to pass screening, etc) 

    I always try to help my tenants figure stuff out when life happens. I hope it works out for all 

     I never try to help my tenants "figure stuff out". Their lives are none of my business. We have a business arrangement - I provide good housing and they pay for it, on time, every time. What kind of commerce system would we have if every purveyor of goods and services tried helping their customers "figure stuff out"? Imagine the plumber providing services, the customer telling him he can't pay, and the two of them brainstorming how the customer can come up with money to pay the plumber? 

    This is where, hard as it sounds, more people need to listen to @Thomas S than not. Trying to help your tenants figure out their responsibilities is a quick trip to insolvency for the business owner.

    and for all these reasons is why I am no longer a landlord  :)   at least at the street level..  

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Denise Pauzano:

    @Thomas S. Any issues with evicting in the winter months? I hear that can be a challenge in some states.

     not sure about eviction but I know many cities wont turn off utls and then those become a lien on your property.. 

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  • Jesse Harris
    Flipper/Rehabber · Richmond, VA · Member since 2018 · 57 posts · 19 votes
    7y

    @Ben Sears Hey Ben, the thing that sticks out to me is that you said he pays a Majority of the rent. That is not like Majority of the water or electric. It might be hard for her to over come that.

    Just my two cents.

    0Reply
  • Alan Grobmeier
    Rental Property Investor · Phoenix, AZ · Member since 2013 · 919 posts · 911 votes
    7y

    @Ben Sears, this problem is your tenants, not yours.  She needed to come up with a plan, which she did not.  Start eviction proceedings.  If she ‘figures’ it out, great.  If not, next.  ;-)

    0Reply
  • Jonathan R.
    Investor · Wichita, KS · Member since 2017 · 584 posts · 813 votes
    7y
    Originally posted by @Jay Hinrichs:
    Originally posted by @Denise Pauzano:

    @Thomas S. Any issues with evicting in the winter months? I hear that can be a challenge in some states.

     not sure about eviction but I know many cities wont turn off utls and then those become a lien on your property.. 

     In Kansas, the electric company cannot hold a landlord responsible for a tenant’s electric bill. I work for the major provider here. If we do a parcel search and pull up the owner’s name and the owner is the one calling him in for service, we turn the service on for them. We only attempt to collect from the tenant. The same goes for turning on service for a tenant. If we can verify the landlord’s primary residence is elsewhere, we do not deny a tenant service if the landlord has a large bad debt account incurred at the property. This is how we handle it here, but we are also a regulated utility company.

    0Reply
  • Caleb Heimsoth
    Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    7y

    @Ben Sears. I have two pieces of advice. 1. Hire a property manager because it sounds like you didn’t screen this tenant very well. 2. Put the pay or quit notice on the door and start the eviction process.

    In landlording there is no room for feelings. Every tenant has a story. You can be polite and listen if you want to (I personally don’t really have the time) but then evict if they don’t pay.

    Keep it business like and you’ll have so many less issues. Give tenants an inch they’ll take a mile. If someone tells me they will pay rent late on a certain day, that’s fine but if they don’t pay by that date I’m filing eviction the next day.

    1Reply
  • Joshua Myers
    Rental Property Investor · Columbus, OH · Member since 2014 · 148 posts · 177 votes
    7y

    @Caleb Heimsoth. The tenant was inherited when he bought the property, so he couldn't have screened them. I agree with you though that there's no room for feelings in this business. It's unfortunate, but as soon as a tenant thinks that you'll "be cool about it" if something unforeseen happens, things suddenly start to come up more frequently.

    1Reply
  • John Nachtigall
    Santa Rosa, CA · Member since 2017 · 325 posts · 701 votes
    7y
    Originally posted by @Jay Hinrichs:
    Originally posted by @Denise Pauzano:

    @Thomas S. Any issues with evicting in the winter months? I hear that can be a challenge in some states.

     not sure about eviction but I know many cities wont turn off utls and then those become a lien on your property.. 

     Every time I get tempted to invest in a property and not a syndication I read a thread like this and I feel much better about my choices.   

    1Reply
  • Ben Sears
    OP
    Flipper/Rehabber · Farmville, VA · Member since 2018 · 280 posts · 171 votes
    7y

    Thank you for all of the responses. I’m glad that my post prompted a good discussion since that’s the entire point of BP. I will be issuing the pay or quit notice this week to get the ball rolling.

    0Reply
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