Rent to not ideal tenants?

38 Replies

Hello! My wife and I are new to the REI scene and actively looking to make connections, deals and grow our portfolio. We just recently bought a duplex and am owner occupying. The tenant side was already rented out and since closing, a few red flags have popped up. 1: the day rent was due, I received a text asking for rent to be delayed 2 days for personal reasons(I accepted because after 7 days there was an official late fee). 2: The condition of the unit is clearly not kept very well (ruined carpet with holes from dog, pee and poop literally on the floor), and 3: most recently I learned that they habitually pay electric upon notice of shutoff.

The dilemma we're running into is that we have long cold winters (Fairbanks, Alaska) and cant afford at the moment to pay for the renovations and carrying costs (cash), that will be required to make the unit to my standards. My wife and I think we should keep them for 6 months til summer when it will be easier to get the renovations done. They still pay the bill and arent "technically" late, and they clearly are okay with their current conditions. I guess my question is, should we ride out the winter with them, or give them notice and carry some costs for a few mo this to get the renovations done with credit? I appreciate everyone's time and help!

The damage is done already, why accrue additional expenses by vacating a source of income now? If renovations have to get done either way, wait until you're in a position to handle it more effectively. How they are living in their unit has no impact on you now. Just be sure to keep their security deposit and work that into your operating budget.

@Jeremy Bartlett

I agree with Jeremy. The damage is already done. You can’t move someone in their without spending a couple grand at least. It doesn’t sound like they’re going to make it any worse than it is now so just let it ride.

No reason to force a vacancy until it work for you to do so...... if the timing isn't right and you don't really have the finances to do the work right now anyway, don't shoot yourself in the foot and get them out now..... the damage to the unit is done and the rent is still coming.......

I had a renter identical to what you've described for my first owner-occupied as well. He was in there for 10 years, so I didn't mess with fixing anything but what was required. When I read others say "don't force a vacancy" - I agree too. However, it is important to set expectations. Serve every notice to quit when they are late face to face. Serve reminder letters on business letterhead that if their service is disconnected, they will receive a notice to quit. If there's unruly behavior, get those issues addressed as well through lease addendum and written agreements. Also, evaluate rents - raise them to market rate in the spring or next lease renewal. Welcome to landlording.

@Chris Brenner - great advice here - I am so proud of our AK BP community showing up! This is much better than even just one year ago! - well done @Keenan Fitzpatrick @Jeremy Tompkins @Connor Dunham - Chris - I'd add - having a little time should allow you to start getting some discounts on the materials you want to stockpile and have on hand for the renovations - if you want to DM me I have some coupon connections that can help you save $$! 

@Chris Brenner . Chris. You jumped in short of funds. The first rule of ANY business or investment is “your first loss is your best loss”. If you roll with the punches with a tenant they will beat hell out of you. I know I lived in bush Alaska 12 years. Fairbanks is no different than any other place. ( I live in Colorado now) Where are they going to find a place in Fairbanks in the middle of nov?? Tell them to pay up or move. You can’t even begin to go down that road with any tenant. It’s cheaper to have the unit empty than you kick them out in 2,3, or 4, months ( if you can) and they owe you rent. If they don’t pay then you have worse than an empty apartment. You have one you can’t rent cos it’s occupied. You paying the payment it’s occupied and your not able to rent it out. Put your foot down. Get the rent or get it empty. Then fix to the best shape you can and re rent. For the best rent you can. LEARN from this. The school of hard knocks is expensive. You bought a problem tenant so now your gonna have to Learn from this and hope your sharper on the next one. There is no reason to postpone the beating your going to take here. It’s no worse now than later. I know Alaska, it’s people, and I know the land lording buisness. My profile (check it) isn’t complete. I have15 rentals, 40 storage units, and an ownership in a 47 space campground. Been doing this 15 years. Do not try to soften your loss by postponing it 6 months. It will not work to your favor!! Maybe smart to get a PM and learn from them before you attempt managing on your own. RR

@Chris Brenner . I forgot to mention that it doesn’t matter about a late fee. After all if they can’t or won’t pay rent on time how are you going to collect a late fee? Check your land lord / tenant rules. I think Alaska will allow you to get a court order for rent but I don’t think it’s any good for late fees. RR

If the rent is being paid even if it is late why change?  Keep them in til spring then you can do your renovations.  That's one of the reasons I don't allow any pets in my houses.  And most times the owners are worse than the pets.  We bought one similar to what you had and had to gut everything.  It was disgusting.

@Jeremy Bartlett Yeah I know the rent is coming in today and there is a slim chance he may get lucky but a big part of being successful in this business is how you Handel tenants. From what I read here that tenant is about to turn south. He’s testing the waters with a new land lord. It’s gonna be better for the OP if he takes a harder stance than if he backs up in the first 6 months. Late fees don’t mean much. If a tenant can’t make his rent he can’t pay a late fee either. That’s never an excuse to accept late rent. I know it’s hard when you only have a few units but the tenant that’s consistently late is the one that will cost you the most. It’s 30 days to evict here in co. If the guy is a week late and it takes you another week after posting your pay or quit notice then a month to evict that’s 6 weeks. Then 2 more weeks to do the repairs that’s a 2 month loss. Now add the court expense. Remember the guy was only a week late to begin with. Now add additional “late weeks” to the 2 months. These expenses are the same now or in April. By April this tenant will likely be running 2-3 weeks late every month. Remember too we are just starting the high dollar time of year. There’s Holidays, Taxes, and in Fairbanks -40 degrees, (high heat bills) higher lite bills, The mistake here was buying without the funds to fix the unit up, or the reserves to stand a couple months vacancy. The stress this tenant can now put on the OP is unlimited and if the OP starts off with a soft posture this caliber of tenant is very likely to apply that stress. Ive walked that road a dozen times. Most land lords and property managers that have been doing this for any length of time will not let a tenant push them around much. It almost always ends up costing you heavily. There are exceptions (death,illness, etc) but the op didn’t mention any of that. RR

@Chris Brenner Since slow season is approaching, keep the tenant in place unless they stop paying rent and will force your hand into an eviction process.

Next, clearly communicate to your tenant that having a dirty unit 'is not' acceptable.

@Chris Brenner two things:

"The damage is already done" - yes but once a property starts going down hill, it gets worse and worse. The tenant has the same attitude and they also figure the damage is already done, so they just stop caring. They figure they are not getting their deposit anyways, so who cares if you knock a few more holes in the wall or rip some doors off their hinges. Every month they stay, your rehab expense gets higher.

"Wait until summer to do renovations" - summer is the best time to rent a property. Winter is the best time to do renovations, so the property is ready by summer. If the issue is that you don't have money, then maybe your hands are tied. My general advice it to not buy rental property if you are that cash thin. This bad tenant could move out tomorrow, so you really need an emergency fund at all times.

Personally, I would lay down the law. Start inspecting their unit monthly and keep sending them lease violation notices until the unit is cleaned and repaired. Worst case they get annoyed and leave, which is really best case in my opinion.

@Ralph R. Whoa, this is great info. I really appreciate your time and wisdom! I am using my best customer service to get things I need from this tenant. I'm going to use the LTA as a guide to remedy issues and cover my butt. Thanks for the response!

@Chris Brenner . These posts are hard for me because I went through the exact same stuff in my beginning days 2005 ish. No money no depth and no expierience. My gut said be nice. Today I know better. That guy is tearing your house up every day. He has the upper hand here. He could stop the rent anytime and leave you holding the ball. If your gonna be a landlord you can't be soft or wishy washy. You gotta take hold and manage through your tough spots. RR