Tenant moved out while still owing back rent, what are my options

General Landlording & Rental Properties
13yFollow

Tenant moved out while still owing back rent, what are my options

Paul ZofsakPro Member
Investor · Cypress, TX · Member since 2013 · 118 posts · 15 votes

I had a tenant get a job suddenly in another city and had to move. He put in proper notice and left the house in great condition. The only problem is that he got behind on rent after losing his job shortly after moving in. All in all he was only behind about half a months rent. After moving out we agreed he would pay $200 a month until he got caught up; he made the first payment and then nothing. I can't reach him by phone or email. I have no deposit left to draw from so my question now is, what are my options? Do I go the collection agency route, just chalk it up to experience, or is there another way? Help is much appreciated.

1Reply
26 views

Most Popular Reply

Troy Fisher
Specialist · Kirkland, WA · Member since 2013 · 1k+ posts · 817 votes
13y

You can. But if he gave notice and left the place in good condition, why bother with the headache? Just focus on getting that sucker re-rented.

5Reply
See this reply in the discussion

16 Replies

Jump to latestLatest
  • Troy Fisher
    Specialist · Kirkland, WA · Member since 2013 · 1k+ posts · 817 votes
    13y

    You can. But if he gave notice and left the place in good condition, why bother with the headache? Just focus on getting that sucker re-rented.

    5Reply
  • Rob Roy
    Belcarra, British Columbia · Member since 2013 · 1 post · 0 votes
    13y

    This happened to me many times and i would probably just let it go. The reason I say this is because I have a friend that got so upset by things like this stuff that he sold all his property and since those sales, he has lost over $5,000,000. in capital gains! I kid you not. One guy gave him stories, "....his Mom died, the cat got sick", then he bolted. My friend hired a private investigator to find him, took the tenant to Court and won. The only problem was that the tenant had no money and....."you can't get blood from a stone". (the lost rent and extra expenses came to over $7,000) In my travels (regarding real estate investment), one in 11 or 12 will stiff you, but the other 10 or 11 make it all worth while. Keep smiling and try to buy close to a University or Hospital.

    0Reply
  • Stephen White
    Buffalo, NY · Member since 2013 · 106 posts · 75 votes
    13y

    Paul Zofsak the collection agency route is not a bad idea. Go for an agency that specializes in tenant debt and has contingency based fees. FYI the rental industry is statistically one of the lowest recovery rates in the collection business. So with that being said, I agree with Troy Fisher and Rob Roy that you should not become attached to the idea you'll ever get paid. But at least putting this on his credit might make you sleep a little better

    0Reply
  • Rob K.
    Investor · Southeast, MI · Member since 2012 · 2k+ posts · 1k+ votes
    13y

    Wouldn't his security deposit cover this if it was only half a months rent?

    I'm pretty sure you would have to get a money judgment against him before starting any type of collection process.

    1Reply
  • Stephen White
    Buffalo, NY · Member since 2013 · 106 posts · 75 votes
    13y

    Rob K a very common misunderstanding is that you need a money judgment before you can begin the collection process or even affect someones credit. I had many clients (when I owned a client based collection agency) that would place the account without a judgment in cases where there wasn't an eviction or past due rent, but simply damages to the unit. The rule with placing an account with collection agencies is the account must be past due, usually at least 30 days, but no prerequisites such as judgment filing.

    0Reply
  • John Chapman
    Investor · Dallas, TX · Member since 2009 · 718 posts · 913 votes
    13y

    Stephen White that's interesting, because I was always under the impression that Rob K was right about having to reduce the debt to judgment before you could farm it out to a collection agency. (I've never bothered pursuing a debt via judgment or collection so I've got no experience in this area.) Do you have sources of authority you might be able to point us to?

    I guess I can see the reasoning behind it. You get a judgment to avail yourself of judicial remedies for collecting (liens, garnishment, etc.) If you don't want to use any of these resources, then you could theoretically hire a third-party to try to collect via phone calls and reporting the debt to credit agencies. Is this about right?

    1Reply
  • Stephen White
    Buffalo, NY · Member since 2013 · 106 posts · 75 votes
    13y

    John Chapman I just scanned through the FDCPA and the only exact language I could find relevant to this is the definition of a collection account. "A collection account is a delinquent or past-due account transferred from routine account to the collection department (or a collection agency)."

    So by definition, if the tenant is "past-due" the account may be placed with an agency for collection.

    I am checking with my contact at the collection agency that purchased mine to see if they can get something from the ACA that speaks specifically about placement. I don't think we'll get lucky enough to have anything specifically about the rental industry but maybe something relating to pre/post judgements. Although so far even he can't think of anything that specifically references this situation in the rental industry.

    So for now all I can give is my experience and the hundreds of property management clients I sold my agency with that placed accounts without judgments. In fact, if the account DID have a judgement, we still made calls and collection attempts to execute the judgement but treated it no different than an account without the judgement in terms of curing the account. Most often garnishments and liens don't work or work fast, so the best remedy is often an agency that can constantly engage the debtor and commit them to a repayment plan.

    I will keep you posted if I hear that the ACA has any specific guidance on this subject.

    0Reply
  • George Paiva
    Investor · Milford, CT · Member since 2012 · 592 posts · 285 votes
    13y

    Here in CT you have to bring them to small claims then do the collection agency if they don't pay. To be honest for $200 I would not bother. Only if maybe you would want to ding their credit by putting a collection then by all means go ahead.

    0Reply
  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    13y

    How much time and money do you want to spend to chase such a small amount you may never recover??

    My whole goal in life is eliminate problems and enjoy life more with the time that I have on this planet. I wouldn't want to spend it chasing after dimes when I can be making dollars with that time.

    I would just let it go as others have said.

    Podcast Guest on Show #47
    NNN Invest53 Reviews
    WebsiteView Page
    1Reply
  • Robert Carl
    Investor · Baltimore, MD · Member since 2013 · 205 posts · 44 votes
    12y

    This issue adds up to large money. A tenant not paying at least in Baltimore City if you are filing ASAP can cost you almoust 3 months rent.

    Numbers don't lie:

    6 wks minimum to evict

    +2 weeks for clean out and repairs avg. time

    +3 weeks the avg. for most properties to be rented.

    + clean out and repairs($500) if no major damage.

    If you rent for a $1000 a month you have lost almost $3000 in rent plus $500 repair cost.

    Total $3500.

    2 of these tenants in a year for the same rental. You might as well chalk a whole year up to a loss.

    This problem of collecting on bad tenants has to have a solution. Big rental companies are able to do it on a regular basis. Im talking to lawyers now to find a solution.

    0Reply
  • J. MartinPro Member
    Rental Property Investor · Oakland, CA · Member since 2011 · 3k+ posts · 2k+ votes
    12y

    That sounds like a cheap exit to me.

    Listen to @Troy Fisher , and move on with your business. It's not going to be worth your time 19 times out of 20. The best revenge is living well ;)

    0Reply
  • J. MartinPro Member
    Rental Property Investor · Oakland, CA · Member since 2011 · 3k+ posts · 2k+ votes
    12y

    @Robert Carl , if you have that much in expenses, I would recommend getting higher deposits. I got 2 months for some of mine in a low income area. You'd be surprised what people can come up with. Or let them pay the extra month over the first 2 months of tenancy.. At least gives yo more cushion.

    Also, if you're doing $500 worth of cleaning and repairs, I would have it done in one day or two, rather than 2 weeks. Pay more or get more people to work on it at the same time. That 2 weeks vs 2 days is costing you almost the entire $500 cleaning cost in lost rents..!

    And you can take them to small claims, get a judgement, then you can try collection later if they don't pay the judgement, depending on your state..

    0Reply
  • John Weidner
    Chicago, IL · Member since 2014 · 710 posts · 200 votes
    12y

    @Paul Zofsak

    Cost of doing business. Forget about it and be glad they exited without causing any damage

    0Reply
  • Bill S.Pro Member
    Moderator
    Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes
    12y

    It's not hard to do yourself but you need need to learn how. If you expect to have this happen again and again (typical tenant profile) in the near future, learn the process as you will be able to use that knowledge again and again.

    If you only own a few places and plan to use this process to sharpen your tenant screening process. Do as other suggested and write it off. As they said you most likely won't collect and will spend a lot of time.

    What I have seen landlords do is get the judgement and wait hoping the tenant eventually wants to buy a house or something and needs to clean up their credit. That's when you get paid in full with interest. They say the few times they have collected made it worth learning the process and doing it.

    0Reply
  • Gerald K.
    Real Estate Investor · Kirkland, WA · Member since 2012 · 480 posts · 116 votes
    12y
    Originally posted by @Paul Zofsak:
    I had a tenant get a job suddenly in another city and had to move. He put in proper notice and left the house in great condition. The only problem is that he got behind on rent after losing his job shortly after moving in. All in all he was only behind about half a months rent. After moving out we agreed he would pay $200 a month until he got caught up; he made the first payment and then nothing. I can't reach him by phone or email. I have no deposit left to draw from so my question now is, what are my options? Do I go the collection agency route, just chalk it up to experience, or is there another way? Help is much appreciated.

    As other's have noted, not a huge deal. Actually, I'm sure many of us ended up with more expenses to pay even after receiving all the rent payments in full. Do you have his new address? If not, you may be able to mail the bill to him at the current address (your rental) and it could be forwarded to his new address. Not that he would pay, but might worth trying since it's only the cost of mailing a letter. However, if the emails are not bouncing, and the phone isn't disconnected, he's probably going to ignore that too. Good luck.

    0Reply
  • Ellis San Jose
    Specialist · Westlake Village, CA · Member since 2010 · 1k+ posts · 781 votes
    12y

    @Paul Zofsak

    Trying to collect without a Judgment has no teeth.

    Consider Filing a suit in small claims court. If you win, you get a judgment. You can then place it with a collection agency ( they will take the lion share of the money if they ever collect, or you can record it in the county where the former tenants live & hope that it creates motivation for them to deal with it.

    If the time & money is worth it to you, then go for it. If not, let it go & get better at tenant selection.

    1Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free