All Forum Posts by: Nathan Gesner

Start the eviction process. It's sad that he can't figure out his life but it's not your responsibility.

I've had this and it's not difficult. Contact the tenants on Day 1 and introduce yourself as the new owner. Provide them with contact information, payment instructions, etc. I would also include a short statement that you will require them all to sign a new lease and set up their own utility accounts for gas and electric.

Keep in mind, this sounds like a great idea but you need to confirm the market supports it. If the increase is too much, the tenants will all leave and you'll be losing far more than you had hoped to gain.

Another option is to keep utilities in your name and increase rent for the tenants to cover the expense. This is actually cheaper for everyone involved. The utility companies charge base fees for every account which means all ten tenants are paying those base fees and then paying for the actual use. With one Landlord account, you are charged the base fee once and then actual use so the overall charge is lower and you tenants save some money. Another benefit: you can usually put it on "budget billing" where the utility company will charge you the same amount every month so your tenants can pay the same amount every month and it's easier to budget. Another benefit: tenants don't have to establish their own utility accounts which means they won't have to pay the deposit required by most utility companies.

If the tenant causes an expense, I charge it back to them and expect them to pay it. If I pay $50 for the Sheriff to issue them a 3-day Pay or Quit Notice, I list the unpaid charges AND the $50 service fee and require them to pay the entire amount or I proceed with eviction. Same with court fees.

By the way, my lease includes a clause for "Application of Rent" that says any payments made are applied to outstanding charges in the following order:

1. Tenant-caused billings
2. NSF fees, late fees, service fees
3. Utilities
4. Security deposit
5. Unpaid rent (oldest to newest)

Let's say the tenant owes $600 in unpaid rent, $100 in utility, and $50 for the eviction notice. They pay me $600. I apply it to the $50 eviction notice, then the $100 utility, leaving only $450 to rent. They are still short $150 rent money so I continue with the eviction.

Cleaning is a tenant responsibility and the vast majority of them can handle it fine. Why pay for that?

I handle landscaping on multi-family by hiring someone. I want to ensure it's maintained properly without tenants fighting over it. I also don't want to have to maintain a mower, edger, hoses, and other equipment or figure out where to store it.

I collect a deposit based on increased risk. I determine that risk during the application process using a score sheet that assesses employment, credit, and rental history. It's objective and fair.

Where's the risk in renting to four people? It's not the number of people; it's their relationship with each other. A married couple is far more likely to remain together and stable for the term of the lease than two friends or two co-workers. This is especially true when you have three or more unrelated people. In my experience, three or more unrelated people are far more likely to have late rent, increased damages, lease violations, and early terminations. Not to mention the inter-personal relationship drama.

If three or more unrelated people want to rent from me, I require each individual to earn at least 2x the rent. This step alone eliminates the vast majority of applicants and reduces the additional risk.

I'm with @Mindy Jensen on this one. Many tenants will offer to pay large sums up front as a diversion. If they were irresponsible in the recent past, they will likely be irresponsible with you now. 

Tenants with bad financial skills tend to have other problem areas, like cleanliness, relationships, employment, etc. 

Another point: what is gained? You would take on a high-risk tenant and gain nothing for the risk. Why not take a well-qualified tenant that pays the same amount and presents little risk?

Start with a book that provides a bird's-eye view of investing. The "Ultimate Beginner's Guide To Real Estate Investing" is free and a good place to start. They have a new book coming out in the BP Store that is similar but more detailed and I would recommend reading that next.

Once you have a general understanding of terms and types of investing, then you can educate yourself on the specifics:

• How do I find a good deal?
• How do I pay for it?
• How will I manage it?

I think it's important to be financially sound so maybe you could read a book like "Set For Life" by @Scott Trench and evaluate whether you're prepared. Without a solid foundation, everything else you do can fall apart.

Providing rental criteria up front will dramatically reduce the amount of time wasted on unqualified applicants. Give them the basics and most of them will quickly know if it's worth applying or not. I also recommend having a more detailed policy written so you and the applicant can reference it. You can create a free web site or have it available to email anyone that asks.

I also agree with @Nathan Schiess that you should always let people apply if they want. When an applicant shares information that may disqualify them, I just state our policies and let them know they can still apply if they want. I also make it clear the application fee is non-refundable. You'll be amazed how many people can't afford a $20 application fee.

I often adjust the length of a lease to ensure turnover or renewal during the "hot" season, which is May - August for me.

1. Don't ever accept a tenant 18 months in advance, particularly a kid. They have no way of knowing what they intend to do that far in advance. I would normally suggest you not accept a tenant more than 90 days in advance.

2. I don't recommend signing leases longer than one year. Even mature tenants can't normally plan that far in advance and the majority of them will break the lease before the two-year term is complete.

3. When you take a deposit and hold a property off the market, you are accepting risk. You can mitigate that risk by requiring a large fee that is non-refundable if they change their mind. The longer you hold it off the market, the bigger the fee should be. For example, if the house rents for $1,000 and you normally require a $1,000 security deposit, charge the tenant a $1,000 holding deposit that will convert to the security deposit if/when they sign the lease and move in. If they fail to follow through, you keep the fee to cover your losses and put the property back on the market. Be careful with your language: a deposit is refundable, a fee is not refundable.

4. I don't know what paperwork was signed or what evidence you have but I would contact the former "tenant" and let her know she violated the agreement and has caused me some major losses. Let her know you intend to take her to court to cover those losses and see if she's willing to offer to compensate you. You could wait until the unit is rented so you can determine the exact amount of losses suffered, but I suspect you're already pretty close to the limit of what you can sue for in Small Claims.