One of the most crucial aspects of property management involves handling tenants. And most of the property management companies see this as a way to make money. They thrive on quick tenant turnover. Each new tenant means additional tenant placement fees for them. These companies neither work in the interest of the tenants nor in the landlords’ best interest. They don’t really care even if the tenants end up not paying the house rent. They immediately file for eviction, costing the landlords time, stress, money, and the hassle of getting the tenants out without considering any other options.
I feel quick eviction of the tenants should not be considered as the immediate and only option by the property management companies. In fact, our company sees eviction as the last resort when we’re out of options to get the rent out of the tenants. We believe that most of the tenants are decent human beings who don’t like to get behind on rent unless something really unexpected happens to them. In my opinion, property management companies must approach tenants fairly and open up a discussion with them to understand the reason for not paying rent. They should give the tenants at least one last chance to pay the rent before showing them the door.
Frankly speaking, in Toledo, I don’t know a decent property management company who handles problematic tenants in a good way. As an investor, you’ve got to be very careful when buying a turnkey property from any provider that has an outsourced property management company. These companies never work in your best interest and are also pathetic in handling tenants who don’t pay rent on time.
This is one area that a lot of investors are concerned about. Many have asked me if I do in-house property management and how my company deals with problematic tenants. So, let me give you some great tips on how we handle problematic tenants.
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As landlords wait for their monthly cash flow in the form of rentals, a late payment or refusal to pay the rent on time can drive them crazy. Let’s say that a payment was due on the 1st and it’s already the 5th. Their property management company immediately takes the extreme step of sending a 3-day eviction notice to their tenants. Well, it’s never in your best interest to get your tenants turned over. A lot of effort goes into qualifying each tenant, and so you should always try to get them to stay in your property and pay a monthly rent.
If the tenant fails to pay rent on time, you can ask them to pay a late fee. There can be several reasons for not paying, such as temporary unemployment, cash flow shortage, or certain repair and maintenance issues. Jumping to immediate conclusions won’t benefit you in any way. The key here is to communicate with your tenant and understand the nature of their issue. And if possible, even try to negotiate different terms with them. You could agree to a differently structured payment system. You can also try including a policy of accepting a partial payment from the tenant once per year. Yet another feasible option for rent collection is to prorate the late fees and deduct that sum from the remainder of the tenant’s lease.
Take Legal Action When Necessary
The previous paragraph is all fine and dandy when you know your tenant is decent and has kept you informed about the delay in payment. However, there are other types of tenants who first of all fail to make a payment — and on top of that, they don’t even bother to inform the landlord about the delay in payment.
In such cases, if you don’t receive any communication from your tenant or you receive a communication that’s presented in a malicious manner, that’s when you shouldn’t be merciful at all. You should take the legal route and give your tenants a 3-day notice to pay or quit. By taking this step, you ask your tenant to either pay the rent in the next 3 days and if they don’t pay the rent, you’ll force them to move out of the property. If the rent is not paid even by then, you should order them for eviction on the 4th day. And then there’s a court hearing that’s normally scheduled within the two weeks. Even the court is not merciful to people who don’t pay the rent in time. The judge will order for an eviction and for your unpaid rent. This is the case for Ohio only — different laws apply for every state.
Our company always keeps the landlord’s best interest at heart. Under these circumstances, we give the tenant a 3-day notice after which we go to court, we evict, and then we normally get possession to the property within the next 10 days. We keep track of the whereabouts of the tenants. We come crashing down to every tenant; we call their employer and do whatever it takes to get justice for the landlord. That is the extreme measure we are ready to take. I’m very proud to say that we’ve had only three evictions in the last two years, and that speaks volume in terms of our in-house property management.
Screen, Screen, Screen
Being a landlord, you should ensure in the first place that you’re not dealing with a bad tenant. The best way to ensure this is by applying a solid screening process. We have a very strict screening process. We do a thorough background check, reference check, and income verification check of the prospects. Most of the time, we even call all the previous landlords of the prospects to verify their conduct. And you know what? Many tenants aren’t sure about the amount of rent they’ll be comfortable paying each month. They may pay for the next few months and then don’t pay. As a thumb of rule, screen only those tenants whose monthly income is at least three times the monthly rent of your property. Keeps it simple and straightforward.
Sometimes even after a good screening process, there are tenants who get through and end up in your property. As a precautionary measure, you’ve got to be as objective as possible. Set strict rules and policies. Ensure your tenants adhere to those policies. This is your business, and you need to treat it professionally. If you’re not professional, believe me, your tenants will always try to get their way and bring you under their control. Always be firm but fair.
So, practice strictness and professionalism while also keeping your empathetic side in place. It’s alright to bend the rules once in a while, but just don’t let your tenant feel that you’re always flexible on rental terms.
Make Time for Occasional Visits
Visit your rental property occasionally to determine if the tenant is taking good care of your property and is abiding by the agreed terms and conditions.
When you pay a visit, do not assume that everything is fine. Talk to the neighbors to get an idea of your tenant’s behavior.
When dealing with tenants, write down everything that you negotiate on. A strict agreement will save you a lot of grief in the future. After writing down everything, give the document a legal legitimacy by getting it signed by a qualified attorney. Your tenant will think twice before breaking any of the legal agreements that you mentioned in the document. If tenants start to get problematic, you need to keep a very detailed timeline of events. We have taken it as far as recording conversations. In the case of court proceedings, a judge loves to see a detailed timelines of events.
Hire Property Management if Needed
Since many landlords have a job, property management is not necessarily their cup of tea. There’s just too much to handle. In these cases, the landlords should hire a reputable property management company that keeps the best interest of their clients in mind.
Maintain a Good Relationship
And as I said before, many times a mutually good relationship solves many of the rental issues mentioned above. Respect each other and stand by your words. From the very beginning, listen to your tenant regarding repair and maintenance issues of your property. Do not let distrust sprout between the two of you. After all, many people prefer a comfortable and peaceful stay in a rental property. Duh!
Food and shelter are the two most important things to humanity. If you cannot afford your shelter, you’re not just disrespecting your landlord, you are also disrespecting yourself. If a tenant is not able to pay the rent on time, he/she should first confront the issue with the landlord and negotiate a structured payment option that’s agreeable to both the parties.
Investors: How do you deal with problematic tenants while avoiding turnover?
Let me know with a comment!