Dealing with Tenant Challenges in the Detroit Rental Market

by | BiggerPockets.com

Our company operates out of the Metro Detroit area, which, as of this writing, contains the second-least-expensive housing market in the U.S. This means we’ve got a solid perspective on low-cost rental markets for which you won’t find much advice about online. We’ve been talking a bit about how operating in a high-risk/high-reward environment affects the property management process. Today, we’re talking about how the Detroit rental market affects tenant management.

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Defining Tenant Management

Tenant management consists of four basic tasks:

• Collecting rent (and any other bills you collect from the tenant and pay out, such as utilities)
• Taking care of repair and maintenance requests (and answering general tenant questions)
• Arranging for annual and as-needed inspections
• Renewing leases or arranging for marketing efforts to begin as the end of a tenant’s term nears

Related: The Risks and Rewards of Screening Tenants in the Detroit Rental Market

Income-Related Issues

There are a few different income structures that we see in the tenants we screen. Each one comes with a predictable problem that we keep close tabs on so we can call it out as soon as it starts to crop up.

• Paycheck-to-paycheck tenants who have no savings and who seem to fall behind by a couple of days every month. If you don’t put your foot down and start applying late fees as early and consistently as your lease allows, you’ll rapidly find that they get a full month behind and are paying for April on May 5th and thinking that they’re on time.

• Self-employed and/or contractors who mostly get regular work but occasionally suffer uncontrollable periods of temporary giglessness—or similarly, seasonal employees who consistently get laid off each winter (or whenever). Neither of these two groups ever seems to put any effort into saving up for their upcoming downtime, and we make no bones about telling them we don’t pause our collections and evictions processes just because they don’t prepare.

• Any tenant who mysteriously starts to pay in a significantly different way than they have previously done, (especially if they start paying in cash, and doubly if they start paying ahead in cash) immediately gets our full attention. If they can’t explain the change, we start getting worried that we’re receiving the profits of an illegal enterprise and respond accordingly.

Repair and Maintenance Requests

Mostly, this part is industry standard: people make requests, we arrange to get them cared for, life goes on. But there is one major exception that we need to point out, and that is the Suddenly Everything is Wrong tenant. This is a tenant who has gone months without a request, and then suddenly has several issues at once. This is almost always a result of one specific scenario:

• The tenant has just received an eviction notice and can’t pay rent, so they try to conjure up an excuse to not pay. This is startlingly common, but we track 100 percent of communications with our tenants—we record every call, save every email and text, and take notes on every conversation. So, when we go to court for an eviction hearing, we can prove to a judge that the tenant maintenance excuses are just a smoke-screen to stay rent-free as long as possible.

Related: The Risks and Rewards of the Detroit Rental Market: An Overview

The Case of the Mysteriously Disappearing Tenant

There’s one more thing that happens in the Detroit rental market more often than in most places: tenants simply disappear. We’ve had tenants vanish over night because they figured out they were going to lose their eviction case. We’ve also seen them vanish for no reason whatsoever. Many times, the tenant vanishes and strips the house as they go, leaving behind no water heater, no furnace, and nothing else worth selling. In one particularly zany case, a tenant vanished and kept paying rent electronically while not living in the house—turned out he had moved to South Dakota and was marketing the house himself so that he could move people in and charge them more than we were charging him!

If a tenant reaches the end of his or her lease, of course, we decide whether to offer them the chance to renew or not. But sometimes, tenants don’t reach the end of the lease because they’re getting evicted.

Next time, we’ll talk about how being in Detroit’s high-risk/high-reward market changes the evictions process.

Do you have experience dealing with tenants in high-risk markets? Share them below!

About Author

Drew Sygit

Drew is the manager of Royal Rose Property Management, a fairly high-tech solution for Detroit Metro area property owners & investors.

10 Comments

  1. Erik Whiting

    Good information.

    I rent solid, safe, functional, clean “Class C” housing, and my pool of tenant share many characteristics that you describe. We have learned having a “Firm and Fair” attitude is the only way to manage these. Folks in this category rarely think twice about taking advantage of wimpy leases or absentee land lords. 3 times per year we get inside to change furnace filters and do preventative maintenance inspections. I have found so many unauthorized pets and ex-convict boyfriends who moved in unannounced I sometimes wonder if we ought to open a rooming house so we can do instant lock outs. But no…it’s simply a matter of having clear policies and following up on them in a timely manner.

    Looking forward to your next piece in the series.

  2. Hardeek Patel

    Hi, this is really good information. I’ve recently looked at Detroit for investment properties but still continue to think they’re very high-risk especially for a novice like myself. However a tempting opportunity recently came to me, home is tenant occupied and managed by COTS – a Detroit non-profit that doesn’t not take a management fee, they act as the tenant but allowed to sublet to their ‘special cases’. This ensures rent is paid on time and they handle the eviction if necessary. Still seems a bit too good to be true, I got a copy of the lease and it checks out, owner is only responsible for taxes and water. Do you have any experience working with COTS?

    • Drew Sygit

      @HARDEEK PATEL: COTS will still contact you for repairs and they often want the property licensed as a rental and inspected by the city. It’s a step up from Section 8, but not something to be totally passive about.

  3. Alistair Brown

    This article was very informative. As an owner of a larger portfolio in Detroit, I can attest to some of the challenges. Early on in the process I dealt with some less than stellar property management companies. However I am now working with two managers that do a great job. Also you can avoid many of these issues by purchasing in the right neighbourhoods.

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