Tenants from Hell: Five Tips for Managing Terrible Tenants Frustrated with your terrible tenants? Here are five tips to help landlords avoid nightmare scenarios from our friends at BiggerPockets. APARTMENTSREAL ESTATE TIPSBACONBIGGER POCKETSINVESTINGLANDLORDSTENANTS Guest Author 46 articles, 0 comments 544 views Every landlord eventually gets them. If you are a landlord and haven’t faced them yet – don’t worry, you will. I’m talking about the tenants from hell. The tenant who pays rent late, argues with everything you say, damages the property, lets their children turn your walls into a work of modern art, and lies like they get paid to do so. Perhaps you are not even a landlord yet – but with a decreasing inventory and rising prices, many are finding now is a great time to get into the world of investing in real estate. As a landlord for the past six years, I’ve had my fair share of tenants from hell. They aren’t fun. I could tell you countless stories of tenants who lie, cheat, steal, and create disastrous messes that I wouldn’t expect an animal to make. However, each year I find less and less of these tenants within my little kingdom. It’s not because the tenants in my area are improving and it’s not because I’m covering the homes in delicious bacon to attract only the best tenants. The difference is in how I deal with the problem. This post is going to share five tips I have used in minimizing my dealings with the tenants from hell. Tip 1: Don’t Scream, Screen The first step in dealing with tenants from hell is simple and obvious: don’t admit them. When renting to anyone, be sure to do a proper screening. A good screening includes: Running a background check Running a credit check Calling their references Calling ALL previous landlords Driving by their current residence – maybe even inviting yourself in Verifying their income Additionally, most tenants do not know what amount they can afford. Begin by requiring that their verifiable income must be at least three times the monthly rent. This is a standard used by many investors to qualify a tenant and for me – it’s non-negotiable. Don’t be affraid of saying “no” and waiting for the perfect tenant. Tip 2: Have a Written Policy It’s difficult to know how to follow the rules when there are no rules to follow. The lease is your first step in creating a written policy, but you can also create a list of “dos and don’ts” to give to your tenant when they move in. If rent is due on the 1st – then have that in writing and have the tenant sign a lease that says so. Don’t be a “handshake” landlord and show the tenant that this is just a hobby for you. You wouldn’t expect a lawyer to draft up a legal document without paperwork or a car dealer to sell you a new Prius without your name on the dotted line – so the same should be said for the relationship between you and your tenant. Start things off on the right foot: get it all in writing and show that you are a professional. Tip 3: Be Strict and Carry a Big Stick Most of the “horror stories” involving tenants were, I’m sorry to say, the landlord’s fault. No, the landlord wasn’t the one “doing the deed,” but usually it was the landlord’s flexibility that gave the tenant the permission to do wrong. For example, by not charging a late fee, the landlord is giving permission to the tenant to pay whenever. While it might sound mean, being as strict as possible will ensure that the rules are followed and actually create a better relationship between you and your tenant. It comes down to the question, Is it better to be feared or loved? In the case of landlording: it is better to be feared. Having punishments in place (monetarily speaking) will ensure the tenants follow those rules. I require that rent is paid on the first, but I offer a 5 day grace period. On day six – if no rent is received, we issue a three-day “pay or vacate” notice taped to their door, along with a hefty late fee and “notice serving fee.” I do not let tenants get behind on rent – and you know what? They never do. Tip 4: Don’t Be the Landlord If you are a non-confrontational person like me, the best tip is to simply “not be the landlord.” No, I’m not suggesting that you hire a property manager to take care of your rental (though, for many this is the best answer.) Instead, I believe it is important to separate yourself from being the owner and just be the “property manager” to the tenant. This way, you can always need to “ask the owner first” and get back to the tenant, giving you time to think about tough (or not so tough) questions they might ask. The bad guy becomes this elusive and mysterious “owner,” and you become simply the “middle man.” I know some of you reading this are thinking “but that’s dishonest!” Trust me – it’s not. If you are holding property in your own name (instead of a legal entity) you are are just setting yourself up for legal problems. Go speak to your lawyer, form a legal entity to own the house, and then simply manage that entity. Two birds, one stone. Tip 5: Don’t be Afraid to Remove the Problem Life is too short to be stuck renting to tenants from hell. If you are having problems with your tenants after following the rules above – get rid of them. There are plenty of places they can go, so it’s not like you are kicking them out on the street. If they have a lease and you don’t want to evict – you can always try a technique known as “Cash for Keys” where you actually offer the tenant money to leave (while I know the gut reaction to this is shock – trust me, sometimes it’s the best thing for the wallet and the headaches that an eviction could cost.) In the case where an eviction is necessary – come down hard and come down fast. Hire a qualified lawyer to swiftly evict the tenant and move on. As I said, life is too short to deal with tenants from hell. Have you had any tenants from hell? What tricks have you used to deal with them? Leave your answers in the comments below and let’s talk about it. About the author: Brandon Turner is the Senior Editor & Community Manager of BiggerPockets, the premier real estate investing social network, as well as an active real estate investor and author of How to Rent Your House, a #1 best selling Kindle book.
Posted on: Thu, 26 Sep 2013 23:43:54 +0000
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