Passive Income Investors: Working With Tenants
By Paul Esajian on December 1, 2014
In theory, owning a rental property should be a seamless process of collecting rent every month. Anyone that has ever owned rental property before knows that this is not always the case. As much as we try to find the best tenants; even good tenants can have unexpected issues any month. Instead of throwing a fit and threatening eviction if your tenant is a few days late on the rent, you may be better served finding out what the problem is. It is much easier, and far less expensive, working with your existing tenants than in dealing with eviction. Not every tenant can, or should, be worked with, but you need to give yourself and chance and find out.
As much as rules are in place to help run your property, there are also times when you need to take a step back and look at the whole situation. This isn’t to say that you should let your tenants walk all over you and not enforce the lease, but you need to pick and choose your battles. Look at the bigger picture. If you hound your tenant from the second of the month until you get your check, you will certainly irritate your tenant to the point that they will want to move out as soon as the lease is over. Before you go off the deep end, you should find out what is going on.
If you have fees in place after the fifth of the month, you can certainly enforce them at your own discretion, but only if you see if it is a one-time issue or not. As simple as it sounds, most renters are not late because they forget to send a payment. This may happen on occasion, but in general, someone is late because they lack the funds to make payment. It is important to find out if a late payment is just a short term blip from unexpected car trouble or something else that can be a sign of bigger problems. If you are open and fair with your tenant, they could give you a heads up. This will give you time to either work something out with your tenant or get started as soon as possible in finding a new one. A late payment is not always a sign of bigger problems, but it is a strong indicator that must be met with some action on your part.
If you are in a situation where your tenant isn’t late, but may be in the future, you should act sooner rather than later. It may seem like a crazy notion, but in these cases the best option you have is to attempt to work out either a payment plan or some other remedy for your tenant. Find out what is a comfortable number that they can pay in the short term (30-60 days) until they find new employment. If the number is drastically lower than their current payment, you can prepare to find a new tenant. The alternative to getting a discounted rent is getting nothing. The eviction process can take several months and, in that time, you will generate nothing from the property.
If you go this route, you need to make it clear that anything less than the revised amount will result in immediately starting the eviction process. It is also important to have a set number of months on this new plan until you revert to the original rent. You can add the reduction to the back end of the lease or prorate it for the subsequent months until they are caught up. Hopefully your tenant will sort out any issues they may be having and can stay in the house. If they do think of the good will you have just created with your tenant. For a few hundred dollars you now have a tenant that will appreciate you and your property and will want to stay there as long as possible. Any landlord knows the trickiest part of the job is finding new tenants and picking the right one. If you work with your tenant you will not have to worry about this for a very long time.
The alternative to this is overreacting on the eight of the month and sending threatening texts, emails or phone calls. This could work in getting your rent, but more often than not all you are doing is making the problem worse. Getting the rent late is not something that you plan on, but if it happens you need to be able to react to it quickly and in the right manner. Anyone that has ever dealt with an eviction knows that it is something that can ruin a portfolio. Know where you can be firm with your policies, but also know when you may need to work something out with your tenant.