Charlotte Property Management Monthly: If You Can’t Sell, Rent: 3 Steps to Get a Great Tenant
Rental homes are in a full-on, undeniable uptrend! A recent real estate article headline blared, “Property Managers Set to Rule the World! 1.8M new tenants to enter the rental pool in the next two years.” Exciting stuff for us stodgy property managers!
While this leads to raised glasses (no plastic cups- they’re actual glass now!) in the property management industry, it is unwelcome news for homeowners trying to sell their homes. The math is easy to calculate: there is roughly the same amount of people moving into homes every year. So if 1.8 million more of them are now renting, there are 1.8 million less of them buying.
So people with homes they can’t personally live in anymore have to do something. The “selling the house and moving on” thing isn’t working for most due to an uncooperative real estate market. Some are letting their houses go back to the bank via the foreclosure route. It’s not a great option in terms of stress and credit damage, but it does solve the problem. Others are going the rental and rent-to-sell route to fill their homes. Some might argue that this is more stressful than the foreclosure route!
But why is it stressful? It boils down to one thing- the tenant. If you get a great tenant, they pay on time, care for your home, and don’t bother you. If you get a bad tenant, you never get paid on-time, enjoy a myriad of excuses for this non-payment, wind up in costly eviction proceedings, and are rewarded with a busted-up house at the end.
So how do you get a great tenant? Let’s define a great tenant first. They:
1. Pay on time and in full every month
2. Respect the home (aka like keeping it clean and undamaged)
3. Get along with the neighbors, the HOA, and you!
To get someone like this, there are 3 steps to follow:
1. Gather information: Order credit and criminal background checks, verify income and employment (request copies of the tenant’s last two paystubs and call the employer), and call the tenant’s past two landlords. You’ll want to ask the prospective tenant, employer, and past landlords as many questions as it takes to get a comfort level of what type of person wants to rent your home:
a. “Mr. Prospective Tenant, it is a pleasure to speak to you again! I never tire of your hilarious tales of amazing coincidences, which seem to be your hallmark. The honeymoon beach story with your two ex-wives somehow being on the same beach as you and your soon-to-be third ex-wife? Priceless! Now, why didn’t you pay your light bill in 2008? Why is there a collection account with Macy’s? What would your last landlord say about you?”
b. “Mr. Employer, if I may humbly ask, is Mr. X’s employment part-time, full-time, or contract work? How long has he been working there? Is he in good standing?”
c. “Mr. Landlord, your azure eyes must have been killing the ladies for years! At a risk of wasting your precious time with my inquiries that are so well beneath you, would you rent to this tenant again? Why or why not? How many times have they paid late? What did the house look like when they moved out? Is your superior intelligence a product of extensive domestic schooling, a plethora of renowned international boarding schools, or ‘Good Will Hunting’-like genetics?”
2. Analyze the data collected. Does the prospective tenant have stable employment? Do they make enough money to afford the rent and their other expenses realistically? What about if there is a slight bump, like a big car repair- can they still afford the home? Do they pay other people they commit to pay? What did their last landlord think of them? Would I feel unsafe renting to them if I had to give them bad news? Am I being overly optimistic about their merits or am I making a solid business decision?
3. Make the call. If they pass the smell test, approve them and move forward. If your gut is telling you to pass on their application, then pass! There is more than one fish in the sea.
There are many great tenants out there! Get a lot of data on the applicant, analyze it objectively, and make the decision on whether to approve them. It will work out most of the time!
Brett Furniss is the President & Owner of BDF Realty (“Charlotte’s Most Innovative Property Management & Investment Company”), and Rent-To-Sell Realty (“When You Need a New Solution to Sell Your Home”) which specialize in rent-to-own (lease options) and rent-to-sell homes. His newest book, A Real Estate Agent’s Complete Guide to Representing Rent-To-Own (Lease Option) Tenants (Delight Clients, Fill Vacant Homes, and Earn $2,250* Upfront! (*Minimum!)
Learn MoreCharlotte Property Management Monthly: Rental Home E-Harmony: What Tenant Is Perfect For Your Rental?
Dating web sites, like E-Harmony and Match.com, have grown in popularity and are apparently very effective; one in five people getting married met on-line, their advertising claims. That’s pretty good!
It can be even better for real estate. Many polls conclude that 90%+ of home searches begin on-line! Real estate web sites have the potential to be much better matchmakers!
But the real test of effectiveness is how many leases are consummated (for lack of a better word) from this on-line home matchmaking. And whether the landlords and tenants are happy with the union after move-in. Much like the 4 out of 5 people who don’t get married from the dating sites, sometimes it doesn’t work out between the landlords and tenants. Why not?
Maybe this matchmaking could be much more effective if there was a lot more honesty going on from both sides of the deal?
For example, on-line ads for homes tend to look like this regardless of what the home actually looks like:
Immaculate & cozy, this 3 BR / 2 BA stunner can make even the most choosy renter’s heart melt. Beautiful home with too many upgrades to count. Voted safest and best run neighborhood in Elmwood for 2 of the last 3 years (as reported by the Elmwood HOA Newsletter)! Priced attractively at $1,200/month and is sure to go fast!
And if the renter had an ad? It would read something like this:
Ideal tenants seek quiet abode for a loving family. Our 8 dogs are trained in Vienna (on Vienna Drive in Lincroft, NJ, it turns out…) and have never soiled a single fiber of carpet. Our rent is always paid on time and the only time the police come to our home is when we make them hot chocolate after they are done caroling in our neighborhood. We love our landlords and they love us!
But what is the truth? No tenants or landlords are filling out a 300-question survey where algorithms are going to match the tenant and house together. Each of them is going to claim that what they offer is top of the line, no matter what the real truth is. The problem for the landlord is that the tenant can see the home and make a determination if the rental ad is true, while the landlord must run an application and make a partially subjective decision on information gathered during the application process.
So how can landlords get the type of tenant they want? It really goes beyond the rental application. Much like dating is about being the mate that you want to attract, rental homes are the same way. What???
Generally-speaking, it’s a simple truth and goes like this:
If the rental house is in a safe area, priced economically, and immaculate, the chances rise exponentially that tenant it attracts will not be a criminal, be economical (buys things valued properly), and value cleanliness.
On the other hand, if the house is in a crime-ridden area, overpriced, and dirty, the tenant it attracts will more likely be involved in more shady dealings, spend recklessly (re: which may lead them into situations where they struggle to pay rent), and not care about the cleanliness of the home.
So, in practical terms, should the spots in the carpet be cleaned out prior to going to market? Yes, if the landlord wants a tenant who rents the home to care about spots on the carpet. What about cleaning the appliances? Only if the landlord cares about attracting tenants who care about clean appliances. Should the highest rent possible be asked for? Only if the landlord wants a tenant who doesn’t conduct research on their biggest expenditures which may signal their overall financial shakiness.
Much like humans, homes attract suitable mates. Good-looking people marry other good-looking people. Clean people rent clean houses. Financially responsible people don’t lock into overpriced rental homes.
What type of renter will your rental home naturally attract? Or more importantly, turn off?
Brett Furniss is the President & Owner of BDF Realty (“Charlotte’s Most Innovative Property Management & Investment Company”), and Rent-To-Sell Realty (“When You Need a New Solution to Sell Your Home”) which specialize in rent-to-own (lease options) and rent-to-sell homes. His newest book, A Real Estate Agent’s Complete Guide to Representing Rent-To-Own (Lease Option) Tenants (Delight Clients, Fill Vacant Homes, and Earn $2,250* Upfront! (*Minimum!)
Learn MoreCharlotte Property Management Monthly: Should I Even Bother to Try to Sell My House in this Market?
This is a question that I was posed on a call last week. For property managers, this is a no-brainer, right? It’s like any buying question to a salesperson in any industry:
Question from prospective client:
Do I need a haircut?
Barber:
Absolutely.
Question from prospective client:
Do I need insurance coverage for (fill in the blank)?
Answer from insurance agent:
Absolutely. If your family’s (fill in the blank) is important, it would potentially be devastating to live without it.
Question from potential client:
Can my house sell in this market? It didn’t with the past 2 real estate agents I used.
Answer from real estate agent (straight faced without blinking):
Absolutely! My team has a 10-point marketing plan that can sell any house in any market*!
* With a nominal 50% price reduction
So back to the original question:
Should someone even bother to try to sell their house in this market?
My answer:
It depends.
Depends on what?
You should try to sell your home if you:
1. Are living in the house and don’t have to move
2. Have a clean tenant who is amenable to showings
3. Have a unique house (be honest!) that is desirable in any market
4. Are able to afford to price the house competitively (aka on the low end)
5. Are willing to gamble and eat the rent every month and wait for a buyer who might or might not come
My answer to not bother putting the house on the market for sale is under the following conditions:
1. There are several foreclosures and short sales active in your home’s subdivision
2. You can’t afford to or don’t want to drastically discount your home price
3. The home is vacant and #3, #4, and/or #5 above don’t apply to you
4. Neighbors’ homes that are priced around the level you want to sell yours for are sitting
The simple truth is that the buy & sell real estate market is continuing on a sharp downtrend with no end in sight, while the rental market is on a sharp uptrend. Everyone still needs a place to live, but the banks are not willing to lend to less than perfect borrowers. This leads to a surplus of rental and rent-to-own tenants, and a dearth of buyers. So the question is if it is better to go fishing at the small pond stocked with thousands of fish or the big pond with 25?
Whether it still makes sense to list your home for sale really depends on your answers to the questions above. Truthfully, for most people, the best financial option is to stay put in their home. But going straight to the rental or rent-to-sell market is best for people who are:
1. In a time crunch
2. Need to move
3. Can’t or don’t want to afford 2 mortgage payments
Often, it just doesn’t make sense to put the home on the market for sale. It’s an exercise in futility and costs a good deal of money. It’s like asking out the head cheerleader to the prom when you know you are going to wind up going with Suzy next door anyway. You might as well cut to the chase and save yourself the time, expense, and effort.
That being said, one size never fits all. Determine what criteria above fit your situation and act accordingly!
Brett Furniss is the President & Owner of BDF Realty (“Charlotte’s Most Innovative Property Management & Investment Company”), and Rent-To-Sell Realty (“When You Need a New Solution to Sell Your Home”) which specialize in rent-to-own (lease options) and rent-to-sell homes. His newest book, A Real Estate Agent’s Complete Guide to Representing Rent-To-Own (Lease Option) Tenants (Delight Clients, Fill Vacant Homes, and Earn $2,250* Upfront! (*Minimum!)
Learn MoreCharlotte Property Management Monthly: Multiple Rental Offer Situations: Is Engagement The Same As Marriage?
So you’re walking down the street the day after successfully proposing marriage to your girlfriend, who now (you’ve been told) is to be referred as your “fiancée”. You’re happy and are convinced she was meant to be “The One”. But, wait; is that the beautiful Sasha Blue across the street? The girl of your dreams who always had those model boyfriends that put you permanently into the “friend” category? Is she looking at you? I think she is!
As you get closer, Miss Blue excitedly runs up to you. “Max, is that you? I was hoping to run into you! I finally got rid of that no-good Antonio! Wow… Is this the first time we are both single at the same time? How exciting! I’d love to catch up!”
As your heart races, your memory of getting down on one knee the night before is fading fast. Is it too late to run a reverse and go after Miss Blue? Engagement isn’t legally binding, is it? It’s a very interesting conundrum!
That is the same question that faces property management companies when multiple tenants apply for the same property at different times. At what engagement point prior to move-in is a tenant “locked” in and the property manager must forsake all other suitors?
Let’s look at a potential scenario: Tenant A applies for a property and is approved. They have not put a deposit down on the property yet. Tenant B sees the property the next day and loves it. They are a stronger applicant and are willing to pay more money per month. However, when talking with Tenant B, Tenant A puts down the deposit. Company policy is that whoever puts down the deposit first with an approved application gets the house. So, is Tenant B out of luck?
In most scenarios, yes. But there is a caveat. The property manager works for the owner. It is their job to get the best applicant that fits the home owner’s (aka their client’s) goals. Should the overall mandate to pursue what’s best for the owner trump company policy?
The easy answer is “of course!” The practical answer is yes and no- the solid, business school “it depends” response. On one hand, I don’t think it is reasonable to take a deposit from an approved tenant, keep the house on the market at a higher rate, and then renege on the agreement if another tenant appears that is willing to pay more. That could leave an applicant who dealt with the property management in good faith potentially homeless and dealing with the hassle of changing addresses, utilities, moving vans, and losing their piece of mind. This generates hate mail (rightfully so).
But, on the other hand, at what point is it reasonable to accept competing offers?
I believe that up until the tenant is told definitively that the home is theirs is a reasonable time to protect the owner’s interests. That may mean that if multiple applications come in (and even after deposits are put down), there is still time to review the applicants and decide which one is best for the owner. If the applicants are similar, then the first one who applied and put down a deposit should be given first dibs.
However, what about if the following applicant situations present themselves?
1. An applicant with a 600 credit score with average landlord history is approved and puts down a deposit before a 700 credit score applicant with great landlord history
2. 2 applicants are equal but one is willing to pay a higher monthly rent
3. 2 applicants are equal but one is willing to pay the year of rent upfront
4. One applicant is willing to move-in 3 weeks prior to the other
In these situations (if prior to giving “official” notice that the house is locked in for a certain tenant), then it is really imperative to choose the tenant that offers the best deal for the owner.
However, once official notice is given, I don’t believe it is ethical to offer the home to anyone else, regardless of the deal offered. The only way to supersede this is if the one tenant “buys out” the other in a separate negotiation. Money can make things happen!
So, if you asked to marry your fiancée, told her she was definitely “The One”, and gave her a ring, Miss Blue should be off limits. It may not be legally binding, but it’s the right thing to do.
Learn MoreCharlotte Property Management Weekly: The “Additional Security Deposit” Letter Exchange
Dear Property Manager,
I am very interested in the rental house you have listed! I think it will be perfect for our family. However, when you asked me for an additional month of security deposit, it made me concerned. Money doesn’t grow on trees these days and I thought the rental ad said you only needed one month down. We also have to come up with the first month’s rent and pet fees, so you’re talking about a pretty big sum already. I’ll be honest, I just don’t have it.
I explained our situation to you. The economy had turned against us, but we’re past it! My wife is employed again and getting you the rent will be no problem. Haven’t you ever had anything happen to you before? Have a heart! We’d take great care of the home, but just need the security deposit reduced. My business is booming so things will be fine! Don’t worry! You’ll get your money!
So what do you say? Can you help me out?
Sincerely,
Mr. Tenant
P.S. My wife thought you looked exquisite in your emerald blazer! It’s a bold move to wear it in 97 degree heat, if you ask me, but it’s better to look good than feel good, right?
Mr. Tenant,
Thank your wife for the kind words about my blazer. Typically they run the air conditioning at 40 below (so I try to stay prepared), but it didn’t work well when we moved outside. Emerald has sort of grown on me as I’ve gotten older. I think it complements my eyes, but opinions sometimes vary. You know, you make a call on the outfit every morning and sometimes you hit it out of the park and sometimes you whiff. Truth be told, I’d settle for hitting singles in the clothing department!
As for the request for additional security deposit monies, I understand your concern. Let me explain our rationale.
I understand you hit a rough spot a year ago; that happens. It’s obviously not just you; we see applications like this everyday. We also rent to a lot of people who have hit rough spots before! It’s not a deal-killer.
But there are other mitigating factors. Let’s look at your credit application and income. Your scores are obviously not good, but I’m not overly worried about that. There looks to be some recent 30-day late payments on power bills and cable. Your current landlord said that you had a few late payments as well during their lease (at an amount less than you would be paying now). You gave us your business bank statements to show your income, but it’s not clear how much of that actually makes it to you. This information collectively gives me pause about your financial condition.
My job as a property manager is to mitigate risk for our client, the owner of the home you want to rent. I personally think you would be a great tenant; anyone who compliments my wardrobe is good in my book! But if something happened to you that turned into a decent size expense, I can’t say with much certainty (with the information we have) that your lease wouldn’t be at risk. If an extra thousand dollar deposit is a deal-killer from your end, what would happen if your car stopped running next week? You obviously would need to fix that first to get to work. The owner of the home would be left waiting for their payment. And we wouldn’t be doing our job well.
If you have something that addresses these concerns, please send this information over so we can consider it! We make money by filling properties, so we want to approve you! We just have to protect our clients first.
I hope this letter clears the air. Thank you for your interest in our home and I hope we can work together in the future.
Sincerely,
Your Property Manager
P.S. On your suggestion, I’m wearing a short-sleeved cotton blend shirt today, no jacket. It feels good- thanks for the suggestion!
Learn MoreCharlotte Property Management Weekly: Too Many Repair Requests? 5 Methods To Stop The (Cash Flow) Bloodshed
As a property management company, we work to maximize the cash flow of our clients. Period. We don’t have a problem admitting that.
Sometimes things break in rental homes and that decreases the cash flow our clients receive. They don’t like it, and we don’t either. However, it is part of the game (pardon my street talk), so it is a necessary expense. Sometimes.
Normally if a repair policy is explained to tenants properly at the lease signing, there aren’t any problems. The landlord is responsible for operational issues; that is, if there isn’t any evidence of negligence by the tenant (if there is, the “Sorry if you smashed your toilet because your girlfriend dumped you for being volatile, but the bill goes to you…” message is sent). Then the easy stuff (changing light bulbs, air filters, etc.) is taken care of by the tenant. It’s simple stuff and everyone gets along grandly.
If the home is on the newer side and maintained, there just aren’t that many maintenance calls. Most people want their homes to operate properly (“hey, it’s nice to have the dryer dry clothes in less than 3 hours, so maybe I’ll clean the lint filter occasionally”), so they do the small things to keep it that way.
However, there are some tenants that seem to discover an awful lot of problems that they want the owner to fix. And when they are compared to other tenants, their identity becomes painfully obvious. The calls and the e-mails of their problems continue month-after-month. It gets to the point that everyone involved with managing the property has the tenant’s contact information memorized (“Oh, 704-xxx-xxxx? Mrs. X must be calling from work today.”) Sometimes, the repair requests are a string of bad luck and legitimate; often the tenant is trying to take advantage of the landlord’s altruism and is under the impression they don’t have to lift a finger because someone else will take care of them.
Repairs really hurt cash flow. But if the repairs aren’t done, unhappy tenants also hurt cash flow by trying to use their seemingly one point of leverage (holding back rent) to get what they want done. So what to do?
Before getting to some techniques to ward off unwarranted repair requests, I want to first iterate that almost all tenants (that I’ve worked with, at least) are reasonable with their repair requests. Most have busy lives and can’t be bothered will illegitimate claims. It’s not a huge problem on a whole. I find that doing the repairs that are requested builds trust and keeps everything running smoothly. So requested repairs should usually be done.
For the tenants that abuse the repair system, here are the top techniques to stop the illegitimate request flow:
1. Recalibrate expectations on repairs: Before the next repair is done, a meeting should be set with all principals on the lease. The purpose of the meeting (or call) is to reexamine the lease and go over exactly what is covered by the landlord and what is not. Also, it is probably time to schedule a walk-through of the house to make sure the maintenance agreement is being followed.
2. Alert the repair vendors that fraud is suspected: Vendors who visit the home should be put on alert. They can provide information about what claims are legitimate. If a claim is due to non-compliance with the maintenance agreement or rough play, the tenant needs to be billed for the issue, not the landlord!
3. Push back: If it was your house, what would you be calling a repairman fix, and what would you be doing yourself? That question is a good start to figuring out what repairs may be unnecessary for the landlord to cover.
4. Keep at code: The landlord is responsible, by law, to keep the rental home at building code. Nothing more. What is being requested beyond that?
5. Relocation: Maybe it’s worth asking the tenants if they would be more comfortable in someone else’s home?
Though this issue isn’t overly common, it can be uncommonly expensive and will continually siphon cash flow. If you find yourself signing over the monthly rent to the handyman month-after-month, it may be time to try something new!
Learn MoreCharlotte Property Management Weekly: Recruiting Great Tenants- Your Team Is Only As Good As Your Players
It’s been said the most important part of major college coaching is recruiting. A team’s ultimate potential is limited by their talent level. Sure, good coaching can make good players better, but great players are the reason teams win championships and are consistently good.
I started thinking about this the other day when a friend of mine called. He told me that a friend of his bought a property management company inCharlotteand it is proving to be a nightmare. The company he bought has sloppy books, awful employees, and a large cache of substandard properties that are in disrepair. But most importantly, they have a lot of tenants that have not been paying rent and have stayed in the houses rent-free for months. His friend is watching his investment go up in flames as he tries to salvage what’s left.
This made me think. What would be the characteristic that would be most important to measure the strength of a property management company? Is it good employees, growing cash flow, long-term contracts in place, sound business procedures, or something else? They are all obviously very important. But what’s the ultimate key to success?
As I thought more about it, my head began to hurt and my mind drifted to sports:
Why did Coach Nick Nolte agree to buy Ricky a new truck in the movie, Blue Chips? Why are there so many recruiting scandals in college athletics? Why do I read about “tampering” charges in the professional leagues when teams illegally contact players when they are not allowed? Why are college coaches only allowed to send potential recruits a limited number of text messages and are restricted on how often they can call them? Why do coaches work harder in the offseason traveling to visit recruits than they do during the season? Why do the Charlotte Bobcats think they can rebuild the team with late round draft picks?
Then the answer occurred to me. The players are the most important thing. They directly dictate the success of a coach. If a team has great players, they will be a good team (no matter the coaching quality). That is why recruiting is so important and organizations are willing to push the envelope on wooing potential stars.
As a rule, every top-tier athletic team puts a premium on signing great players. And this is the same mentality that top-tier landlords and property managers, like you, must have to build a strong property management company and investment portfolio. It’s about getting great tenants for your properties. They will directly dictate your success.
When a great tenant applies for a property, it is imperative to let them know that you want them. You need them. You will treat them like gold if they would just sign with you (on the lease). Text and call them every hour (there are no contact restrictions in business, only the weirdness factor of over-communication). Add incentives. Buy them the pony they always wanted, as long as it is munching the grass in your rental home’s yard! Let them know your love will never end if they can out down a deposit today.
Great tenants provide so many great benefits! They pay on-time and in full providing consistent cash flow. They take care of the properties so they don’t fall into neglect. They let you know if your employees are lacking or slacking. They even take care of minor repairs on their own!
Your team, investment, and/or company is only as strong as the players it has signed. Maniacally pursue the best, get them under contract, and rest will take care of itself!
Brett Furniss is the President & Owner of BDF Realty (“Charlotte’s Most Innovative Property Management & Investment Company”), and Rent-To-Sell Realty (“When You Need a New Solution to Sell Your Home”) which specialize in rent-to-own (lease options) and rent-to-sell homes. His newest book, A Real Estate Agent’s Complete Guide to Representing Rent-To-Own (Lease Option) Tenants (Delight Clients, Fill Vacant Homes, and Earn $2,250* Upfront! (*Minimum!)
Learn MoreCharlotte Property Management Weekly: With Obama & Landlords, You Can’t Legally Withhold Payment
Taxpayer: “This country is going down the drain quickly with no end in sight! Obama is proving himself to be a bum like the rest of them. “Change to believe in”? I’m laughing too hard to retort. You wanna know what? I’m not funding this incompetent government anymore and will not be a party to it. I’m not paying taxes until this country is fixed!”
Tenant: “This house is killing me! This week the faucet broke. A month before it was the air conditioner. It took 48 hours for the landlord to get the maintenance guy to fix it in 98 degree heat! 98 degrees my family put up with! My sweet daughter, Abby, must have gone through at least 20 popsicles. “Daddy, why is it so hot?” she quietly bleated as she read “Seventeen” Magazine with a cold washcloth lain across her forehead (with the few remaining ice cubes that our (too small) freezer could muster). The landlord should be paying us to live in this house! I’m certainly not paying him this month! Next month’s payment is “under review” too; we’ll see how the faucet repair goes.”
Obama and (diplomatic and highly educated) landlords: “I feel your pain! Once, my radiator broke in my dorm room at Harvard and it just wasn’t fair that it took over 72 hours to repair! The economy is weak and jobs are scarce. Injustices like this need to be made right! But… like with all things that are dearest to us, these things sometimes take time. In the meantime, if you don’t pay me, your house will be taken away.”
The point of these fictitious quotes is that tenants and American citizens do not have to like what is going on with their house or country, respectively. But they still have to pay.
There seems to be a common misconception that home repairs and rental payments are linked. Legally, they are not. If the house is falling apart, the lease still stands. If the country is (hypothetically) suffering high unemployment and being financially run into bankruptcy, citizens still have to pay their taxes. It’s the law.
However, this is not an open invitation for landlords to not complete necessary repairs in a timely fashion. Slow and incomplete repair work makes tenants very unhappy; keeping tenants as happy as possible is paramount to having them stick around! Plus, there are other painful avenues unhappy tenants can take to legally have a home that is functioning to building code. It just can’t happen through rent abatement.
But I’ve seen this played out. Tenants go to court thinking that repairs not being done to their satisfaction will get them a free pass from eviction from a judge. This is just not the case. They find out quickly that their repair issues (even if extremely legitimate) are a moot point in an eviction hearing; these arguments are not heard because it’s not the place for them to be arbitrated. In an eviction hearing, it comes down to one question, “Do you have payment or proof of payment?” If the answer is “yes”, the tenant wins. If the answer is “no, but”, they don’t.
Rental payments and repair work are two separate issues. Tenants are obligated to pay by contract. That’s it.
You don’t have to like Obama, but you don’t want to try not paying him!
Brett Furniss is the President & Owner of BDF Realty (“Charlotte’s Most Innovative Property Management & Investment Company”), and Rent-To-Sell Realty (“When You Need a New Solution to Sell Your Home”) which specialize in rent-to-own (lease options) and rent-to-sell homes. His newest book, A Real Estate Agent’s Complete Guide to Representing Rent-To-Own (Lease Option) Tenants (Delight Clients, Fill Vacant Homes, and Earn $2,250* Upfront! (*Minimum!)
Learn MoreCharlotte Property Management Weekly: How To Handle Evictions And The Reasons To Avoid Them
Handyman: I was over working on your property and your tenant seemed to be really happy.
Owner: You would be too if you were living rent-free.
When tenants don’t pay, it is not good for anyone. Inevitably, things get put in motion. The owner gets upset and wants to know why they haven’t gotten their money. The property manager is spurred to issue threats to lower the hammer on non-payers. The tenants typically try to go “dark” (incommunicado), as Jack Bauer (and those in the spy game) would say.
I think of the Tupac song that I was mistakenly listening to a few years back. It talked about the deep pride he felt about having the ability to pay the rent. I believe that people do want to pay, but they can’t give what they don’t have. Life happens and things cost money. If the rent is not getting paid, it is never the only expense that is being neglected.
Unfortunately, there really isn’t much to do as a landlord but file for eviction if the rent money doesn’t come in. However, due to the costs, stress, and actual time, it is something o be avoided if at all possible! There are two common avoidance techniques that have minimal success:
1. Payment plans to catch up on rent: I’ve been burned on these! If the tenant is on a fixed income and is living paycheck-to-paycheck, there is really no way for them to get out of the hole. The plans seldom work. I really have to have history with the tenant and think highly of their character to entertain these.
2. Negotiated exits: this allows the tenant to leave without an eviction and saves the owner money for the court stuff. The only problem with this is, “How does the tenant have money to pay another landlord when he’s not paying you?”
So, how does one file for eviction as a private landlord? Well, in NC, this is how a normal eviction goes:
1. Make sure the tenant always receives a rental statement with what’s owed on the first of the month (this is your “demand for rent” letter). We e-mail them.
2. The first day evictions can be filed is the 11th of the month. You’ll need to go down to the courthouse with a copy of the lease, a few stamped envelopes, and cash. Ask someone where evictions are filed, go there, wait in line, fill out the paperwork and envelopes, and give these items to the clerk.
3. Once you receive the nod from the clerk, exit stage right (or left); just get out of there. Hanging out at the courthouse isn’t that fun. Or cool (unless you’re a high-priced lawyer working for Lockhart-Gardner).
4. Wait for the eviction court date to arrive in the mail in one of the envelopes you provided. The show up to court on that day 20 minutes early to fill out the paperwork that you’ll need for the trial. Do what the judge says. You should “win”.
You are now thinking, “Yeah! It’s over! I won! I knew I should have forgone mortuary school (stupid “Six Feet Under”!) and been a lawyer instead!” Uh, no. Not quite. The next steps which cost more money and take a month to complete are as follows:
1. Wait 10 days to file a “Writ of Possession”. This can be accomplished at the same desk at the courthouse. Please bring a new stash of stamped envelopes, cash, and the eviction notice you received in the mail from the court. You’ll repeat basically the same process for the eviction in step #2 with the new “Writ of Possession” paperwork.
2. Get out of there. Don’t mingle. Your head needs to be down and a beeline made for your escape vehicle. Pretend to be talking on your cell phone while speed walking. Wipe profusive sweat off of your brow. Wear a hood to cover your head, if weather appropriate.
3. Wait for the sheriff to call you to let you know when they will be at the house to change the locks. This takes a week or two. After they call, you’ll need to call a locksmith and schedule them to meet you at the house when you meet the sheriff.
4. Show up and be really uncomfortable. Watch the sheriff remove tenants from the home and the locksmith change the locks. Give the locksmith cash after he hands you the new keys.
5. The tenant now has 10 days to remove their things. They will call you to schedule a time for you to let them in the house. If their things are not removed within 10 days, you are required to store anything of value at your expense if they want it later (because you’re so nice (!) and it’s the law).
6. Begin the process of fixing up the house to get it in market shape.
I hope this is enough evidence showing that evictions are not desirable! To avoid these costly evictions, utilize thorough tenant screening procedures upfront!
Brett Furniss is the President & Owner of BDF Realty (“Charlotte’s Most Innovative Property Management & Investment Company”), and Rent-To-Sell Realty (“When You Need a New Solution to Sell Your Home”) which specialize in rent-to-own (lease options) and rent-to-sell homes. His newest book, A Real Estate Agent’s Complete Guide to Representing Rent-To-Own (Lease Option) Tenants (Delight Clients, Fill Vacant Homes, and Earn $2,250* Upfront! (*Minimum!)
Learn MoreCharlotte Property Management Weekly: Talking To Your Tenant Will Cost You Money
“Talk is Cheap.” (Keith Richards)
“Talk can be expensive!” (Property Manager)
There are “hands-off” owner clients. And then there are the “hands-on” varieties.
The “hands off” clients just want to know the rent money is in their account on the day they expect. If there are repairs that are going to cost them money, they want to know that too. They just want the bare bone facts with no fluff. That’s fine.
Then there are the “hands-on” owners. They want to be continually updated if there is any news at all about their properties. “What repairs are needed now?” “Is the tenant caring for the lawn?” That’s fine. “How did Felicia do on her math test last Friday?”
What??? Who’s Felicia?
As I pull the property folder and scan through the lease, “Felicia” is listed as an 8-year old occupant. Unfortunately, no math test scores were listed. Darn!
As a property manager, we work for the owners. However, we want to have good relationships with our tenants as well. When executed properly, we serve as a cordial buffer between them. That is a valuable service!
However, we can’t get too friendly with tenants, as much as we’d like to with many of them. We don’t work for them. If we get involved talking about their families and what’s going on with Felicia, we can’t do our jobs effectively. For example, what happens when they don’t pay rent and we need to evict them? The relationship gets really personal; personal to the effect of your “friend” calling you screaming that you’re heartless, they can’t understand why you would evict them when you know she lost her job, and how we felt about Felicia being homeless? Yeah, that’s not a good conversation.
Any decent property manager (with any length of experience) quickly learns to keep a professional distance so this type of scenario doesn’t happen. Dealing with these types of situations where bad things happen in our residents’ lives is part of the job (not a good part!). But we know how to deal with them.
This is where the “hands-on” owner sometimes gets in trouble. They decide to contact the tenant in their home and forge a bond. Instead of relying on the property manager for home updates, they go straight to the source. And this is where talk leaves the “free zone” and becomes expensive. Here are a few examples:
1. The owner calls the tenant regularly and asks how things are going. The tenant brings up any minor issue with the home. The owner feels compelled to ask us to send a repairman there.
2. The property manager asks for a rental price increase. The tenant calls the owner directly and makes their case on why they can’t afford it. The rent stays the same.
3. The tenant is late paying rent and the eviction is scheduled to begin. The tenant calls the owner and swears to pay soon. The owner asks us to call of the eviction. This usually doesn’t work out and the owner loses more money.
My favorite all-time story on this topic is the owner who called us about rescinding a rental increase planned for his tenant. When we asked why he didn’t want the extra money, he said:
“It’s not worth it to me to hear him griping night-after-night about it. To even it up, he’d just make me pick up more rounds at the bar anyway.”
When owners talk to tenants, it takes their relationship from a business to a personal one. And it’s tough for most to say “no” to a friend, even when it means taking a financial loss.
So save some money and resist the urge to talk to your tenant. Rest assured, Felicia’s very capable math teacher is doing her job!
Brett Furniss is the President & Owner of BDF Realty (“Charlotte’s Most Innovative Property Management & Investment Company”), and Rent-To-Sell Realty (“When You Need a New Solution to Sell Your Home”) which specialize in rent-to-own (lease options) and rent-to-sell homes. His newest book, A Real Estate Agent’s Complete Guide to Representing Rent-To-Own (Lease Option) Tenants (Delight Clients, Fill Vacant Homes, and Earn $2,250* Upfront! (*Minimum!)
Learn More