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Welcome to the Centennial Real Estate Investing and Real Estate Financial Planning Podcast.
Learn all about investing in real estate in Centennial, Colorado, with a combination of real estate financial planning and modeling with numbers specific to Centennial, plus syndicated, more generalized recordings of live and pre-recorded real estate investing classes, not all of them specific to Centennial.
Be sure to stay tuned after the podcast for a message from our sponsors. Well, good morning and welcome everyone.
I am your host, James Orr, and this is another module in the Real Estate Investing Secrets course.Today, we are going over the secrets of overcoming tenant challenges.
This sort of complements some of the other classes we've been doing on property management and stuff. So first some acknowledgements.
The original version of this presentation was given by Brian Williams, and I just want to acknowledge all the work and effort that he put into creating this particular presentation.
I've purchased the rights to that, and so I've made a couple very minor modifications, but the overwhelming majority of it is based on the original presentation that Brian gave, and so thanks again to Brian for putting the presentation together.So
This is the part of the property management series we've been doing.The original part of the series, we started with marketing to find tenants.We taught that module, I don't know, about a week ago or so.Then we went on to screening tenants.
What do you do once you get the calls coming in from the tenants?How do you screen them to make sure that they're qualified to rent your couple hundred thousand dollar property?
Then we went over all the different things related to property management. Today, we're going over overcoming tenant challenges.This is all the issues you have with tenants while they're in your property.How do you address those?
What we do about all those.And then we're going to have two more left in the property management kind of subset of the Real Estate Investing Secrets course.We're going to do a whole module next on hiring and managing a property manager.
If you're unable or unwilling to do the marketing to find tenants, the screening of the tenants, the property management, and dealing with the inevitable tenant challenges that come up, then maybe you should hire a property manager.
We're going to go over all the different things you should look for when hiring a property manager.And then how do you actually manage the property manager that you end up hiring?
Because despite some people's selling of real estate investing online, it's this completely passive hands-off investment.
It is not that, that you will need to manage your property manager at a minimum or manage your properties yourself if you're going to do it that way.But even if you're hiring a property manager, it is not a passive investment.
You need to manage the people that are working for you to manage your properties.And so that is an upcoming module.I think that one is next.
And then much later in the series for the real estate investing secrets course, uh, we are doing a entire class, entire module on rent comps, which is related to marketing, defined tenants.Um, and then also all the different deal analysis stuff.
So that kind of class falls more into the deal analysis kind of subset as well, kind of touches in both. So that's what's coming up in property management series, but let's get started.
So we covered this, I think, in the marketing for tenants or tenant screening.I forget which one, but this is the baseline for tenant interaction.
I think this is good to keep in mind as we come across challenges we're going to have with tenants, kind of how we should be thinking about interacting with our tenants and how we should be treating them.
So number one, we want to build trust and rapport.We want to focus in on doing the things that we say we're going to do and building rapport with them by understanding their situation.
Now, we're not always going to fall for a sob story, but we do want to make sure that we understand and are what is the word is empathetic, the empathetic one, the one where you actually can can kind of like feel what they're feeling, but not necessarily, you know,
Don't change your behavior necessarily because they are giving you a story about how they did something.They can no longer afford to pay the rent on the property.I think we need to kind of be firm but fair, which we'll talk about here in a second.
Communicate regularly with them.Keep in touch with them. Make sure that you are interacting with them.Some people recommend contacting them before lease payments to make sure that they're paying their rent.
Some people will do their quarterly or biannually inspections of the property and talk to them about lease renewal.
But you want to communicate with them regularly, stay in touch, make sure you understand what's going on with your property, what's going on with that.Respond quickly.If they've got a request for
repair or maintenance on a property, you should respond.You shouldn't wait a week to get back to them and let them know, okay, oh yeah, I'll call somebody now and I'll let you know when they do that.
And then you never call them back and let them know what's going.You wanna be responding to them and sticking in touch with them, responding quickly to any requests that they have. Handle all reasonable requests.Not every request.
I mean, sometimes they'll ask for things that were not included in the lease.They'll say, I want new carpet in my property and the carpet's essentially brand new.
Or I want a screen door on my property and the property didn't come with a screen door when you first bought the property and you don't want to put one on there because the property was shown without one and rented without one.
And so handling reasonable requests, so if they've got a repair that's on a property and it is your responsibility to do that, you should definitely do that.Overall, I think this can be summed up as be firm, but fair.
It's sort of like the father figure mentality of real estate property management is that you want to be firm, but you also want to be fair with people when you're kind of dealing with any issues that come up. set expectations and hold them to it.
You want them to follow exactly what is in the lease, and you want to follow what is in the lease.
You want to provide them a good quality property that is in good repair, that is maintained properly, and you expect to be paid on time, in full, for providing that.And you expect them to abide by the rules of the lease.
You're loaning them a $200,000, $300,000, $400,000 property in a lot of cases, maybe even more.And so you want to actually understand that they are
borrowing that from you and that you expect them to take care of it and to abide by the rules of your particular lease.Document everything, document all your communications, back that up to Dropbox.
If you have text, make sure you take copies of your text.
If you have emails, make sure you make copies of your emails and put them all in your Dropbox folder or whatever you're using as backup for that particular file to make sure that you document it.
Document with photos before they move in, document with photos after they move out.Make sure you document everything.I think this protects you and it also protects the tenant. remain calm even and especially if they aren't calm in a situation.
So you want to be calm when they're having an emotional reaction to something that is going on with their property.
And if you can't do all of these things, if you can't build trust and report, communicate, respond quickly, handle reasonable requests, be firm but fair, set expectations, document everything and remain calm, then maybe you should be hiring a property manager.
You know, these are skills that you need to have to be a property owner.And if you can't do that, you need to hire those skills so that someone else can provide those.It is not enough to find amazing, great deals.
You need to do the amazing, great deals, and then you need to manage your assets properly once you own them or hire someone who is willing to do that.
So now we're going to start going over all the different challenges we face as a property owner, as a landlord managing the properties ourselves.So the big one that comes up is people not paying rent.So.
The situation is the tenant has not paid rent by the due date, which we're going to assume for the sake of this presentation, it's the first of the month.
Although if you have a different due date for your rent, you can kind of use whatever the due date is. And a lot of these things in this particular presentation are dealing with a very specific lease.
And if your lease doesn't say what we are about to go over, you need to make sure that your lease actually clearly outlines what your policy is and what your expectations are.
You can't just expect something and not have it written somewhere that this is the expectation.This is what the rule is.And so the lease is typically what guides us in how we are
running the property, how we are setting the rules and regulations and what we expect people to do.So if the tenant doesn't pay by the due date, the first of the month, contact them on the due date and ask them where the rent is.
Don't wait until the second or the third or the fourth or the fifth.
You know, if you have not received the rent by the due date, if you get your mail at 11 o'clock in the morning and it's not in the mail and you have not received an auto deposit, if you're collecting auto payments or whatever it is and it's not there, you need to call and you need to ask them where the rent is.
Now, here's some possibilities that could come up. First of all, they may have deposited it, but it doesn't show in your account.
So if you haven't set it up so that your tenant can actually go down to your bank and make a deposit and you actually check your bank account balance, you know, and it's not there, you need to call them and say, hey, you know, the the the rent payment that you're supposed to pay is not in the account.
And they tell you, oh, we know we did it.I'm not sure why it's not showing up.You can thank them and let them know that you'll check tomorrow.
And then if you check tomorrow and it's not there or they check tomorrow and it's actually the day after, it's on the second that they deposited.
You need to call them and let them know that they owe the, whatever the late fee version of that is in your lease.
Some people, most people are probably going to do some type of variation on their lease where they give a discount for an on-time payment of the lease, but that the rent is an oral amount.So for example,
you may go to your tenant and say, you know, you're advertising the property is $2,000 a month.
And then when they get there and they sign the lease, when you go over the lease with them, you're going to the lease signing ceremony, you may say to them, okay, look, so you pay on time, the rent is $2,000 a month.
If you pay late, rent is $2,100 a month.So it's not that they have a late fee, it's that you're giving them a discount for on time rent payments.So in the lease itself, it says the rent is whatever it is, $2,050.
$2,050 or $2,100 or whatever you have it be, but they get a $50 discount, you know, if it's 2050 and the rent's supposed to be $2,000, then you basically have them pay a $2,000 payment for doing that.
Now, if they pay late, they pay on the second, then the rent is actually what it is in the lease.It's $2,050 or whatever your lease actually says.We prefer to do it that way versus doing a late fee, although,
I think either way, you're probably going to have a hard time in court collecting on late fees.Depending on where you are in your market and the judge and everything else, it's going to be hard for you to collect late fees if you go to court.
Um, you'll, you'll find that you will collect late fees for people paying late.If you do it that way.
Uh, if it's actually deposited after you let them know that they owe that they owe that extra $50 or whatever your late fee is, or your discount for on-time payments that they're not getting by paying late.
Uh, what if they forgot to mail it or they forgot to deposit it or have them deposit it or deliver rent to you prior to the fifth of the month.And you charge them a $50 late fee for doing that or $50. non-discounted rent fee.
Basically you're charging the full month's rent that's listed in lease instead of the discounted one that they get for paying on time if you do that.
So this is based on you giving them a kind of like five-day period where there's no additional rent due if they pay by the fifth of the month.So a lot of times in leases they'll say something like rent is due on the first
If you pay on the first, you get a discount.Pay before the first or on or before the first and you get a discount of $50.If you pay after the fifth, there'll be an additional $10 a day or whatever it is in additional late fees on the lease.
And so that's one of the ways that leases can be structured. to kind of do that.So that's why we give them to the fifth and do that.You know, if you think about it, if the tenant says, you know, I have a five day grace period.
No, you don't have a five day grace period.You have a 30 day grace period from the last time you paid rent till the first of the next month when rent is due.So you have 30 days to get the rent together there.
It's not like the first of the fifth is a free extra five days.It's like rent is due on the first.You had 30 days of grace period before that in order to gather up the rent and make sure it's paid on the first of the month.
After that, there is a charge, some type of loss of discount or a late fee, which I'll just call a late fee from here on out, even though I mean both.
Then after the fifth, there's an additional $10 per day late fee for having a balance on your account doing that.So if they forgot to mail it, have them deposit it and tell them that there's a $50 fee for doing that.
They mail the check, but it hasn't arrived.Well, if it arrives by the fifth, charge them the $50.If it arrives after the fifth, make sure you charge them the $50 plus whatever the additional late fees are, like the $10 per day for doing that.
If this is the first time that they are like late on rent, consider waiving the extra $50 if they pay immediately.So if you call them and you tell them, Hey, look, rent is overdue.You've got to pay.
And they run down there to the bank and they deposit it, but it doesn't get credit until the next day.
In that case, I would tell them, look, you know, normally where's a $50 late fee, since this is your first instance, we're going to go ahead and waive this one time.But however, if it happens again, there is a $50 late fee or you lose the discount.
If you do that. Let them know they'll be charged next time, regardless of the reason.There's no reason to pay late.
If you set it up and you establish this with your tenants, they can send you their rent early and you will not cash the check until the first of the month.So they could send it to you a week ahead of time.
They don't have to try to time this perfectly with the mail.Just tell them, look, you could send me a check on the 20th of the month and I'll hold on to it.I won't actually deposit it until the first.
And so they know that they're never going to have late fees if they're sending you checks two weeks early.
Reiterate that they can mail their checks early as they want to, and they won't be deposited until the first of the month, we talked about that.
They're also welcome to do direct deposit or some type of ACH, automatic payment withdrawal, if you offer that as part of your property management.Okay, what if they can't pay?They tell you, look, you know, sorry, I didn't pay.
I'm sorry, it's unfortunate, but I can't pay.So discuss it with them and find out when they will be able to pay.
If it's by the fifth of the month, let them know they can pay the extra $50, and that's, you know, they can go do that in the next couple of days.If it's gonna be later than the fifth, ask them to pay as much as possible today.
It's better for you to get some money in, in most cases, than it is for you to say, OK, well, don't pay me unless you get the full amount.Say, well, how much can you pay today?I can pay $500.OK, get the 500.When can you pay the rest of it?
And they're going to find out when that is.And they still have the late fee if they paid a partial payment because it's not paid in full.
If they are saying, listen, I'm not gonna be able to pay, I'm not gonna be able to pay by the fifth, ask them to arrange a payment plan for the remainder of the rent owed.
And if it's the first time they've been late and they contacted you in advance, they'll like call you on the 20th, they're like, hey, listen, you know, something happened, you know, we're gonna be unable to pay the rent by the first of the month, you know, and they communicated that, they've arranged a payment plan, consider weaving the daily $10 fee per day and charge them just the extra $50 for it being a late fee.
If they didn't contact you ahead of time, consider charging all fees because they didn't communicate with you.They didn't keep you in the loop.And so I think that in those cases, it warrants both the $50 fee and also the $10 per day.
Payment plans can go beyond the 10th of the month.They're not recommended.
You know, the thinking being if someone's really struggling to go beyond the 10th of the month in order to do a payment plan, they're just asking for trouble for next month's rent as well.
You start getting and pushing this back where it's like two months rent is going to be due there.For a lot of tenants, that's going to be a real challenge. The risk is too high for the landlord to do this.
Instead, if they get into a situation where they're needing to pay like, you know, they're not gonna be paid by the 10th of the month, instead post a three day notice or quit and begin the eviction process.
You want to get possession of the property back.You don't want to go, you don't want to let this linger on for months and months and months, them getting behind by a month or two or three in payments.
You really want to get them out of the property, get someone who can pay into the property.If the tenant pays, the eviction process can be halted.However, the tenant will still owe any eviction costs as well as the late fees.
You want, you know, this is like the firm affair part.And when you go over your lease, you sit down with them and you go over the lease signing ceremony.So look, you know, if you can, you want to pay your other bills late.
You don't want to pay me late because there are a lot of fees.It's very expensive to do this.
You know, pay your car payment late, pay whatever else you have late, but don't pay your rent late because your rent is very expensive and you want to pay me first. And that's really how you think about it.You want to go down in priority order.
You want to go in, you know, the roof above your head, you know, food, then transportation, then all your other bills and stuff like that, that you've got to go on.
You want to prioritize your most important expenses when you're doing this, and then realize that you want to enforce your rules.You want to be firm but fair with people when you're dealing with this. What if they won't pay?
Well, as soon as they tell you that they won't pay or they're unable to pay and they don't know when they're going to pay, call your attorney to begin the eviction process immediately.
Have your attorney post or you could post a three day notice to pay or quit.And note that accepting a partial payment can reset the eviction timelines, although our lease says that that is not the case.
In some markets, you will find that if you accept partial payment, then that restarts the clock on the eviction.So make sure you tell them
that you cannot accept payments or talk to your attorney and understand what you can and can't do in your particular marketplace about accepting partial payments on the lease, partial payments on back rent when they are late on their rent, and how that affects your eviction.
If you're allowing them to deposit rent directly into your bank account, notify them via email that they are no longer authorized to make deposits if you're concerned about partial payments.
So if they can go down to their bank account and put in 50 bucks, and they think that that's going to restart the clock on their eviction because they read something online, then you need to make sure that you tell them that they are no longer in writing and document it.
Make sure you tell them that they are no longer allowed to use the direct deposit in your bank account.And then talk to your attorney about how this will work with accepting those partial payments.
Okay, now let's talk about what happens if the tenant has not paid rent by the fifth of the month or didn't follow the payment plan.
So call your attorney to begin the eviction process immediately if it's after the fifth of the month and the tenant has not paid rent or they were on a payment plan and they didn't follow through with whatever their payment plan was.
Then have your attorney post or you can post a three-day notice to pay or quit and then motion will get filed with the court in order to do the eviction.The tenant will have the chance to tell their side.
Most tenants don't show up and the landlord wins, although tenants can show up.And we are seeing in a lot of markets an increased friendliness toward the tenants rather than friendliness toward the landlords.
Just realize what the political environment is and what the writing on the wall is for the system that's going on right now.But just realize that a lot of times, you want to make sure that you are standing on solid ground.
If they're not paying rent, then you want to get them out of the property.But don't do this over really minor stuff.
Then usually what happens is the sheriff is contacted, they set up a time to enter and they remove the tenant, a forcible entry and detainer.Most tenants are gone the day before the sheriff comes, but not all.
So the tenant's belongings are moved out and you retake possession of the property.Make sure you change the locks immediately on the property, clean up the unit and rent it out to an amazing tenant who's going to pay on time.All right.
Next kind of challenge that you're going to see from a tenant is what happens if they pay you, but the check gets returned.So the tenant's check is returned to you.It could take a week.
excuse me, to two weeks or so just to find out that the check is bounced from the bank.
Now, if the tenant tells you ahead of time, because a lot of times they're going to know before you, they're going to get noticed that they had NSF and the bank's calling them to kind of make due on the check.
If that is the case, then the tenant contacts you and says, hey, I'm sorry, you know, we have this mix up of work, payment didn't go through.And so the check that I gave you for your rent just bounced. You can work with them in order to do that.
Work out an arrangement to get an acceptable payment from them or kind of a plan that they do.And if they don't, then do a three-day notice to start the eviction process.
You can always stop it if they do make payment and they kind of come clean on that.There may be some extra cost to them to doing that, but better to you to not wait to start the process immediately and do it that way. So that could happen there.
Now, what happens if the tenant does not contact you?They don't tell you, Oh, listen, you know, I had a check to the bounce.I'm going to make it up to you here.I got a, I got a payment I can do right now.I'm going to go deposit an account today.
Well, if you find out that the check didn't go through, that it bounced, I was returned, then call them immediately.Let them know that the rent is owed.
It's the rent plus the extra $50 plus the return check fee plus $10 per day beyond that fifth day thing.So make sure you set up a follow-up email and a letter.
telling them that, but you want to call them and let them know that, hey, your check bounce now rents with all fees and everything else is going to be this.How are you going to pay?
If they don't pay or arrange an acceptable payment plan and follow it, then post a three day notice and follow the eviction process.You'll notice the theme here.We're being firm but fair.We're giving them a really high quality property.
We're doing all the maintenance and the stuff that we're supposed to do.We're following the rules of the lease.We're being firm but fair with that.But if they're not paying rent, they are probably going to be evicted. Okay.
And it doesn't matter the reason we want to choose where we are charitable, be charitable in what amounts and what kind of, uh, you know, the way that we want to be with all of our money elsewhere.
But this is a business and someone's not paying on this a hundred thousand, 200,000, 300,000, 400,000, $500,000 asset that we are loaning to them to live in.There's an agreement there.
And if they're not holding up the end of their agreement, we need to get them out.We need to get a tenant who is willing to pay and move in.It's going to do.All right.What about late payments?
So the situation here is the tenant pays rent after the first and before the fifth without the extra 50 bucks.So call them and let them know that they need to pay the extra $50.
Now, if you're thinking to yourself, hey, look, you know, but that's like an awkward call.They paid the rest of the rent.Can I just let it slide?No, this is the part about being firm but fair.
If you're unwilling or unable to do this, hire a property manager who's going to enforce your rules. If you're too much of a softie, which is one of the reasons why I don't do my own property management anymore.
If you're too much of a softie, you need to have a professional property manager who is going to enforce the rules for you.So call them up and let them know that you need to pay the extra $50 for being late.
Follow up with an email letter documenting exactly what happened for each day after the fifth that they don't pay it's an extra $10.Call them and let them, and by the way, this is what I'm talking about.This is not in your lease.Don't do this.
If it's in your lease, it says, hey, listen, after the fifth, the extra $10 a day, you know, if it's $50 fee, if you don't pay rent on time, or if you get a $50 discount, if you pay by the first, otherwise the rent is this, let them know that all of those things are applying to them.
If it's in your lease, if it's not your lease, maybe consider adding it to your lease.
If it's legal in your particular market, make sure you check that with your attorney, but go ahead and put in whatever there's and then enforce whatever your lease actually says.I'm just assuming that this is what it says.This is based on our lease.
They'll let them know this is on the call or an email that's an extra $10 a day, whether or not, and by the way, you're going over this in the lease.This is not the first time they've heard about this.
So when you're going over your lease signing ceremony, you're sitting down with them and you tell them, look, I know that you're going to pay rent on time.So this is not going to be an issue.
However, I just want to walk you through what happens if you don't pay, you pay after the first, it's a $50 fee. You pay after the fifth, then it's a $50 fee.Plus, it's an extra $10 a day that you're late for doing this.
I don't want to have to do this.And if you don't pay that, then you're going to be evicted.I'm going to put a three-day notice on there.I'm going to hire the attorney to do that.
And if you pay after we hire the attorney for the eviction, then you have to pay the attorney's fees as well for the work that they did up to that point.So you don't want to go and do this.
You really want to make sure that you're paying on time to kind of set all this up.And you're going over all the other parts of your lease too during that lease signing ceremony, and you're explaining it to them as to what's happening.
Whether or not you choose to charge the extra $10 today is really up to you, but I do think you should be firm but fair in doing that.
You can decide whether or not you want to waive it if they've been a good case with you and they're kind of doing that.They're great tenants, you arrange it with them, they pay the extra following month of rent, this may work well.
So if for some reason They pay on the second of the month, and there's a $50 fee deal.And they've been great this entire time.You don't have to say to them, hey, send me that $50 right now.You say, look, you've been such great tenants.
You've been paying on time.This is kind of a one-time slip-up.Go ahead and just pay the $50 as part of your next month's rent, and I won't charge you the $10 a day in that case.And just please pay on time in the future.
Some lenders will choose to let the $150 penalty slide until the end of the lease, and then in order to renew, it must be paid.And if they're not renewing, it's deducted from their damage deposit.
So that's another way to handle it if it only happens like once.Alternatively, you can post a three-day notice.This also applies to any other rent late fees too.Now, if you go and
The tenant has been great otherwise to maintain the property and they're paying on time except for one time and they're short $50.
Do you think you're really going to get a judge to rule in your favor if you try to evict them over a single $50 late fee or non-discounted rent fee or kind of like they're overdue on that?
I think you'd have a hard time getting a judge to side with you on that.So just don't do it.You know, kind of like wait it out and see what happens there.You could do it that way.All right.Breaking the lease. So here's the situation.
The tenant is deciding to break the lease.Tenant gives you notice that they're moving out and that they're breaking the lease.They're not agreeing to do the entire lease term.Call and discuss with them.
Again, since you're covered, you've covered all this stuff in lease signing.They should know how breaking the lease works, because you're going to go over with them.
OK, what happens if something unexpected happens and you need to break the lease midterm?This is what could happen here.And you go over whatever the lease says about your particular plan.This is what our lease would say.
So they need to give us 60 days notice that they are breaking the lease.And they need to pay the rent during those 60 days.And they need to pay one month of rent as an early release fee in addition to those 60 days.
And they need to leave the property in rent-ready conditions.They need to leave it in condition for us to actually get a new tenant in there. then have them sign a written notice and pay the early release fee in order to do that.
Start advertising the property.Once you get a new tenant approved and they move in prior to that 60 day time period, then you can refund them any rent that they paid to be the overlap for the previous tenant.
So you cannot double dip here for that 60 day period.You can get the early release fee, the one month early release fee.
But as far as like the 60 days where they're supposed to continue paying rent, that's to give you time to find a tenant to replace them in the particular property.
And if for some reason after 15 days you find a new tenant, the old tenant who's moving out,
has paid, you need to refund them for the remaining amount of the month after the 15 days in order to get the new tenant in there so that you're not double collecting on rent.You're not allowed to double collect on rent.
You want to make sure that you refund them whatever it is that they overpaid you and the new tenant is going to pay you the right amount.
send them the damage deposit after you've kind of inspected the property and any bill if there's any additional fees and above to the damage deposit.All right, so what about if they give you a partial payment?
So the partial payment of rent, for example, one roommate didn't pay.So imagine you have three roommates who have split the rent amongst themselves and they pay separately each month.
So you've got a roommate and they're each paying $600 a month to live in a property, $1,800 total.Two of them send you their $600 check and one of them does not send you a check.
Okay now in our lease when we have a roommate type situation where there's three people there each individual tenant is jointly and severally liable for the entire amount of the lease.
So if one of them decides not to pay, other two are responsible to pay.If two of them don't pay, one of them is responsible to pay.
And each one of them is individually responsible for the whole lease amount if we have to go after them in court for something.
So if you have one that has a lot of resources and two of them don't have any resources, the one can be stuck paying the entire thing if it comes down to that.They're not due for a third. That's how our lease is written.
It's jointly and severally liable for the entire amount of the rent.Consider adding to your lease that you will only accept one payment per month.This might help you avoid that.
Although in practical considerations, this might be hard to do if each one of the tenants is paying their $600 a month.
But if it's just one tenant who didn't pay and the other two have paid, contact the roommate who didn't pay on the first of the month and ask for a status.Hey, you know, I noticed you didn't pay your rent.What is going on here with that?
If it's not paid after the first, so on the second of the month, contact all of the roommates, remind them that only part of the rent has been received and that an extra $50 is now due.That's the lead fee, not $50 per person, $50 total.
Remind them that they are all jointly and severally liable for rent.Remind them that in our lease, and we went over the lease in the lease signing ceremony, remind them that all of them were responsible for the entire amount.
They were not just responsible for their own $600.They're totally responsible for that $1,800 total.Post a three-day notice to pay or quit on the fifth if the rent is not received, and begin the eviction for all of the tenants, not just the one.
All of them are responsible, so all of them get evicted. Now let's see the next slide if we have a roommate who wants to move out or has to move out.So one roommate breaks the lease. So here's a situation where the roommate wants to break the lease.
One roommate decides to send a 60-day notice and says they are moving out.Well, contact the tenant and explain to them that they're all jointly and severally liable for rent.
And unless all of the roommates are giving a 60-day notice and plan to move out, then this is not possible.They can't just have one roommate move out.They are still all liable for the entire amount of lease.
Consider offering them the ability to sublease to replace the roommate they or the roommate staying can find another roommate that has to pass your application screening process.This is not a free pass to bypass your screening criteria.
The new roommate must qualify on your existing lease criteria, your tenant screening.And they pay a $250 to a $500 fee, typically about 25% of one month's rent. They pay the rent until the new roommate starts paying rent.
So the person moving out is still responsible to pay the rent until they get a replacement roommate.
Either keep the damaged deposit through the end of the lease to make sure that it's replaced by the person subleasing after taking any damage to the deposit.So you can decide to go and say, hey, look, you gave us a scary deposit.
We don't really know the condition of the property until everyone moves out and we've kind of settled everything.
So I can't give it back to you or with the permission of both the other roommates in the property or all the other roommates in the property, go in there and find out what damage needs to be removed for the damage that the the roommate who is leaving did.
If everyone can agree.Otherwise, you just have everything be coming out at the end and everyone is responsible for all the damage.OK, so you want to go make sure that they are doing that.And if that's the case,
then the tenants agree to take responsibility for everything else in the property except for this one piece that the particular tenant leaving is responsible for, then you go ahead and have that done.
You can give the remainder of the balance back or do a bill to the tenant that is moving out that owes that money.All right, roommate issue. So what if you have a roommate issue?
The resolution, which you state upfront during the lease signing ceremony, is that you do not get involved in resolving roommate disputes or issues.You are not a mediator between roommates.All of them are adults and they can resolve their own issues.
Now, if it's a situation that involves violence or drugs or other illegal activity, have the roommate call the police and call the police yourself.
So if they call you up and they're like, you know, so-and-so is dealing drugs at the back of the property, You tell them, call the police immediately and you call the police immediately and you want to get this resolved.
This is not something you are going to step in the middle of and resolve.And this goes for any situation where someone is fearful for their safety or drugs or violence or other illegal activity.
In any situation, whether it's a roommate or not, even if it's like, you know, a tenant calls up and they're like, Hey, you know, there's something illegal going on in the property.
Then they need to call the police, call, contact the appropriate law enforcement agency immediately when this happens. Now, what if they're not maintaining the property?So the tenant is not maintaining the property.
So contact the tenant and explain the issue and what needs to be done to resolve it and by when.
Follow up with email and a letter containing the above information saying, look, you're not maintaining the lawn or the property is not being maintained with the proper level of cleanliness or you're not cleaning up the dog poo in the yard or whatever it is that's in your lease that you're requesting that they actually maintain the property correctly.
If the issue is not resolved by the due date, post a notice that says if it's not resolved within 24 hours, the work will be contracted for and billed to the tenant.
So if they're not mowing the lawn and they don't get it done within 24 hours, then you're going to hire a contractor to come out, mow the lawn, and you're going to send them the bill.
You can always post this when you post the first issue being noticed as well. If it's not resolved within 24 hours, then contract the work out and have it done by the tenants.Collect this as you would rent.So it's due.
If you don't pay it, there's going to be fees for doing that, and you have to maintain it.So this is part of your rent that's being collected for maintaining the property, doing that.
Now, what if it's like one step above them just not doing something?What if the city gets involved and says, hey, look, you have a city ordinance violation for not doing something.
So like the weeds being overgrown in the yard or whatever it is there.So it's very similar to the tenant not maintaining the property.They will come and weed and mow.If you don't do it yourself, the city will come and take care of this.
And they charge a really hefty fee for doing that. And if you don't pay that, then the city can actually put a lien against your property and come and collect.And so that's not a good thing.And there's interest and stuff that gets recruited there.
So you don't want to get in this situation.So again, contact the tenant, send a copy of the notice of the violation that the city gave you.A lot of times the city will send one to the house as well.
although not always, and the resolution must be done prior to the due date in the notice.Prefer 24 to 48 hours so you can contract the work out if not done by the tenants.
You don't want to mess around with this so the tenants need to take care of it or you're going to take care of it and you're going to bill the tenants.Bill any fees charged by the city to the tenant.
So if the city charges you a fee and then verify the work was completed and contact the city as needed to resolve this particular situation. What about a tenant holdover?So a tenant is supposed to have been moved out, but doesn't.
You know, they tell you they're going to be out by, you know, the first of the month or the 30th of the month.And you've got a new tenant all lined up with a new lease signed and ready to go.But the tenant is not out of the property.
Ideally, you prevent this by contacting a tenant, you know,
30 days out, you know already that they're not renewing because you talked to them before that, but talked about 30 days out, 15 days out the week of the move out just to make sure that they're on track and they're going to be on time with the moving.
And you want to make sure that this goes pretty smoothly.But what they tell you, look, you know, I'm not going to be able to get out.I don't have a new place to move into or my place got delayed or whatever.
So the new tenant is typically, you know, you may have a new tenant yourself who's typically going to be moving in on the same day or the next day or a couple of days later.The lease that we have gives us a 10 day grace period.
It's not fun to do this, but it gives us a 10 day grace period for the tenant coming in that if we can't provide them the property, like the, like the old tenant is not moved out that we have 10 days before they can actually terminate their lease and cancel.
And that we're not responsible for paying for like hotels or food or anything like that for them.Um, but it's beyond our control.The old tenant didn't move out.Our new lease says that we have 10 days to kind of get them into the property.
Otherwise they can then terminate the lease and get all their money back. So communicate with the old tenant that they need to move out.
You've got a new tenant moving in, post a three day demand for compliance notice, begin the eviction process and charge rents.
Usually it's a premium, you know, 110% or 10% per day, whatever your lease actually says that you can do in order to get the tenant out of there as soon as possible.And definitely communicate with the new tenant as much in advance as possible.
If you find out 30 days in advance that the new tenants not planning on moving out and say, look, you know, We expect to get them out, but I just want to give you a heads up that they are resisting and it could be a little bit tricky.
So I just want to give you as much notice as possible that we're doing everything in our power to get them out on time.And as of right now, it looks like we should be able to do it.
Or as of right now, it looks like we should, we were going to have a little, little bit of a problem with it and give them as much notice as possible, be communicative so that they can understand what is happening there.
Remind them from the lease signing that you had with the new tenant that you have up to 10 days.
And while this is unfortunate, because you don't plan on doing this, that you're doing everything in your power to resolve it so that we don't go to 10 days.And if they decide not to move in, they forfeit their damage deposit.
If they decide, hey, look, I can't mess around with this.I need to be in a place.I'm not willing to wait 10 days to move into this property.Then they could do that, but they forfeit their damage deposit if they do that.
Don't charge them rent until they're able to get the keys, obviously.So you don't give them, you don't charge them the rent unless that's, you know, you're able to hand over the keys to the particular property.All right, bed bugs.
So a tenant reports bed bugs in the property.The tenant reports bed bugs and it's been within seven days of them moving into the property.We're gonna assume that's from the previous tenant.So contact the pest control service to fix the issue.
The landlord typically pays for this, not the new tenant moving in.And then you're gonna bill it back to the previous landlord if you can prove that it was the previous landlord.
If the tenant has been there longer than seven days, inform the tenant that the issue is not present on move-in, and therefore, you'll have to contact the pest control company, but the tenant will be billed for that particular service.
Collect this just as you would normal rent.It's like a fate.
If it's a multifamily property and the neighboring unit has bed bugs that most likely found their way next door, then build a tenant where the infestation began for all the pest control services.
Sometimes this is really hard to prove, but if you know that it came from the one next door, then ideally you could build that.Obviously the tenant just moved in and the landlord is eating the bill or the previous tenant may be able to be charged.
We talked about that.Okay.What if you have an HOA violation?
So let's say the tenant didn't put the trash can out of sight, or there's weeds on the property, or the yard needs mowing, or they left their Christmas lights up too long, and the HOA sends you a HOA violation that says this particular property is in violation for whatever it is, weeds, or yard, or Christmas lights, or whatever it is there.
Usually they send you a warning first with a date to resolve it by.Sometimes they'll charge you fees if it's a really strict HOA, and they're kind of nasty.
But a lot of times they're gonna say, look, you have until this date to get it resolved, otherwise there's gonna be a fee. a charge to you.So contact the tenant immediately, let them know about the violation.
A lot of times they're going to get a notice because the HOA is going to send notice both the property and also to the owner's address.
So email or text them a copy of the violation letter, ask them to resolve the issue if it's not already taken care of, and then ask them to contact you once it's been resolved.Just this is going to happen inevitably.
This happens all the time where tenants leave their trash can out and you have like, you know, very severe, very strict HOA people kind of like saying, hey, it's, you know, 401.
In the afternoon, you have to bring your garbage can and they have to be in by four o'clock.I work till five, you know, what do you want me to do here?So a lot of times this happens just unfortunately pretty often. Or what about noise violations?
So a lot of times the city will send out a notice of violation, a public nuisance.In some areas, there can be additional consequences for repeat offenses on a particular property.
Like for properties known as a party house, sometimes the city will associate that and tag it as a public nuisance property.For example, in my market, if you have two violations in 12 months or four in 24 months,
a public nuisance action can be commenced against the owner, the manager, and the tenants of the property.And these can stick with the property even after sale.
So once a property gets tagged as a party house, it doesn't matter if you sell the property to someone else, a lot of times that sticks with the property.And it's a pain in the butt to get it removed.So you don't want to do that.So if a tenant has
noise violations going on, contact the tenant to discuss and find out what happened.
If it's like their once in a lifetime 50th birthday celebration and they've never had any problems before and doesn't sound like they're having problems again, then just send them a notice saying that this is what happened and please don't do it anymore.
But if it occurs again, They're responsible for all the costs associated with the public nuisance action, and it'll be cause for termination of the lease.So realize that that is it.
Now, if your particular city charges you a fee on the first offense, then I would change this policy, and I would say you're responsible for the fee this time.
If this is a multifamily property and the complaint is from another tenant, take the same steps as above, assuming the complaint is reasonable and substantiated.
You know, you're going to, you will find, if you do this long enough, there are going to be some tenants that just complain about everything.
You know, someone playing classical music at volume four, when volume goes up to 10, and it's just a really reasonable thing on a Sunday afternoon attendance.Like, you know, I work nights and I can't sleep and I hate classical music.
And so, you know, you got to stop them from playing classical music.That's probably an unreasonable request.So just realize that that could be problematic.All right.Neighbor dispute. So situation, neighbor has a dispute with the tenant.
So neighbor that is not also your tenant says your tenant is disrupting their life in some way, noise or threats or the care of the property or whatever it is.
Tell the neighbor if they see any illegal activity or feel threatened or unsafe, they need to call 911 or the non-emergency number if it's not an emergency immediately.So if they have an issue that's going on, they should call the police to do that.
Now, I would also tell them, talk to your neighbor. You know, if you have a problem with your neighbor, you're an adult, they're an adult, talk to them directly.
If you've got something that you see that's illegal or that you feel threatened or that's unsafe, then call the police because they're doing something and it's their responsibility to kind of behave themselves and they should not be doing that.
So call the police.That's what the police are for. If the above is not an issue, ask the neighbor to talk to the tenant in person and explain their concerns.So have them have an adult conversation between them.
This is almost always, this will almost always resolve the issue.Like if they go and communicate.
If it doesn't, discuss the situation with your tenant and explain that the lease they signed has a quiet enjoyment clause, meaning that they need to make sure that the other people around them have quiet enjoyment of their property, just like they should have quiet enjoyment of their own property.
It states that they won't create excessive noise disturbances or excessive disturbances at all for others.
and give them a warning and follow up with an email and a letter stating if it continues, their lease will be terminated for failing to abide by the terms of the lease if they're really having problems with neighbors doing that.
All right, what about automotive by the way, automobile violation?So what about a non-licensed vehicle, um, or an inoperable vehicle or other vehicle that is not allowed like an RV or a boat or whatever, just kind of sitting at the property?
Um, this could also be an HOA violation at the vehicles are parked in the street or recreational vehicles and parked for over a set period of time.
Some HOAs will have rules that say can't park an RV for more than three consecutive days or whatever it is. So realize that these could be issues by the city or the police or also the HOA.
So contact the tenant, ask them to resolve the situation, letting you know when it's been resolved.If it's an inoperable vehicle that's not removed, our lease allows us to have it towed at the tenant's expense.
So realize that we would do that if that happens.By the way, if they don't fix it, then that's a lease violation to convict them.A pet violation. So they violated the pet policy during their tenancy.
So during the inspection, you may find an unapproved pet living at the property.
This could also be a violation of pet policy with an approved pet where, you know, there's aggression or annoyance or a nuisance toward others by the property that you did originally approve of the property.
And now you're finding out that they are no longer a safe pet to have in that particular property.
So if you're okay with the additional pet, if you meet them and they kind of meet your criteria, you can document it and begin charging the pet rent and the pet deposit that you'd get for the tenant.
And you can retroactively charge pet rent for when the pet was at the property.When did it start?If you're not okay with the additional pet, notify the tenant that the pet must be removed immediately.
Send them an email letter stating this and charge for any pet damages found immediately and get payment for that.And then let them know that they're not allowed to have that pet at the property.It's a violation of the lease.
and that if they continue to have the pet there, they will be evicted.Occupancy violation.So what happens if you have unauthorized occupants living at the property?
So the person gets a girlfriend or boyfriend or new husband or new wife and they decide to move in, they need to be approved of on your lease and done full tenant screening.
So you need to contact the tenant, let them know that they're in violation of lease.
If you do not want or cannot, like the city says, you can only have four people living in this property and they now went from four to five, then you may not be able to add them to your lease.
So if you don't want them or you cannot because of some type of occupancy restrictions, add them to your lease, then the unauthorized occupant must immediately vacate the property.
Email them and send them a letter, stating that they must be removed from the property, post a three-day demand notice for compliance, and if they do not comply, you'd have to start the eviction process for everybody.
Charge them for the time the unauthorized occupant was there retroactively if you have an additional fee for that sort of thing.
If you want to add them to the lease, if you're like, okay, this is someone getting married, then get a full application, screen them, and if they pass, then you can add them to the lease.
If they do not pass, they must immediately vacate the property. So you could have a situation where, you know, they get married and you find out that the new spouse is unqualified to live in your property.
They have a vacancy or some other issue, or they have an eviction rather, and some other issue that they're not approved to live in the property, really problematic.Because you've got one tenant who's been great paying on time.
And now they've got a new tenant where they want to live with them.Maybe they're married to them and they can't live in the property.It's going to be a problem.
So it's going to be tricky for you to kind of work through that, but that's the policy you should kind of use.Because if you make an exception for them.
and you have to document all this stuff, then you could be in trouble with fair housing if you don't allow someone else in on the same terms later on.Maintenance requests. So they've requested some type of maintenance of the property.
Tenant contacts you with some type of request.You need to decide whether or not it's something you're going to fix.Decide if it's urgent after hours, weekend, as soon as possible, like a leak or something like that.
Or if it's not urgent, just let the tenant know when you plan on getting around to it if you're doing it.If you are fixing it, let the tenant know who will be contacting them and approximately when.
Contract the work with whoever the contractor is who's doing it.Have them contact the tenant to schedule a time to meet with the tenant and have the tenant let them into the property.If the tenant cannot be there, Schedule it and be there yourself.
If you're not fixing it, communicate that to the tenant with an explanation.You know, the ice maker was not working when you rented the property, so we are not going to be fixing the ice maker.
We disclosed that to you and you knew that it was not going to be working.That's why we're not fixing that particular issue. Repair requests.So how to choose what repairs to do for your tenant.
Immediately resolve any type of life, safety, or code issues going on with the property.You want to provide a property in great condition that meets all codes, that is safe for them to live in, and make sure that it kind of like abides by all those.
I would also immediately resolve any non-livable conditions like heat during the winter, lack of hot water, lack of the ability to cook or refrigerate food, fire in the property, any flooding, any mold going on the property.
You want to address all of these issues as soon as possible immediately to make sure that they are resolved.
Immediately resolve any potential major damage causing issues like water leaks going on, any roof leaks or roof issues, any bad electrical or bad plumbing going on the property.Those are things that you should definitely resolve right away.
For all other issues, determine the actual need for the repair, evaluate the costs versus the benefit you might get from doing that thing, and take into consideration the impact to the quality of the life or annoyance to the tenant.
If the issue makes the tenant unhappy, and they feel like you didn't live up to your end of the deal being reasonable, then you should probably fix it.
If it's like $100, $200, or $500 type repair, these are things that you should just resolve as part of the property. Would you fix it?Let's go talk about like, you know, would you go and fix this?
What if the gutter has a small leak and drips when it rains?Would you go and fix that?I probably would not go and fix that, but that's really up to you.
If it's like one of those small annoyance things, maybe you fix it under that kind of context, but otherwise that's not a major issue.Usually that would be refixed.
You know, if you're going ahead and have made it such as the outside of the property, and you're going to fix all the gutters, you're going to paint the property or repair and a bunch of things like that.
What if the tenant wants screens put on the windows?In some markets, screens are required by code.So a lot of markets, you'd be fixing that.
And such a small cost, it'd be annoyance to a tenant that can't open their window or there's bugs getting in or whatever, that you probably should put screens on the window anyway, because it's probably a small request.
What if a tenant wants a screen door? Didn't have a screen door when he showed it to him.But they're like, Hey, listen, I really want a screen door on this property.
I think in most cases you tell the tenant the property did not have a screen door when you leased it.You know, maybe you're willing to do this for a good long-term tenant as just sort of like goodwill where you put a screen door on the property.
But in most cases, you're not going to go ahead and do that. What about a stair leading into the unit is broken?Yeah, it's health safety.You're going to fix that right away.What about a handrail not attached to the building?
Again, that's a safety issue.You're fixing that right away.What if the tenant wants new carpet after they moved in?They saw the carpet condition.They're like, OK, I'm going to rent the property.
And after they move in, they're like, hey, we really want new carpet in our unit.
Well, what if after they move in, it's that the carpet smells of pet urine from the previous tenant, and you really couldn't tell that when you saw the property, when you showed it to him for a short duration?That changes it for me.
I probably would replace carpet or at least clean the carpet if that were the situation going on with that particular tenant. What if a tenant say a tree is diseased and they want it removed?
If it's going to cause additional damage to the property, I probably would have that addressed.If it's not going to cause additional damage to the property, I'm probably not going to address just the disease tree.
What about the garbage disposal stopped working?I would probably fix that.But if it's happening repeatedly, I'd have a talk with a tenant about what are you putting in the garbage disposal?
Because it seems excessive that this thing is happening, especially if you haven't fixed, you put a new one in and it continues to happen. What happens if a bedroom door is hard to shut?
So in a lot of cases, I probably would fix that, especially if it's a roommate situation, they need the privacy or they need to secure their door because they've got their own personal stuff in there and they don't want other roommate tenants going into their property.
So I'm probably going to have that fixed.What if the front door isn't painted?Probably not fixing that.What if a window until I paint the property in full?What if a window doesn't open properly?I'm probably fixing that.
What if the ice maker in the refrigerator doesn't work? Well, if you provided them a property and it worked when they moved in and now it doesn't work, I'm probably fixing that because that was part of what was promised to the tenant.
If the ice maker no longer, if the ice maker does not work and then tenant knew about it when they moved in, even if they complain about it, I'm probably telling, look, it didn't work when he moved in.I told you it didn't work when it moved in.
I'm not providing you a new ice maker. All right, let's talk about disputed damage deposits.So you have the tenant move out and they dispute the damage that they did on the refund.
So within 30 days, send them the damage deposit refund or bill, if it's more than what they owe to the tenant.Send the invoices from any third-party companies with it.
Note on the invoices any amount due is due within 60 days or will be turned over to collections.And the note on the invoice that they must respond in writing before you will discuss it on the phone or in person.
You want to document in writing what issues they have with things that you had on your damage deposit receipt, kind of showing them what they owe or what was deducted from their damage deposit on there.
Then once they've done that, you can communicate with them via phone or whatever it is.So if disputed, look at the statement and respond accordingly.
If they're correct, they say, look, you know, this wasn't damaged or this was damaged and I did it and you just made a mistake, remove it and send the invoice, remove the charge and resend the invoice.
If it's something small, you may want to let it slide because If they're going to press hard, you don't want to go fight over 50 bucks.It's just too much time and effort and hassle for you.Just kind of let it go.
Determine whether it's worth the stress and time and the money if you go to court over that.I think for a lot of really small things, you're probably just going to let them go.You can also negotiate.
Look, if you pay everything else within 30 days, we'll remove that one charge that you're disputing.If they don't pay, send it to a collection agency.
And then you need to decide whether you're willing to go after them, if they can pay and stuff like that.So that's really a discussion for you and the collection agency that you decide to use. All right.
And so that concludes all the different overcoming of tenant challenges.Hopefully that was helpful to give you an idea of like how you deal with different situations that come up with tenants that are living in your property.
Inevitable things that are going to come up if you manage enough properties for a long enough period of time.So hopefully that's been helpful.I am James Orr.
This has been the overcoming tenant challenges module for the Real Estate Investing Secrets course.
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