What would you do - renter pays old rent refuses increase...

I have a renter who I personally served a legal tar form rent increase notice on 8/27/2015 to be effective for 10/1/15 rent.

On due date I get a rent check for the old amount. Renter never answers phone, I take 2 trips to residence - 2nd trip his son comes out and tells me they aren’t going to pay $1250, that it is only worth $999 (rent has been same since 2011 - everything has gone up since - my taxes doubled) - he says do what I need to do, rip up the check or cash it… blah blah.

They are on month to month with 45 day notification.
I have TAR lease with 1 day notice to vacate…

My plan to avoid problems before end of year was to serve notice of nonrenewal of lease and give them till Nov. 30
and also send them a notice of rent deficiency for the missing $251.
If they pay old rent amount of$999 again for Nov (likely) - I send another notice of deficiency for $502 total.

I haven’t done an eviction ever. This property is in Harris county, TX.

Thanks for any advice

Tenant laws are state and sometimes city specific. Where is this house located?

hockley, TX - in Harris County

Hi,

You do realize we are a year away from 10/1/16 don't you?????

This might actually be the problem as I would not pay the rent increase until it’s due!

        GR

This is gonna sound harsh, in light that you’re coming here for help…

But…

You are your own, worst, self-inflicted, management nightmare.

It’s really unprofessional, if not just bad business, to jack up a good-paying tenant’s rent, by nearly 25% in one jump. That is, unless you prefer self-inflicted drama and trauma.

You can do anything you want, but HOW you do it, makes all the difference in the world.

The fact is, rents ARE negotiable, and ‘market value’ is a matter of opinion.

That said, evidently, your tenant is quite ‘fine’ with whatever you do in response to him failing to pay you another $251 dollars. As for him, if you cave, he pays $251 less. If not, he’s willing to gamble that he can find another place that costs $251 less than what he’s paying you. Or at least willing to find a place that is freshly renovated, that’s actually worth $251 more per month, than what is the current, unrenovated, hell-hole you are offering.

My guess is that you have not offered to repaint the interior of his “home,” or updated anything, including cleaning his carpeting, or in some way made it appear that you wanted to keep him as a loyal customer.

As a result, a catastrophic rent increase is just the ticket for losing a least $1000 in vacancy and credit losses for the year, which you’ll never recover …and/or creating an angry customer.

I realize this is now an after-thought, but it would have been much more professional and businesslike to keep the rents at market value, all along; increasing the rent to $1250 over the past five years. That would be $250 divided by five years, or an annual increase of $50/mo. That’s much more predictable and profitable than the blunt force trauma strategy of rent adjusting, you’re currently using.

And just for giggles, if you had gradually adjusted the rents by $50/mo, you would have received an extra $600 the second year, $1200 the third year, $1800 the third year, and $2400 the fourth year, and another $3000 this year, or an extra $8400 over five years. Instead you lost all that income, AND are now ready to risk losing more in vacancy and credit losses, if not marketing and legal costs. How dumb.

All that said, I adhere strictly to the “He Who Cares Least, Wins.” philosophy of real estate management. That is, I always care least. So, when a tenant picks a fight with me, by sending me partial rent due, I send the check back, with a demand for the full amount, along with a “Notice To Pay or Quit.” Sometimes this includes posting a notice on the tenant’s door, depending on the history I’ve had with that tenant (and/or what the law requires that I do, to keep my options open).

Finally, if you have to go to court, and the judge discovers that you accepted partial payment of the tenant’s rent, he will assume that you accepted that as full payment due. Please, just believe this.

So, if you intend on getting a judgment that includes the larger rent increase, do NOT accept anything less than the full amount due.

Meantime, consider the losses you are about to incur, which you are not likely to get back; legal fees, lost rent, court time, clean up, and re-marketing costs.

Sure, you may get a judgment. Then try collecting.

Nobody pays you to collect money owed you, and there’s no less than a billion ways for the debtor to blow you off, and to make you run around in circles chasing his money. For what? $250, plus court costs? Really? You have that much extra time to indulge on these kinds of unprofitable distractions?

So, either renegotiate the rental increase to something the tenant can absorb, or return the partial rent, file a formal Notice To Pay Or Quit, and then wait for the tenant to either pay up, bail, or squat. If he squats, then you file for an eviction, receive a judgment award for possession and rents owed, and finally rehab and re-rent the unit.

And then put the judgment to collection, and pay another $60 for the satisfaction of dinging the tenant’s credit for thirty-six months. Yay for you.

Wow guys you are gold mine of info thanks for the positive pro landlord replies.

Sorry the year typo got you in a tizzy obviously it wouldn’t be that way on any notice I provided

The statement and assumptions about the condition of my rental house are completely wrong I don’t know where you get off suggesting such things. This area was slow to appreciate back up and my property value has increased significantly just in the last year thus the taxes as well… Thus the rent increase after holding it steady for four years.

This home was one of the nicest properties in the neighborhood when it was renovated when they moved in. Just this year they had a water leak in the wall and I had the master bathroom completely redone and replaced the shower with a whole new tub and shower replacing what was only a shower

This house is 1750 ft.² with a 350 ft.² enclosed patio with four bedrooms two full baths and a two car garage. they will not be able to find anything comparable for under 1250.

There’s such a thing as customer satisfaction, service, and loyalty, even in real estate investing.

For example, I’ve been a T-Mobile customer since 2001. My lower rates have been grandfathered in, and they’ve been flexible on terms, only because I’ve been a reliable customer for so long.

In fact, T-Mobile tells me that I’m part of a tiny percentile of loyal customers that they’ve done business with for longer than 10 years.

Again, my rates have gone up nominally since 2001. BUT T-Mobile has never surprised me with a catastrophic increase, much less justified it with a notice that the market has improved for them; that they spent extra money putting in a new receiver in my area; and made my reception more reliable and clear; and now they feel they should charge me twenty-five percent more per month, “because we can” to quote their motto. (that’s not really their motto, j/k).

I’m not debating what is fair, or right. I’m debating good management strategy and approach.

Yes, your taxes went up. The market is hotter now. You made expensive repairs. You need the best return possible. I understand all that.

However, you’re also dealing with people. If you fail to handle people in a professional manner, at the least, they will respond in kind, and potentially make your rental business a living hell.

If in fact, your market is volatile, and only recently has appreciation and taxes skyrocketed, you still have the burden of justifying the increases, if not the option of easing them in. That is, unless you just like drama and trauma.

After all, if the tenant wanted to assume the risk of paying skyrocketing taxes and gambling on appreciation, he would own a house himself. However, he’s not. He doesn’t want to assume those risks, and doesn’t expect to be hammered, because you can’t manage your rental in a more professional fashion.

It’s all in how you manage, not what you are managing.

In my earlier days, I just accepted the drama and trauma as normal operating procedure. I got wiser.

Now, when necessary, I ease in major adjustments (depending on whether I want the tenant to stay or not). Some tenants are very hard on my units, and any increases will have nominal effect on my bottom line. Well, I don’t want nominal effects. I want profitable ones.

Otherwise, if they’re good tenants, I want to adjust their rents incrementally, (every six months), and tell them what to expect. Most landlords will not do this. But I think it’s wiser to ease in major changes in rent, and allow the customers to adjust psychologically to what’s coming down the pike …and make informed decisions, whether to move, or stay, and allow him to feel in control.

No matter their decision, it’s quality feedback for me, while drastically reducing the potential tension and negativity involving financial changes I’m imposing on them.

We haven’t even touched on the strategy of allowing the rents to remain at say 10% under market, simply to reduce turnover, and keep a reliable, paying tenant in place, and paying off our mortgages in the process.

That’s a viable alternative, over camping on market values, and constantly twisting the screws to get top rents.

There’s something to be said about not getting as many nuisance calls from tenants, while still making routine observations of the property conditions, and addressing problems as they emerge. You still adjust the rents, but you’re always maintaining an apple cart of a perceived bargain, that the tenant doesn’t want to upset.

FWIW

P.S. Routine maintenance and making necessary repairs is NOT a justification for raising the rents.

If this were me, I would give the tenant a six-month heads up and say,

"Our property taxes have skyrocketed and so have the market rents. As a result we cannot afford to maintain this house at the current rates.

In fact, you’ll discover that other houses like yours are renting for [insert highest possible rental rate known in the area) $1450/mo, or more. However, because you have maintained the property, and paid your rent on time, we want to adjust the rent to only $1250/mo as of (six months from today)."

Any variation on this theme justifies the rent; contrasts what you could get in rent, with what you’re willing to accept, only because the tenant behaves; appears like a bargain rental rate; affirms the tenant’s good behavior; ties the tenant behavior to the bargain rent itself; gives the tenant time to psychologically adjust to the increases; and helps to insulate yourself from appearing like a Grinch.

Never mind that tenants hate their landlords, no matter what you charge. They’ll turn on you faster than a two-year old robbed of its lollipop.

Okay, that’s all I got.

Javipa has good points. I am in Texas also. Never accept partial rent. And start eviction proceedings as soon as the rent is due each and every time it is late. You can always cancel if they pay but you can’t skip steps so always take them on time. When you get to the parts that actually cost money they owe you for that too. My lease states that fees come out of the payments first and then rent. So if they owe $1000 in rent and $100 in fees and he gives you $1000. Assign those payments as $100 in fees and $900 rent. They still owe you $100 rent because any judge in Texas will throw a tenant out for $100 rent but no judge in the sate will evict for fees owed.

Thanks for your time, but I am not interested in your crash course in management your way. Yes, I did ask what you would do… - but prefer direct answers like the last one.

I cannot afford to subsidize renters into the future below the market by $250, which is why I served notice of the increase in august.

These are problematic renters to begin with - they do not answer phones, sometimes not the door, they have changed the locks - but I have tried to manage “nicely” and have let a lot go…

So I have written a letter explaining to them that I can give 1 day notice to vacate for partial rent withholding - and the ramifications - I then told them if they play ball (get me key, be good about showing property, keep property in good shape) I will let them stay until nov 30 and give them a decent review for their next place. I included the notice of nonrenewal with ending date, plus another copy of the CMA for the neighborhood for the last year which shows the minimal rented price per sq ft of 0.73 - on my 1727 sqft house = $1260 they could have been paying for the last 9 months.

@bluemoon06 - I believe I can take the partial rent and just use the amount delinquent in filing the motion for eviction if it comes to that. ( they are short $251.00 currently)

I don’t care if you take my advice, or not. It’s not for everyone, as you’ve pointed out. However, there are others who want to hear from a professional, and are happy to read long proverbs re profitable property management.

Meantime again, you’re your own worst management nightmare.

BTW, two professionals suggested that you not accept partial rent, but you know better. OK.

Frankly, you should consider hiring professional management. You don’t appear to have either the temperament, or wisdom, necessary to profitably deal with renters. Not everybody does.

At the same time, professional management will more efficiently and effectively deal with customers like yours, if not provide a higher level of return on your investment over time.

Just in case you take this personally, this is advice I give anyone, regardless of the people skills. I don’t even manage my own units. I manage my managers.

Meantime unfortunately, you’ve peed in your own pool long enough that this is likely not a salvageable situation, and you’ll have to start from scratch with a new tenant very shortly anyway.

Good luck with that.

I’m sure this won’t be a welcome resource, since you simply want affirmation for doing things bass ackwardly. Notwithstanding, this is the primary source of my management philosophy, and is required reading for anyone who works for me. It’s not a cheap resource, but it’s invaluable for all those that want to manage real estate profitably.

http://www.amazon.com/Manage-Residential-Property-Maximum-Resale/dp/0939224429

Wow javipa you don’t know when to shut up. Your commentary is actually more annoying than the situation I originally posted about. I will be rid of my problem tenants next month while getting rent both months- but you know better , even though you don’t manage your units and you aren’t in TX with vastly different laws than CA. Your self aggrandizing bloviated comments, condescending attitude, and asinine assumptions are not at all helpful. Go bow to yourself and try not to get chaffed as you ride your horse into the sunset. I’m definitely not saving this site as a resource with clowns like you on it.

Jeez.

LOL. You further prove you don’t have the temperament, or wisdom, to manage people, much less real estate, profitably.

As professionals, the first thing we don’t do, is lose our composure. You can’t even handle yourself on paper without a string of emotionally-driven insults, and what not. I mean wow.

Again, I don’t care if you take my advice, or not. It’s no skin off my nose. I was simply attempting to make some points, in order to help you salvage a self-inflicted problem, that you brought to the table, and avoid doing it twice. It turns out, you didn’t want that kind of help. OK.

After your house is vacant for a month and a half, and you spend a couple thousand dollars replacing the carpets, and a few hundred more on paint, why not come back and tell us how much money you saved by churning your rental with a blunt-force rental adjustment again.

Never mind.

Am I late to the party?

I think you should drive over there and just kick him in the jimmies. That would probably be the most professional way to resolve this.