What are some methods to use when dealing with tenants ? How do you set boudaries ? What is in your lease ? When a person isn’t paying there rent or is always late, what are some methods you use to “strike the fear” in them that they will pay ?
Thanks
Steve,
Follow the lease to the letter! If a tenant does not pay the rent on time, then you begin the eviction process the NEXT MORNING! This sets an example for the other tenants.
Mike
Hi Steve,
It’s not ‘hard nosed’ tactics . . . this is business and it’s about your money. Mike is right . . .follow the lease and start the eviction immediately . . . and then you learn to do all that and have the tenant still respect you.
Once they respect that you will do your job (follow the lease and hold them to their obligations), that is how you either get their attention to straighten up and fly right or move it on down the road.
That simple.
Good luck!
Cate
They have the money they have put the rent as a lower priority than something else. You have to make sure that the first priority with their money is rent of moving.
You cant expect them to guess how late you will let them be paying rent. And wonder if they can get by being late to use the money for something else. Dont allow them to think.
They MUST KNOW that as soon as they are late you will start the eviction process as soon as you as you can
I tell them up front that I will follow the guidelines in the lease to the letter, as another poster stated. I told them that this means I have to live up to my end of the bargain as well.
We have a landlord/tenant council in Austin that provides free advice to landlords and tenants. When I am being “hard-nosed”, I tell them to call the free legal service hotline so they can know their rights. They quickly learn that I follow the letter of the law and that they will be required to hold up their end.
I think you also need to show that you care. Repairs are completed as quickly as possible and I sometimes send grocery store gift certificates or little “thank yous”.
a lot of LLs like to “shows tenants whose boss”, etc, etc. Remember, they are your customer. With that said, I follow the lease and the letter of the law very precisely. I use property mgmt and I make it very clear that I expect them to keep things running smoothly without side-deals, etc. Most EXPERIENCED property mgrs know this anyways, but it always good to re-enforce that you view it as a business as some LLs seem to operate on the “buy it and foget about it as long the mortgage is paid” philsophy.
I also follow my leases to the T but I also do like they did in the movie road house, I do every thing nice, if im evicting im nice, if im threatening im nice, if im putting their stuff on the curb im nice. I try to get my tenants not to see missing rent as being one up on me but more as stealing. If a tenant owes me $500/rent and cant understand why im being “so mean”. I ask them “what if you had $500 sitting on your dresser and you sister or mom stole it” they typically say I would “beat their a##” or I would never forgive them. Then I say well that is exactly what you are taking from me by not paying rent. This helps them understand a bit better, and often they will move out without having to go through the eviction process, or they will just give me there deposit and leave the house clean when they go. Sometimes they even pay.
I also try to treat my tenants like I actually expect them to pay, and that they are great people. Many landlords treat them like dirtballs until they prove themselves otherwise. I chose to treat them wonderful until they prove me wrong. I set a standard for them to live up to, rather than a standard for them to live down to.
All of my rentals are in verrry low income areas and I have never once pulled a credit report, and never once looked at a criminal record. This is extremely contradictory to what most landlord would suggest doing and I understand I can understand why. I get calls all the time from landlord wanting to sell because they have terrible occupancy rates. When I ask them what the problem is they tell me that they cant find good tenants. What were they expecting in the low income areas, A-1 credit. I would rather put a tenant in NOW with a security deposit rather than sit 3 months empty. The oppurtunity cost of your money during that 3 months is $1800 (3x$600/mo rent). So while there waiting for the great tenant they essentially did $1800 in damage to their unit, or they gave away $1800 to anybody. I dont know about you but I can replace alot of carpet and paint alot of units for $1800.
Most landlords will say that im crazy, but I just do what works. Most landlords in my market are hurting, Im not, so something that im doing is working. I cant speak for any other ideas other than what I do, because what you do is what you know.
Eric Medemar
Eric,
Whoa. Back up the horse here. In one of your posts just a couple of weeks ago, you didn’t even know that there were ANY expenses with rentals except the mortgage payment! Now, you’re talking about evictions and giving advise to landlords??? Give me a break! It is absolutely clear that you don’t know the first thing about being a landlord. Your advice to do no screening is absolutely suicide. IF you really have any low income rentals (and quite frankly I doubt it), you would know better than that. Tenants with lengthy criminal records and previous evictions will move into your apartment or house; never pay another dime in rent, and force you to evict them. You will lose the deposit, a least a couple of months rent, court costs, legal fees, setout fees and then these tenants will trash the place (sometimes to the tune of several thousand dollars). In the mean time, they will get their predator lawyers and try to sue you for any number of silly things that they invent. In addition, the city will fine you for the nuisances you are allowing. Landlords that follow your advice are the deadbeat landlords that gives everyone a bad name!
Trying to put a guilt trip on the tenants is just silly. Professional scumbag tenants do NOT respond to that. They don’t care if they are stealing from you and in fact that was probably their intention from the beginning. In addition, being a weak landlord is like a cancer. Before long, every tenant in town will know that you do not screen your tenants and they will come to stay when they have been evicted and are homeless. Landlords who do not screen their tenants end up with drug dealers, professional tenants, and other losers who will eventually cause the failure of your business.
Why not stick to what you know, whatever that might be? Landlording certainly isn’t it!
Mike
Eric,
It’s important to understand what is being said here. Mike is absolutely right and if you’ve ever really had to deal with the ‘verrrrry’ low income tenants, you would know that.
Letting a unit sit vacant for three months says you’re doing something wrong to begin with. But let’s assume it’s just a bad market, bad time of year, whatever. It is better to lose the three months of rent to wait for the right tenant (gainfully employed, no evictions or rental collections, no criminal or sex offender history, etc., and not a ‘great’ tenant, but the ‘right’ tenant’) than to take a chance and ‘fill’ the unit now in the hopes that your new customer will do what they have promised to do. But if you have done no screening, you are asking for trouble.
You may be able to replace a lot of carpet and paint for that $1,800, but what about the $10,000 - $15,000 just one bad tenant can cost you in all of the actual costs.
Good response Mike. Thanks for telling it like it is and letting other readers who have yet to experience those joys know the real truth.
Cate
Sorry I guess 20+ units wouldnt qualify me for a landlord, Property manager you never cease to amaze me with your extreme knowledge, and you ability to always doubt whatever I say. I love it.
I have sent you my phone number, email, heck I even offered to pay you to call me yet you still hide behind your computer and your pretend name. It is so easy to criticise with a computer to hide behind. I would love to have you send me your portfolio, and give me your number to call, you can bet that I would, I wouldnt call to criticize though I would call to learn, because unlike you I dont know it all. I always just type what I know, you always just type what you heard, not what youve done.
If you doubt any of what I say feel free to visit www.accesskent.com and you will see every property that I own except for the most current. Just enter Eric Medemar into the deed search and there I am.
With all of your advice I hope you own alot of properties and make alot more money than me, because I would really hate for people to learn from a broke landlord with a bad attitude.
I love that you say that you doubt I will make over $200k this year yet I have even offered to send you my w2 and 1099’s.
I have been a land lord for 4 years now, and I can only speak from my experience, this is what my expererience has been.
Would I be better off to lie and make up an experience?
Would I be better off to just say something clever that I have read?
I would never judge what anybody has to say and say that it is wrong. Especially if it was there experience. I have only had tenants show up to court on very rare occasions and never with an attorney. I wish I could say that I had but I havent.
Would it be more smart to make something that agrees with everyone else though it has not been my experience.
My court fees have never exceeded $200 so it would be dumb for me to say they were $15000, like you say. I guess I could make it up, or say that I read it somewhere so it must be so.
You guys certainly have shown me,
shown me that you know much more than me,
that my experience as a landlord must be wrong,
that certainly only kate and property manager know it all.
that there is no more to be learned in the landlord world other than what you two have to say.
You will never here me criticize anybodies experience, how could I say that someone is wrong in their experience? after all it is what they have experienced.
If you would like to see I deal with verRRRRRRy low income tenants feel free to give me a call, I can send you MLS cards of my properties, or send you pictures of the RIP painted across the sidewalk in front of one of my homes where a man was shot to death.
Like I have always said, I can only preach on what ive done, nothing more nothing less.
Eric Medemar
Couple questions Eric,
Would you rent a property to a sex offender?
Would you rent a property to someone who has been evicted from the last 5 places they lived? (excluding prison)
Eric,
The reason that I have responded to a few of your posts is that you are posting nonsense! You are advertising your services to the newbies (trying to get their money) and yet you continually demonstrate that you don’t even know the basics yourself.
You claim to have 20 rental properties. Your web site says:
I make over $4,000 a month in cashflow (Rent - Mortgage payment, taxes, and insurance=cashflow).
THAT IS WRONG! This is not a gray area, YOU ARE WRONG! Rent - mortgage payment, taxes, and insurance is NOT EQUAL TO CASH FLOW - NOT EVEN CLOSE! How could anyone who has been a landlord for 4 years have absolutely NO UNDERSTANDING of the expenses involved with rentals? Someone who has been a landlord for even a couple of months should know better than that! You said that you have heen to court to evict tenants. What about those expenses? I don’t see that in your equation for cashflow! Either you are just ignorant about landlording or you are intentionally lying about landlording to get money from the newbies.
In one of your posts, you said that normal math says 1+1=2 and that in real estate 1+1 could be just about anything. WRONG! 1+1 is ALWAYS 2. You might be able to fool newbies with this crap, but you can NOT fool the real investors like Cate, Danny, Keith, me and many more.
In many of your posts, you say that you are presenting ideas from doing, not reading about it (as if becoming educated is bad). But on your website, you claim to have a library of over 120 books on real estate investing. Didn’t you read them? Can’t you keep your story straight?
You are inconsistent. You play fast and loose with numbers. You can’t keep your story straight. It is painfully obvious that you don’t know the first thing about being a landlord. Why not limit your posts to something that you actually understand?
Mike
When I type something I dont intend on it being under a microscope from a strange landlord type who hides behind his computer. You know the strange ones that wont give you a real name, that just run around and dont offer any proof of anything that they have done. You seem to have all the answers, I only offer what I know to be true because I do it. You offer advice with no evidence of anything that you have done.
In my mind you have gross cash flow which I have mention and Net cashflow which in your mind is the only type of cashflow.
I just didnt intend on some wierdo chasing me around the internet always proclaiming he has the only way. I am beginning to wonder if you were pushed around on the playground when you were a kid, and now your lashing out at successful people behind the shield of your computer.
Did you play dungeons and dragons?
The same weirdo says “I have not seen a single deal that will cash flow with real world expenses when only getting monthly gross rents of 1% of the investment. In fact, most multi-family properties will barely have adequate cash flows at 2%”
Your real world expenses crack me up. You are such an expert, I should perhaps give you a pat on the back.
If you ever get enough nerve to call me, I would love to learn your real world investing. I would love to take a look at your portfolio. I would love to compare income statements.
If there is one thing that I have learned, it is dont learn to make money from people who have none, which is what I will consider you have until you prove me otherwise.
You always doubt everything that I say, yet when I want to provide you with info to prove it you tuck tightly in behind your screen and hide. No names, no numbers, just rampant criticism.
If anyone would like to doubt me, or anything that I do feel free to PM and I will happily send you my phone number. Even if you would like to call to criticize me, perhaps I could learn from you, as my cup isnt so full of learn that there is no room for more.
You always refer to me praying on newbies and it makes me laugh, I dont even accept payments from anyone until after they have talked to me and gotten a chance to use fully everything that I have to offer.
I dont claim to be an expert on landlording like you, I dont even talk about landlording in my services. I offer advice on wholesaling. Here is what I know about my deals so far in 06.
1st deal Bought for $45k sold for $73k net profit of $12,000
2nd deal bought for $52,000 sold on 6 month option “as is” 2 days later for $64,000 net profit of around $11,000
3rd deal bought for $26,000 sold for $62,000 net profit around $31,000
4th deal bought for $30,000 sold for $62,000 net profit around $16,000
5th deal bought for $33,000 sold for $62,000 net profit around $20,000
6th deal bought for $30,000 sold for $62,000 net profit around $17,000
7th deal bought for $38,000 sold for $62,000 net profit around $15,000
8th deal bought for $18,500 sold for $32,000 “as is” one week later net profit around $12,000
9th deal bought for $30,500 sold on 10 yr option for $53,000 in “as is condition” net profit over $23,000
I dont know how to be the perfect landlord, but I do know how to make $150,000+ wholesaling houses. So you do what you do, run around criticizing people that are far more successful than you, and I will do what I do keep making money, and learning from people at the forums.
Eric Medemar
P.S Property manager I will get you my phone number again in case you forgot.
P.S.S Keep up the criticizing, I’ll do my thing making money, and you do your criticizing.
Eric,
I hate to play the semantics game but your are incorrectly using the term “cash flow” for RE investments. After you deduct operating expenses (more than insurance and taxes) you get your NOI, then you may or may not have debt service to pay, then finally you get your before tax cash flow, then after tax cash flow. Gross and net cash flow are not the same as gross and net income.
Mike has a very good understanding of the typical operating expenses involved in keeping up rental properties. If it means calling you out so that people reading your posts don’t make a purchase based on your misinformation, so be it! The reason your under a microscope is because you are in the business of selling advice to newbies. Therefore, in fewer words, YOU are claiming to be an expert. When you brag about how much money you have to entice people to pay for your knowledge, you better be absolutely perfect in everything you say. You are shouldering a big responsibility and quite frankly, your dropping the ball.
I am also curious to know this, why is your name on the deeds of the properties you own(ed)?
In dealing with tenants, here’s a few thoughts:
If you are like me and do you work on some units, don’t annouce you are the landlord when you knock on the door. I have fixed many problems and driven away and the tenants never knew the guy laying on the kitchen floor owned the place.
If tenants do figure out you are the owner, so what. They see me pull my tools out of truck and get to work to fix their (our) problem. Sure, I’ve had tenants try to ambush me with all their problems, stories and complaints during which I switch into “talk to XYZ Real Estate, they manage the property, I’m just here to fix the toilet, sink, whatever” Never, ever cut deal, discuss on-going rent payment issues, etc. (I expect all those to be routed thru and handled by prop. mgmt).
One of favoriate statements to tenants (when they know I’m the owner) is the following:
Here’s the responsibilities of you and me; You pay the rent on-time and tell me when there is a problem with the property and I’ll provide a reasonable place to live. If you don’t meet those responsibilities, then there will be a serious problem. I’ve been using this line for almost 7 years with many, many tenants and never gotten an arguement.
Also, I own a number of properties in an area with a reputation for being home to welfare types, meth cookers and skin-heads. All I can say is screening is the key (keeps vacancy and expenses low). Other (good) tenants get attract to this area as the rent is cheap. Look for tenants with steady, verifable income. People with real jobs tend to be having less blow out parties at 2am during the week that really PO the neighbors.
Mike in Calif.
Thank you for your input danny, im sure im wrong about cashflow, frankly I dont care I make far more than that but who’s checking?
I offer advice to people who want it, and they pay me afterword. My income level exceeds 200k, I need to be paid for my time thats why I charge, I get an incredible amount of people requesting help, which takes away from work time. I essentially charge for my time, that is what I make per hour.
I dont claim to be an expert on anything, but I do know how to make money. I would rather learn from someone doing anyday over someone who knows from not doing.
To build the biggest building in town you can either build the biggest one, or you can try to tear all the other ones down.
I think I’ll stick with building the biggest one,
and let my dungeons and dragons buddy, keep hiding tightly behind his laptop. and no he still hasnt called or emailed.
Danny you seem like a solid guy, I would be interested in talking to you at somepoint.
I think there should be a post on the forum where people post what properties they actually have, then new investors will know who is doing, and who is reading. I dont put dollar figures down to impress anybody, I put them down to impress upon people that if I can do it anyone can.
If a guy who cant even figure out cashflow can figure out how to make close to a quarter million dollars in a year, then anybody can do it. Thats all im sayin.
Keep tearin down those buildings,
Eric Medemar
You guys can go back and forth all day long about who’s 1040 is bigger but I don’t really see how it affects this topic. Can we get back on topic and discuss some more tactics on dealing with non-paying tenants?
C’mon, this wouldn’t be the internet without a couple good food fights once in a while.
While fights are fun you have to wonder how much they help and how much readers learn from reading them. I prefer fist fights myself, they actually seem to have an end result. Internet fights are kind of lame, I have a graphic to illustrate the point but its not appropriate.