VanDyne, (Pardon the novel. I’ve got extra time tonight…)
Regarding your property mis-managing friends…
You can’t pay attention to someone this incompetent.
If your doctor told you about all his botched surgeries, would you trust him?
I’ve been managing property since the mid-sixties when my parents bought their first rental.
We did everything ‘wrong’ in the beginning. If the tenant had cash for a deposit, he qualified.
Of course, our eviction process got to be routine, because we had to get rid of deadbeats like clockwork.
Why?
Because we didn’t treat our rental business like a business.
You’re ‘friends’ obviously don’t know how to manage real estate properly. Adding insult to injury they’re attempting to ‘home depot’ the management, instead of using professionals who actually know what they doing.
Your friends are not giving their tenants “something” to lose for screwing with them. Otherwise, any tenant, with nothing to lose, will treat your friends like they were Chinese prison orphans.
That ‘something to lose’ could be damage to their credit, or damage to a co-signer’s credit, or perhaps getting a huge deposit back.
I prefer getting huge deposits, when possible, and/or navigating (legally) around the law, in order to command larger deposits, if there’s a limit.
Let me give you an example. BTW, I rent to tenants with ‘bad credit’, which I don’t recommend to beginners.
In California it’s against the law to charge more than 2x’s the contract rent in deposits. So, if the rent is 725/mo, the biggest deposit I can ask for is 1450 dollars.
That’s not enough security for me, to overcome a tenant with iffy credit, which again, is my specialty.
So, instead I double the contract rent, and offer a sizable discount for on-time payments. Then I base the security deposits on that larger contract rent.
In a particularly peculiar case, the retail rent was 725/mo, but I wanted 900/mo to rent to an iffy credit app.
I raised the contract rent to 1500/mo with a 600/mo on-time rent discount. The tenant agreed, which brought the effective rent to 900/mo.
I based the security deposit on 2x’s the contract rent of 1500/mo.
That legally allowed me to charge 3,000 for a security deposit.
On a two year lease, I pocketed 4200 dollars in extra rent (175/mo x 24 mos)
I received 3000 dollars in prepaid rents (or 3.3/mos for on time rents, and the equivalent of 2 months in ‘late rents’).
I received 3000 dollars in deposits.
Bottom line:
The tenant gave me 6000 to move in, without a cosigner.
In the event the tenant decided not to pay me, and defaulted on the lease agreement, I had a LOT of leverage. I could offer the tenant a 3000 lump sum to move out …if he was out by Friday, and the place was clean. Or…
If not, I could begin evictions proceedings, get an unlawful detainer judgment, get another judgement for rent still owed (since I can’t credit deposits for unpaid rents), tear up his credit (even worse), keep him from renting anything decent in the foreseeable future (without finding another landlord like me), put my judgement to collection for years, garnishee his wages, and otherwise make his life miserable, until his great grandchildren were dead. It’s his choice.
Guess which alternative everybody chooses?
This is effectively a ‘cash for keys’ approach to avoiding expensive evictions, and lost rents. However, it only works well, when you’re giving the tenant HIS own money back, and not YOUR own money.
Meantime, cash for keys is a great way to avoid evictions generally in my experience.
BTW, evictions and bad tenants are BECAUSE we are bad managers. Otherwise, all tenants are liars, cheats, and advantage-takers. So, if they do what’s normal, and we’re not prepared against it, it’s our fault.
Which brings me to point out again that your friends are crappy managers.
Pay no attention to their opinion of property management, because they don’t know know their head from a hole in the ground. Just saying.
If you don’t want to learn to manage property, then find someone competent that can manage it for you.
That means you’ve got to buy right, in order to afford professional management.