Tenant has me worried

Rehabbing, Fix and Flip, Rental Properties
1

I have an application policy. I do not allow co-signers for rentals.

I had a man apply for a rental property with a woman who was moving from another state. I suspected that they were newlyweds and processed the application. He easily qualified.

I am beginning to think that he lied on the application (listing himself as an occupant), the woman in the house is a relative, like a sister, and that he never moved in.

She pays on time and she is paying fair market value (maybe a little more) for rent. She emailed me today and told me that the man wants off of the lease agreement.

This woman contacts me every month. The garage door was mysteriously broken and now the heating air conditioning unit (which is 3 years old) is apparently in need of repair. I suspect that her children are damaging the property.

At what point would other landlords begin to think about eviction based on a breach of lease agreement?

If the HVAC repair person makes a written statement that the unit was damaged and not worn out, would that be grounds for eviction? Would falsifying a rental application be grounds for eviction?

I have been doing this for 10 years. I’ve never evicted anyone. I really believe that her kids might cause damages that outweigh any possible financial benefit.

2

Issue: You didn’t verify your applicant’s information.

Issue: I don’t understand the ‘no cosigner’ policy. The more people you make liable for a lease, the more likely you maintain leverage in a loss situation.

Issue: You don’t know what’s going on at the house? You need third-party management.

Issue: I’ll have to assume you’re already passed the point of salvaging this loss, because the tenant hasn’t given you a significant deposit, and you have no cosigner, and the tenant will not be able to afford keeping up with their children’s extraordinary wear and tear.

A/C units don’t ‘just get damaged.’ They get stolen. If the unit is damaged it ‘is’ because the tenant’s are damaging it. Consequently, the tenant should be forced to repair the damage. That would be my position.

Meantime, it’s up to you whether you have the A/C fixed before the tenant reimburses you, or afterward. Either way, it’s probably going to be a net loss to you.

Forcing a tenant to pay for damages, without the deposit able to cover those damages (and more), is dicey. Renters live at their income, and demanding reimbursement is pretty much tantamount to getting chocolate milk out of a cow.

However, again if you had a co-signer, you would have MUCH more leverage in getting the A/C fixed at the tenant’s expense.

Get this property under professional management. You are causing your own problems here.

3

Hi,

Since the man is the only one on the lease agreement and he wants to go, I would write the tenant back and basically except their 30 day notice to move out and schedule the property for a vacant property walk through.

If she complains I would simply indicate "I leased the property to this man, he wants to leave and therefore I expect the property vacant and we will handle the property accordingly.

Now I don’t know what the lease terms are or how many months remain on the original lease but I would be using this for an opportunity to clear the property and force a vacancy. I would state I don’t let other parties take over a unit so I expect you to move out.

Then handle damages and unpaid lease as your state law allows!

                 GR
4

Thank you for the responses. It really helps to talk with the people on this site. I would like to make a couple of clarifications and ask a couple more questions:

I use standard state apartment association forms. I verify application information, in fact my screening process is pretty rigorous. I have middle class, blue collar houses. There are 3 adult “occupants” (man, woman, teen adult child) on the lease agreement, and 2 minor children. I collected one month’s rent cleaning and security deposit (standard property management practice).

All adult occupants are jointly and separately liable for damages. I often see women in the properties and men are commonly out at work, so meeting male head of household occupants during occupancy seldom occurs. So it’s not really a matter of verifying information so much realizing that they lied to me. They said that he would be an occupant. As a practically comical side note, the man wants off the lease so he can buy a house. Riiiight.

I don’t allow cosigners because I only put qualified applicants in my buildings. At least one applicant must have a monthly income of 2.5 x the rent. I can’t imagine what a nightmare it would be to put an unqualified tenant into the property, suffer damage, and only have dad’s signature on a cosigner agreement. Then what? Small claims court? I suppose if I had low income properties that had high vacancy rates, I would change my policy. I don’t want unqualified tenants living in my properties.

What qualified tenant is going to try to find a cosigner? I imagine that cosigners are used for apartments near colleges. Do you allow cosigners in houses? Doesn’t that just open you up to having teenagers move in and destroy the place? This sounds like good policy for commercial property but not residential.

Landlords are not legally allowed to let property fall into a state of disrepair that substantially changes what the tenant saw when they initially inspected the unit. I suppose it’s possible that the air conditioner had a faulty capacitor or something.

I haven’t used property management. They charge 3-5% plus tenant finder’s fees. I could buy a new air conditioner every 5 years with the money I would save from paying a property manager.

Have you ever had a property manager that cared about your buildings? I know how to manage property; I don’t want the headache, but I don’t want the expense of a manager. I’ve had other landlords tell me horror stories about property managers that not only charge 3-5% plus tenant finder’s fees, but also either let the property go without maintenance or repairs, or try the exact opposite and charge for repairs that they never did.

What do your ledgers ultimately show in terms of cost versus benefit? A home warranty is only $500 per year, that’s cheaper than a property manager.

How do you find good property managers? What are you paying?

I suppose I could ask the tenant if she is willing to give her 30 day notice, but she already told me that she wants to stay.
I’m going to perform a full property inspection. I’m going to have the HVAC unit repair bid by a professional, and have them pay particular attention to whether these problems look like damage or wear and tear.

I’m not sure if I can (or want to) evict here. So, the lease agreement ends May 1st. If I give a 60 day notice, I can legally tell the tenant to leave. I think I’ll do that if the report from the repair guy or my inspection seems to demonstrate that the kids are causing too much damage.

5

IRO,

Avoid being the classic, low-budget operator. Blowing a buck, trying to save ten cents.

Issue: You manage your managers.

Issue: You choose your managers based on reputation and performance, and fire any that don’t perform as predicted or expected.

Issue: Anyone you manage will attempt to take advantage of you somehow, someway, sometime …tenants …managers …vendors …contractors …etc. Stop chasing the unicorns of management perfection.

Issue: You have leverage over a professional, that you don’t have over a tenant, when things go wrong.

Issue: Sure, the manager might cost what it would cost you to replace the AC every five years. However, without a manager, you’re gonna replace the AC anyway, AND manage yourself anyway, so now it’s gonna cost you twice.

Theoretically, if you hired a competent, professional manager you wouldn’t be replacing (or paying for) a 60-month A/C unit, because the manager would have exercised more efficient supervision over your tenants than you would. It’s his business. It’s your hobby. Two different things.

Issue: What’s your time worth. It’s not like real estate manages itself for free, just because you do it for free. It means you don’t value your time. That’s fine. Many people don’t.

Issue: If you’re not making more off your property than a property manager would cost, then you’re not really investing well enough in the first place.

Issue: It’s enormously difficult to find SFH’s that are much more than appreciation plays, where management costs must be front-loaded, if not borrowed, from future appreciation, and/or debt reduction.

Issue: Any management hiccup you have is YOUR fault, not your tenant’s. Tenant’s lie, cheat, and steal, and did I mention lie? So, that’s the operating assumption, and so it’s up to you to uncover the lies, cheating, and stealing, and give a tenant a reason not to lie, cheat, and steal from you.

Issue: Your security deposit requirements, don’t give your tenant’s enough inventive to live by the rules, much less pay for a damaged A/C unit (evidently).

Issue: Renting to 3 unmarried adults is ‘not’ renting to “quality” tenants. It’s renting to ‘the best alternative’ available that you considered ‘qualified’. There’s a difference.

Issue: I can “qualify” a raccoon, if the deposit it big enough, and a co-signer is strong enough. So, “Qualified” is a subjective term.

Issue: A “quality” tenant for a 3/2/2 in a blue collar neighborhood, would be a married couple, with two children, both working at the same jobs for five years, and are looking to buy their own home. They pay their bills, are concerned about their credit, they’re not overextended financially, and they make 4 times the rent in combined incomes. These tenants are extremely hard to attract, because every landlord known to mankind is trying to attract them.

Meantime, anything less than that, needs to be “qualified” with larger deposits and co-signers. Credit and income isn’t the only criteria for qualifying tenants. It’s also the quality of the family unit, and their associations.

For example, is dad running around on the wife? Is he an alcohol abuser? How about the wife? Are they headed for divorce? Are the the kids under control, or are they little, dysfunctional hellions acting out on their parent’s marital dysfunctions? A trained, experienced property manager would pick up clues, and weigh his options, when leasing your house to this family.

Issue: You would be explaining to your selected property manager, what your goals were, and seeing how they fit the market and demand for what you currently offer. You would want an understanding regarding the trade-off required between camping on the rents, versus maintaining a zero vacancy factor, and/or achieving something in between.

FWIW

6

This just happened to me. Rented a place to a nice family, turns out that a registered sex offender is living there.

Come to find out the daughter slept with this much older guy when she was 13 and when he got out of prison they were generous enough to let him move in with them. I sent them a noncompliance letter and I guess he is back in prison so they get to stay until their lease is up.

Moral of the story is, tenants need to have skin in the game and something to lose by breaking the rules.