What to Do, When They Don’t Do What They Are Supposed to Do?

Tenants have the troubling quality of being human.  You may have a fantastic five year real estate investment strategy lined out for yourself in which you spend only 7.5 hours a month managing your rental property and in 15 years it will all be paid for and you can sit back and sip cocktails on the deck.  That very well may happen, but you might be surprised how you spend that 7.5. hours a month.

Recently, I had some tenants move in and lo’ and behold, about a week after depositing their move in check, I got a notice from my bank indicating that the check had bounced. In seven years, this unfortunate reality has only happened to me one other time and it was a simple clerical error on the part of the tenant.  This time, however, there is nothing simple.  The tenants clearly don’t have the money anymore (and maybe never did) and they are not handling the situation well.  Not to mention, they just had a baby.  It was an oversight on my part to let them pay with a check, but I am human, too.  They had an excellent rental history and slightly below average credit.

So, how have I been handling this situation? Here is a rough outline of my process:

1.  I got the notice from my bank and had an internal temper tantrum.

2. I tried to step back and assess the big picture (if this were a movie, you would see me scratching my head with a voice over as follows . . .)

  • Was this a simple mistake on the part of the tenant, like just forgetting to transfer money? (seems unlikely)
  • Have I had any other issues with the tenant? (yes, they have already left a lot of trash around and they have a young child who is often outside unattended)
  • Do I think I made a mistake renting to them? (good chance I did)
  • What time of year is it? (it is getting to be the end of the summer, which is a better time to re-rent a unit then 3 months from now)
  • Am I willing to struggle with these tenants for the next few months? (not really)
  • How are they responding to my communication with them about this situation? (not particularly pro-actively, but she just gave birth)

After thinking about all this, it was clear to me that I needed to respond immediately and firmly.  I sent both people (husband and wife) a text (their preferred method of communication) and let them know that the check bounced and that I would be posting a 3 Day Pay or Vacate Notice on their door. Within 3 hours, I posted the notice on their door with a copy of the NSF notice from the bank and mail them a copy (as required by WA state law when you are unable to serve the notice in person).  I also attempted to contact their bank to see if there were now sufficient funds in their account.  This process took 2 days because I did not have the right documentation.  Once I did, I could tell by the teller’s response that there was nowhere near enough money to cover the check. Another red flag.

During this time, they were contacting me intermittently.  I told them this situation was extremely serious and indicated that they either are not doing a good job managing their money or they deliberately wrote me a bad check.  Either explanation was very concerning.  They, of course, assured me that they would never write a bad check and they have no idea what happened.  After I let they know what I found out at the bank, their responses shifted to “we are trying to get the money together.” Another red flag.  Because the third day of the notice fell on a weekend and I had to mail it, I needed to give them an extra day to respond (which they did not know).  They were grateful when they found out they had until the end of the day Monday.

On Sunday afternoon, I got a text from the wife and she said that the pastor of her church would be contacting me and had agreed to help them out.  I have worked with churches in the past, but this was another red flag since it indicated they did not have the funds available (despite telling me that the money should have been there.  Well, why isn’t it still there, then?) Before calling the pastor back, I clarified with myself what my goals were:

1. To get complete payment of move in funds as soon as possible

2. To serve the tenants with a 20 Day Move Out Notice soon after (I was thinking it was time to cut my loses and move on).

With these two goals in mind, I decided to listen to the pastor, keep my emotions in check and respond only to the questions he asked me.  The two things I learned in the conversation that were further red flags (yes, I have an entire color guard squad, at this point) 1.  She obviously had just met this pastor this morning at church 2.  She told him that she thought her husband must have spent more then she thought. The husband was conveniently “sick” and not at church (inconvenient for her is the fact that I know that she is the only person on the bank account).

I should be getting the check from the church in the next two days and then I have a few days to make my final decision about requiring them to move out. Clearly, I have already made my decision.  It is just a matter of being 100% firm with them in the face of all of their rationalization (and being willing to start the expensive eviction process, if necessary).

In summary, here’s my tenant survival guide for today:

1. Keep your emotions and personal affront in check

2. Look at the facts and listen for what is unsaid

3. Work the process (following the landlord tenant laws in your state)

4. Focus on your business’ best interests

5. Be patient with yourself about having to make hard choices, but be willing to take swift and decisive action (sometimes it is better just to rip the band aid off).

Good luck out there in the rental jungle!

 

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It Makes Me Nervous When You Say That

Today, I showed a one bedroom apartment to some potential tenants.  On the phone I had gotten the idea that there were some bumps in their past, but I always give people the benefit of the doubt and meet with them in person (unless they are a registered sex offender or some have some other major issue that does not meet my background screening criteria).  They called the day before to confirm the appointment, which was good, but then called in the morning to reschedule for two hours later.  It wasn’t a big deal to make the change, so I just went with it.

I asked them to bring their dog, a pit bull, so I could meet it.  The dog seemed friendly enough, but was constantly straining on the leash and seemed barely under the man’s control. Although they assured me that their little nieces can stick their hands in his mouth. Moving on, the dog goes back in the car and we go up to look at the apartment.

I always let people look around first to make sure the unit meets their needs and then I start to ask questions and go over the process.  The female in the couple starts to tell me that she “got in trouble” in the past.  A long time ago, when she was 18 and she is 23 now. (I think of a long time as 20 years, but that’s just me.)  She was in some kind of high speed car chase with a police officer, so my follow-up question was “Any drug charges?” Well, yes, and yes it was meth.  But lots of people will tell me that she is doing really well now, trying to turn her life around.

Rental History: They had lived in their current place for about a year and it was too expensive.  Also, her boyfriend has to do UA’s (urinalysis for drug testing) right down the street, so it would be really convenient for them to live here. His drug of choice-meth.

We moved on to source of income and she says she has worked for a few months at a bar owned by her friends.  And he keeps telling me he is on academic probation at the community college (but he says it like it is a good thing).  We talk about their credit and from their vagueness, I have a sense that there were probably a lot more issues there then they realize.

So all of this should make me nervous, and it does, but the thing that scares me the most is that he keeps saying “We will be really good tenants.”  Like about five or six times.  As his girlfriend is saying how he just got out of treatment, he is saying “We will be really great tenants for you.”  When I ask him about his criminal history, he says “We’ll be good tenants.”  He says it so many times that I finally say to him “It makes me nervous when you say that.”

I have rented to people with felonies and with other significant barriers and the ones who seem to do best are the ones who don’t beg for a chance.  The say what they did and what is different now and leave it at that.  I felt like this guy was trying to do some not-so-subliminal mind control hoping that the only thing that would stick in my brain would be “But they will be great tenants!” Needless to say, it didn’t work.

Rental Showing Packets

Create a simple packet for showing vacant units. It will make your life a lot easier because you won’t have to remember what to say every time.  And most potential tenants will be impressed by your organizational skills and appreciate having all the details about your property in writing.

The packet should have three parts:

  1. An attractive cover sheet that has all the vital details about the unit, security deposits, application fees, and your contact information,
  2. A one page sheet outlining your uniform background screening criteria,
  3. And the Rental Application and Release of Information Form. I use a separate release form so that I can fax that to employers/previous landlords without disclosing sensitive personal information about the potential tenant.

Here’s an example of the cover sheet I use at one of my apartment buildings:

Rental Packet Cover Sheet for Blog

Showing units can be a hassle, so I try to make it as easy for myself as possible. I just print out four or five packets, put them in a folder, and keep them in the bag that is always with me.  That way I am always ready for those unexpected appointments that seem to pop up.

Drama Detector

I have found that how a person behaves in the process of looking for an apartment usually mirrors how they will behave as a tenant. Sure, we all have bad days when we get stuck in traffic or get lost on the way to somewhere new.  I am not talking about those types of issues (besides, the good potential tenants will call you and let you know what is going on!).  I am referring to the person who calls to set up an appointment and then cancels and then calls again and then cancels.  Or when two members of the same couple call and don’t realize the other person has already talked to me.  Or my personal favorite is when some spends ten minutes on the phone with me asking me every conceivable question about the unit and then announces that their income is $700/month and the rent is $650.

Don’t ever work harder than a perspective tenant. Once I do a thorough job showing an apartment and explaining the application process, the ball is in the tenant’s court.  I never call a potential tenant back at that point.  It is their job to show up with a completed application and the screening fee.  If they don’t, I just move on to the next person. I have had people call and explain how they will need a letter from me or a form filled out so they can access a down payment assistance program and I say “I will be happy to do that for you once your application is accepted.”

I have had several occasions when someone shows up to look at an apartment and they spend a long time with me and seem very interested and then they even come back and look again with friends.  And they call me every twenty minutes asking a new question each time.  Then they text me and tell me they are going to bring their application in tomorrow.  And then I never hear from them again.

Filling a vacancy is all about non-attachment.  Do your job.  Be professional, courteous and friendly. Ask the potential tenant lots of relevant questions.  Explain how your business works.  And then let it go.  I know you need to fill that unit as soon as possible, but the harder you push; the more likely you are going to end up with a problem tenant on your hands.

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