Non-payment of rent is a rather serious problem. It's one of those predicaments that places the owner in a hard situation. Moral and ethical values are often challenged by the necessity to collect the rent. If your only two choices are to evict a family that has fallen on tough times, or to go weeks or months without getting paid, the correct choice isn't always apparent. Most landlords have a conscience and really care about the safety and contentment of their tenants. So the challenge is finding a solution that works out well for your tenant, and also for your net result.
Being caring and compassionate is great, but at the day's close, you depend on that rental earnings to pay for some, or even all of your bills and expenses. We're going to talk about some options that aren't always apparent. This includes ways to have an open and effective discourse with your tenants, an efficient technique that will work out well for both parties, as well as the best plan of action for securing the renting costs. This should give you the knowledge and mindset you need to have in order to be profitable and successful.
If you've got a tenant that's past due on the rent, then sitting with them and having an open and earnest discussion may end up being very constructive. Most tenants who are coping with financial issues will be more than happy to have a conversation. In the majority of cases, they feel guilty and weighed down by not having the ability to pay the rent in good time. It's an unpleasant situation for both parties. So it's critical for the landlord and the renter to get their thoughts and feelings out in the open. Keeping it all pent up will only create more anxiety and stress. Provide your renter with the chance to explain their present position. Permit them to tell you in their own words why they can not pay the rent.
Perhaps because of the state of the economy, their company made a decision to downsize which meant terminating their position. Or perhaps they were forced to deal with health concerns that drained their checking and deposit accounts. It's also possible that their car broke down and needed repairs. To get it fixed so they could continue going to work, they had to give their rent cash to the mechanic. These are all situations that will prevent your tenants from paying their rent. But as the landlord, you also have to make your position known. Make sure they know that you also have bills and costs each month. And since the bank won't give you more time on the mortgage payment, you can't give them more time to pay their rent.
Before threatening them with eviction, and we only suggest that as a last possible resort, see if their cashflow difficulty is short term or long-term. If they latterly lost their job, or had to handle other bills and expenses, it may only be a short lived problem. If that's the case, and their payment history has been solid up to that point, it might be silly to get rid of a good tenant who slid into a bad situation. Alternatively, if the problem will take more than a few weeks to solve, then your best course of action is to get them out of the rental unit. You can't have a renter living rent-free for an extended time period. So as to do that with the least amount of drama possible we suggest making the tenant an offer that they can't refuse.
One interesting offer will be to give the tenant a 5 to 7 day window for packing, cleaning, and moving out of the unit. And as a reward for their cooperation, you agree not to chase any back rent. You also agree not to file a legal action or eviction papers. Going the legal route for removing a renter can be expedient and pricey. It'll also cost seriously more than the back rent they owe you usually. So it's one of those eventualities where you're much better off simply cutting your losses. For the tenant, they'll also avoid having an eviction on their credit score. This is great because an eviction will destroy their FICO score for several years. Once that happens, it can be incredibly difficult to do anything in day to day life that requires a creditworthiness check for approval.
Most tenants experiencing finance problems will jump at an offer like that. Even if it's not what they would like to do, it will keep them out of court and protect their credit. If they are still on the fence nevertheless , you can improve the bargain by employing the "Cash for Keys" Methodology. This is when you offer the tenant a specific amount of money, generally a few hundred bucks, in return for the keys to their unit. It may not appear like a good deal , however it might actually help them out with gas and moving costs. This will be the real difference between the tenant accepting or rejecting your offer. But at the day's end, when talking about dealing with a renter who is behind on the rent, communication is critical!
Discuss the problem in order to discover the best solution.
[For more articles like this please visit our Rental Property Investing Blog.]
Being caring and compassionate is great, but at the day's close, you depend on that rental earnings to pay for some, or even all of your bills and expenses. We're going to talk about some options that aren't always apparent. This includes ways to have an open and effective discourse with your tenants, an efficient technique that will work out well for both parties, as well as the best plan of action for securing the renting costs. This should give you the knowledge and mindset you need to have in order to be profitable and successful.
If you've got a tenant that's past due on the rent, then sitting with them and having an open and earnest discussion may end up being very constructive. Most tenants who are coping with financial issues will be more than happy to have a conversation. In the majority of cases, they feel guilty and weighed down by not having the ability to pay the rent in good time. It's an unpleasant situation for both parties. So it's critical for the landlord and the renter to get their thoughts and feelings out in the open. Keeping it all pent up will only create more anxiety and stress. Provide your renter with the chance to explain their present position. Permit them to tell you in their own words why they can not pay the rent.
Perhaps because of the state of the economy, their company made a decision to downsize which meant terminating their position. Or perhaps they were forced to deal with health concerns that drained their checking and deposit accounts. It's also possible that their car broke down and needed repairs. To get it fixed so they could continue going to work, they had to give their rent cash to the mechanic. These are all situations that will prevent your tenants from paying their rent. But as the landlord, you also have to make your position known. Make sure they know that you also have bills and costs each month. And since the bank won't give you more time on the mortgage payment, you can't give them more time to pay their rent.
Before threatening them with eviction, and we only suggest that as a last possible resort, see if their cashflow difficulty is short term or long-term. If they latterly lost their job, or had to handle other bills and expenses, it may only be a short lived problem. If that's the case, and their payment history has been solid up to that point, it might be silly to get rid of a good tenant who slid into a bad situation. Alternatively, if the problem will take more than a few weeks to solve, then your best course of action is to get them out of the rental unit. You can't have a renter living rent-free for an extended time period. So as to do that with the least amount of drama possible we suggest making the tenant an offer that they can't refuse.
One interesting offer will be to give the tenant a 5 to 7 day window for packing, cleaning, and moving out of the unit. And as a reward for their cooperation, you agree not to chase any back rent. You also agree not to file a legal action or eviction papers. Going the legal route for removing a renter can be expedient and pricey. It'll also cost seriously more than the back rent they owe you usually. So it's one of those eventualities where you're much better off simply cutting your losses. For the tenant, they'll also avoid having an eviction on their credit score. This is great because an eviction will destroy their FICO score for several years. Once that happens, it can be incredibly difficult to do anything in day to day life that requires a creditworthiness check for approval.
Most tenants experiencing finance problems will jump at an offer like that. Even if it's not what they would like to do, it will keep them out of court and protect their credit. If they are still on the fence nevertheless , you can improve the bargain by employing the "Cash for Keys" Methodology. This is when you offer the tenant a specific amount of money, generally a few hundred bucks, in return for the keys to their unit. It may not appear like a good deal , however it might actually help them out with gas and moving costs. This will be the real difference between the tenant accepting or rejecting your offer. But at the day's end, when talking about dealing with a renter who is behind on the rent, communication is critical!
Discuss the problem in order to discover the best solution.
[For more articles like this please visit our Rental Property Investing Blog.]
About the Author:
Marco Santarelli is an investor, author and founder behind Norada Real Estate Investments รข€" a nationwide property investment firm providing turnkey rental property in healthy markets around the U. S.. "My Renter Stopped Paying the Rent - What Can I Do?" was originally published on our Real Estate Investing Blog.
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