Being caring and compassionate is great, but at the close of the day, you depend on that rental income to pay for some, or even all of your debts and costs. We're going to talk about some options that aren't always clear. This includes the right way to have an open and effective discourse with your tenants, an effective strategy that may work out well for both parties, as well as the best plan for securing the rent. This will give you the information and attitude you require in order to be profitable and successful.
If you have a renter that is past due on the rent, then sitting down with them and having an open and sincere discussion may end up being really constructive. Most tenants who are coping with fiscal issues will be very pleased to have a talk. In the bulk of cases, they feel guilty and burdened by not having the ability to pay the rent in good time. It's an uncomfortable situation for both parties. So it's critical for both the landlord and the tenant to get their thoughts and feelings out in the open. Keeping it all suppressed will only create more anxiety and stress. Provide your renter with the opportunity to explain their scenario. Permit them to tell you in their own words why they are unable to pay rent charges.
Perhaps because of the state of the economy, their company decided to downsize which suggested terminating their position. Or maybe they had to handle health concerns that drained their checking and saving accounts. It's also possible that their auto broke down and needed repairs. In order to get it fixed so they could continue traveling to work, they had to give their rent cash to the mechanic. These are all eventualities that will prevent your tenants from paying their rent. But as the landlord, you also have to make your position known. Tell them that you also have bills and expenses every month. And since the bank won't give you more time on the home loan payment, you aren't able to give them more time to pay their rent.
Before threatening them with eviction, and we only suggest that as a last possible resort, see whether their cashflow difficulty is short-term or long term. If they recently lost their job, or had to cope with other bills and costs, it may only be a temporary problem. If that's the case, and their payment history has been solid up to that point, it might be silly to eliminate a good renter who dropped into a bad situation. Alternatively, if the difficulty will take more than a few weeks to solve, then your best plan of action is to get them out of the rental unit. You can't have a tenant living rent-free for an extended period of time. In order to do that with the absolute minimum amount of drama possible we suggest making the renter an offer that they can't refuse.
One attractive offer is usually 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 follow any back rent. You also agree not to file a legal action or eviction papers. Going the legal route for removing a tenant can be timely and costly. It will also cost you seriously more than the back hire they owe you usually. So it's one of those scenarios where you're better off simply cutting your losses. For the renter, they may also avoid having an eviction on their credit report. This is great because an eviction will destroy their FICO score for a few years. Once that occurs, it can be incredibly difficult to do anything in life which requires a background check for approval.
Most tenants experiencing financial problems will jump at an offer like that. Even if it's not what they want to do, it'll keep them out of court and protect their credit. If they are still on the fence , however , you can sweeten the bargain by employing the "Cash for Keys" Technique. This is when you offer the tenant a specific amount, typically a couple of hundred bucks, in exchange for the keys to their unit. It might not seem like rather a lot , however it might truly help them out with gas and moving costs. This may be the honest to goodness difference between the renter accepting or rejecting your offer. But at the close of the day, when talking about dealing with a tenant who is behind on the rent, communication is imperative!
Talk about the problem in order to get 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 growing markets around the United States. "My Renter Stopped Paying the Rent - What Can I Do?" was originally published on our Real Estate Investing Blog.
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