My Renter Quit Paying Rent-What Should I Do

by Marco Santarelli

Non-payment of rent is a serious problem. It's one of those predicaments that places the owner in a hard situation. Moral and ethical values are sometimes challenged by the need to collect the rent. If your one two choices are to evict a family that has fallen on hard times, or to go weeks or months without getting paid, the right choice isn't always apparent. Most owners have a conscience and genuinely 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 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 — 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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The Best Property Management Is Free

There are many property management companies in the marketplace today. All companies have their own charges and fees that you must incur to contract their services. The truth is that the only property management companies that you should hire with are the companies that are FREE.

I know everyone believes there is nothing that is "free" and this is true in general but not from every perspective. When I refer to Free property management, I am talking about a property management company that provides added value to the properties that it handles. A value that would be unlikely to be reached by the owner managing the property themselves. Let's examine the value of good property management. Value can be expressed in many terms such as equity, lower turnover, higher rents, lower maintenance costs and most importantly, time. Time is the most important asset that exists. Simply put if you had all the money or goods in the world but you had no time to enjoy them, you don't have much.

Many property owners have full time jobs, family obligations, and little time to manage the property they own to maximum efficiency. Some of these owners work long hours in an attempt to "save" money by not hiring a property manager. After we examine this practice we will see that in most cases the property owner is actually losing money, and more importantly losing time.

The old saying "Time is money" will be a cornerstone of our analysis. Let's say the property owner in our example is an employee at XYZ Corp and is paid $20 an hour. A general price for property management is somewhere around 10% of collected rent. So we will pretend this owner owns a two family rental property and each unit rents for $700. That means the fee for professional management of this property will be in the area of $140 a month (10% of 700= $70 per unit , times 2 = $140). That equals 7 hours of income for the owner. So if managing this property takes more time than 7 hours a month, or the management of the property interferes with the work of the owner than the owner would actually be better off with a professional property manager.

The time analysis shows that there is not a lot of money to be saved by managing the property yourself, especially if you could use your time towards work you are paid for. However, the time analysis does not show the complete benefits of property management. If property management was easy and predictable there would be no property management companies. We all know that real estate repairs can pop up seemingly out of nowhere and late tenants can turn into evictions at any time. The main cost occurs during these times, when you need to evict tenants, repair the property, advertise and attract new tenants, and lease the unit to get rental income again. These are the times when property owners with other obligations really lose time and money. You see if a property owner is unable to manage the issues efficiently and loses just one month of rental income, they would have lost enough money to pay for close to a full year of professional property management in many cases!

Good property management will allow you more time to create income or spend time with family and friends. More time is a good enough reason to hire a property manager but that is not the end of the benefits. In addition efficient management will be able to pass savings on to the owner for routine repairs and maintenance through network contractors and vendors. They will be able to make smooth transitions from vacancies to new qualified tenants and maximize Cash flow. So I will conclude by urging property owners with other obligations to strongly consider professional property management, because sometimes the cost of trying to save money is just too high.

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Why Savings Money Is Important To The Rental Property Investor

Real estate investments, particularly in rental properties, have always been considered one of the best ways to accumulate wealth. Rental property investment, given the prevailing market, offers encouraging potentials in terms of return on investment, but it likewise entails costs, far above general expectations. The rental property business requires that an investor should be very dedicated and familiar with the nitty-gritty aspects of the business.

Most investors who are entering the business for the very first time generally don't give much thought to the innumerable expenses associated with rental property investment and real estate, on the whole. In the real world, you need to have considerable savings as back up funds before jumping in and in anticipation of surprise expenses that ordinarily accompany Metrics rental property management.  

A reason why it's advisable to have at least a total of half a year's worth of mortgage payments in savings ahead of investing in rental property is that tenants are not always predictable. It is common for a unit to end up unoccupied, and will need some repair or renovation before it can be occupied again; in this case there is cost of renovation involved as well the cost of an empty rental unit. Major damage caused by tenants is unusual, but it's a likelihood that you should not ignore.

A landlord is also likely to encounter non-paying tenants and if this happens, it usually takes some time to complete the eviction process to make them vacate the property and the unit becomes available for the next tenant. Although they are liable to pay you their outstanding balance on the lease, you can't be certain they can or will actually pay you what they owe. This risk, while it can be minimized through careful screening of likely tenants, has been experienced by even the most experienced landlords.

As well you need to have some money saved up for any unforeseen emergency. Septic tanks are likely to back up, appliances might suddenly stop working, or heating and cooling systems can break down. Pipes that get frozen can cost a lot of money to cleanup or repair, and acts of nature can even cost you big time. With enough savings money, you can immediately fix any broken item/items in the property, thus keeping it safe and in working order for the protection of your tenants as well. Check out the link to get more information on rental property Supplies.

Saving at least six months worth of mortgage payment goes beyond making sure you get to pay your mortgage promptly, it's also about being prepared to face any problem you may encounter at any time. Rental property management can indeed be very risky compared to regular property ownership and you must be prepared to take on anything that comes your way promptly, efficiently, and most importantly, financially.

Getting Facts About Rental Property Investing And Management

Effective rental management should be observed if you want to get more profits from your rental properties. You should be sure that your property is in excellent condition so that others would like to rent it. Other people may say that rental and property management is simple but there are a lot of things that you need to do for it to be successful. There are professional management companies that could help you managing your properties if you are not experienced but if you know how to run your own properties, then, you may simply decide to work for it.

As a property owner, you have the responsibility of keeping your place clean before the occupants arrive. Since you give due care to your property, a lot of people would become interested to come to you and ask you about the rent. Since you show the occupants how you take good care of your properties, then, they will surely be cautious. Before you allow any Tenant to get inside your property, you should orient them regarding the proper use of your items so that they will never make any damage, glitch, and let some of your appliances and water sources malfunction. Take snapshots to the important areas of your house so you could keep them as your proofs that your property is really in a good condition before you let somebody in.

A part of your responsibility is to know the concerns and requests of your occupants. For the property to improve a lot, you need to make some repairs and do inspections as well.

When the occupants decide to move to another place, you need to ensure that no damage to property has been done and the entire place is clean and of good condition. The tenants are required to pay you additional amounts if you find some parts of your properties damaged. Having your rental properties protected very well would allow you to take many investment profits.

You will earn peace of mind if you will decide to hire professional management experts. These people will surely conduct essential managements. These people are well-trained in terms of handling the collection of rents, finding good tenants to occupy your places, and ensuring the maintenance of your properties.

If you do not have the skill in managing a property, you would experience difficulties in getting maximum  Financial profits. You need to be knowledgeable and skillful in line with managing and maintaining rental properties. Find the key people to help you handle the business if it is your first time to manage rental properties. Find them now.

Investing In Rental Property

Rental property investing is one of the businesses today that is growing in popularity and if you are a businessman who is interested in this line of business, then you have to remember that you first have to come up with a strategy for a plan and you can do this by following three fundamental steps as discussed in this article.

First, it is important that you first determine the aims and objectives that you want to attain in becoming a landlord and the time property in which you plan to manage the strategy. As an example, one objective would have to be possessing the property for a few, several years then putting it out on the market for sale. It is also possible that you are looking into long term holding of the property and making it such that you would be able to benefit from it through rental expenses paid by Apartment tenants.

Looking at the example objectives stated above, you would be able to observe that the options that you have for your aims would ultimately be dependent on the total sum of capital that you have on hand and you would expect from the bank loans that you are applying for. If your capital is comparatively large and you are confident that you would be able to take it back when you execute a short term rental property investment, then by all means, do so but if your capital is not that much and you really need to achieve returns at a quick pace, then it is more beneficial for you to rent out the property and obtain tenants or it.

The next step that you have to do after this is to identify the type of property you wish to invest in. This would depend on your aim to start either on a small scale or a big scale. In starting as a small scale investor, which is generally the choice of many, you should begin by putting your investments on properties which do not measure above four units but already with multi-purpose functions.

The last step then that you have to do in rental apartment investing is to select which part of your local area you want your property to be located. You should pick an area that is really close to your home, ideally, a 30 minute drive from your house since you do not want to waste your time going to and fro the place so that you can periodically watch over the property or manage the tenants that are living inside your property as their landlord and moreover, you would be able to save more in transportation expenses if you can find a place or area which is close to your home so it is definitely a benefit if you take the time and effort to search for a property with such characteristics.