"I'll
gladly pay you Tuesday for a hamburger today…"
Wimpy
“I will have
the rent for you next week- guaranteed!”
Late Tenants
As a property
manager in Charlotte, collecting rent is obviously one of our main
functions (in my opinion, the most important function!). Our primary job is to create the most
favorable ROI for our clients; we need to be taking rent in for this to be a
reality. When we are collecting rent on
time and in full, all things are typically good with our owner clients. If a tenant is not paying, things aren’t so
grand. And we like things to be grand
with our clients!
When a tenant doesn’t pay, eviction is always a last resort. It’s costly, time-consuming, and
stressful. And, to boot, the tenant will
usually tell you they are going to have the money for you next week! The mind games begin. You can surely hold out until next week to
get paid!
But then next week comes and there is a new excuse. “My paycheck was shorted!” That’s one when you don’t feel that badly
about going the eviction route. But when
the tenants pull out the big guns like, “My mother is dying and I had to use
the money for the rent to fly out to see her one last time (the last time I saw
her 2 years ago, we said things we both regret- I couldn’t leave it like
that). I had no choice… But I get a bonus next week from work and
will pay you then!” That’s tougher.
We get calls from home owners who have tenants who haven’t
paid for 6 months. Once they get that
behind, they’re never going to get caught up.
So what’s the answer?
At what point should eviction be filed?
First of all, bad things occur and many tenants are going paycheck
to paycheck. When a big expense (aka
major car repair) happens, the money just isn’t there for that and the rent.
But most people get paid twice a month (the 1st
and the 15th). Filing for
eviction prior to the 16th day of the month doesn’t allow you to get
those funds. So I believe filing for
eviction on the 16th is the earliest point in which it makes sense to
do so.
If they aren’t able to make good by the 16th, the
next factor to look at is the tenant’s income from when you did the original
tenant screening. How much money do they
make? Is it even possible for them to
come back from being a month overdue (their next paycheck)? For some people, it’s just not possible.
Note: This is
something I would strongly recommend paying strong attention to in the tenant
screening process. Watch the income to
rent ratio- when it is too high, it makes you highly susceptible to negative
events happening in a tenant’s life. You
ideally need to be less than 33% (examples: $3,000 monthly income and
$1,000/month rent = 33% ratio. $4,000
monthly income and $1,000/month rent = 25% ratio. 25% ratio would be much better!)
If their income is too low, eviction should be filed right
away. However, if they make enough money
to pay the rent by the 1st of the following month and then get
caught up sometime later that month (and express an earnest willingness to do
so), then I’d wait. It could be worth
the gamble.
But set hard, no-excuse deadlines at this point. If you don’t have all of the money by the 1st,
you need to file for eviction to protect yourself. After a month goes by with no rent, you can’t
wait any longer (no matter how good the excuse is).
If the tenant really is going to have the money in another
week like they claim, they can bring it to court and stop the eviction. If not, you need to move on and take the
loss. There is really no excuse to go
multiple months without full rental payments.
Timing evictions for maximum ROI is a judgment call. But going past 30 days is a dangerous and
usually unfruitful proposition!
Brett Furniss is the President & Owner of BDF Realty (Charlotte Residential
Property Management), the trusted real estate advisor for Charlotte
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