Too Much Sympathy Can Kill Your Rental Business

“Moderation in all things, especially moderation.”

Ralph Waldo Emerson

Over the years as a Charlotte property manager, I’ve gotten a lot of calls from landlords who tell some version of this story:

We had placed a family of tenants into our rental home and everything was going great!  They paid on time for the first 8 months and were really a joy to interact with.  I mean, Brett, when minor repairs were needed around the house, they took care of it at their own expense- they would just call and ask if it was okay with us if they made the repairs!  They really were a beautiful family; you should just see their youngest daughter, Cybil- she reminded me of my granddaughter!  But, I digress…

The problems started when they were late in July.  Apparently there was some mix-up with accounting at their work and the paychecks weren’t cut correctly that month.  I was okay with it (things happen); they wound up paying on the 15^th that month and I didn’t charge them the late fee that I could have.  They assured me this was a one-time thing and they wouldn’t be late again. 

August 1^st came and went and there was no rent.  When I called to ask about it, I started getting voicemail.  Two weeks went by and I was wondering if I needed to start thinking about evicting them, but then they returned my call.  They said their car had broken down which left them without transportation to work, so they had to choose to pay for the car repair instead of rent (you can’t earn money to pay rent if you can’t get to work).  They said that was also why they didn’t call me back immediately; they didn’t have the funds to pay their cell phone bills either.  After apologizing profusely, they asked if they could wait until the 1^st of September to pay.  “Of course,” I said.

September 1^st came and we got a check for about a quarter of the rent (for August).  They said the rest would come from the paycheck on the 15^th.  When the 15^th came, they called to explain that it was either paying back rent or paying the light bill, and the children couldn’t live without heat.  And they also had to pay for Cybil’s dance recital which she had been looking forward to all year.  “Our kids need to come first.”  Then they told me what a great landlord I was and said they were so appreciative of my understanding.

Brett, this story goes on, but I’ll bottom line it for you.  The tenants are 5 months behind and I am beside myself and out of patience.  I wish they would just get caught up!  Where do I go from here?

First of all, there is nothing wrong with being a nice, understanding person.  We have enough jerks in the world.  And what’s done is done; it’s a sunk cost and it’s time to deal with the facts on the ground.

If the tenants are 5 months behind, it’s time to evict.  There is no way that they can get caught up at this point.  Find an eviction attorney (ask a property manager for a recommendation if you need one) and get the ball rolling ASAP.  In NC, you could be looking at 6-8 weeks if the tenants prolong the process (and possibly longer if they know how to play the game).  You need to get your house back and stop the bleeding.

A caveat- I don’t ever want to evict anyone.  It’s expensive, it’s time-consuming, and it is a lose-lose-lose proposition (owner/property manager/tenant).  At lease signings, I communicate to tenants that if they are having payment issues (life happens), to contact me immediately so we can work something out.  Whether that means a payment plan, negotiated vacancy, or something else, we need to talk it out and negotiate a workable plan.  We’ve worked things with tenants in the past that has made the best out of a difficult situation.  Everybody needs a place to live.

But we’ll never get to 5 months of non-payment.  It just can’t happen.  Sympathy, at that point, turns into taking advantage of home owners, which isn’t fair.

Though every tenancy situation is different, there are a few non-negotiable parameters:

1.  Non-payment can never get past 30 days.  That’s 2 pay periods and past the point of return for most tenants.

2.  If a payment or negotiated vacancy plan is agreed upon, it is set in stone.  If the plan is breached (for any reason), eviction must be filed. 

3.  Don’t take it personally.  Rental properties are a business and sometimes business stinks.

I am all for sympathy.  But with rental homes, sympathy can kill your business if not used with moderation.

Brett Furniss is the head property manager of BDF Realty (Charlotte Residential Property Management), the trusted real estate advisor for Charlotte landlords & Home of $100 Flat Fee Property Management.   BDF Realty utilizes their innovative Pod System for exceptional customer service in residential property management, home repairs, and home sales for single-family homes, Uptown condos, and town homes in the Charlotte-Metro Area.  Contact Us Today!

“When To Evict Or Not To Evict”, That Is The Question

"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 1^st and the 15^th).  Filing for eviction prior to the 16^th day of the month doesn’t allow you to get those funds.  So I believe filing for eviction on the 16^th is the earliest point in which it makes sense to do so.

If they aren’t able to make good by the 16^th, 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 1^st 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 1^st, 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 landlords & Home of $100 Flat Fee Property Management.   BDF Realty utilizes their innovative Pod System for exceptional customer service in residential property management, home repairs, and home sales for single-family homes, condos, and town homes in the Charlotte-Metro Area.  Contact Us Today!

Charlotte Property Management Weekly: With Obama & Landlords, You Can’t Legally Withhold Payment

Taxpayer: “This country is going down the drain quickly with no end in sight! Obama is proving himself to be a bum like the rest of them. “Change to believe in”? I’m laughing too hard to retort. You wanna know what? I’m not funding this incompetent government anymore and will not be a party to it. I’m not paying taxes until this country is fixed!”




Tenant: “This house is killing me! This week the faucet broke. A month before it was the air conditioner. It took 48 hours for the landlord to get the maintenance guy to fix it in 98 degree heat! 98 degrees my family put up with! My sweet daughter, Abby, must have gone through at least 20 popsicles. “Daddy, why is it so hot?” she quietly bleated as she read “Seventeen” Magazine with a cold washcloth lain across her forehead (with the few remaining ice cubes that our (too small) freezer could muster). The landlord should be paying us to live in this house! I’m certainly not paying him this month! Next month’s payment is “under review” too; we’ll see how the faucet repair goes.”



Obama and (diplomatic and highly educated) landlords: “I feel your pain! Once, my radiator broke in my dorm room at Harvard and it just wasn’t fair that it took over 72 hours to repair! The economy is weak and jobs are scarce. Injustices like this need to be made right! But… like with all things that are dearest to us, these things sometimes take time. In the meantime, if you don’t pay me, your house will be taken away.”



The point of these fictitious quotes is that tenants and American citizens do not have to like what is going on with their house or country, respectively. But they still have to pay.



There seems to be a common misconception that home repairs and rental payments are linked. Legally, they are not. If the house is falling apart, the lease still stands. If the country is (hypothetically) suffering high unemployment and being financially run into bankruptcy, citizens still have to pay their taxes. It’s the law.



However, this is not an open invitation for landlords to not complete necessary repairs in a timely fashion. Slow and incomplete repair work makes tenants very unhappy; keeping tenants as happy as possible is paramount to having them stick around! Plus, there are other painful avenues unhappy tenants can take to legally have a home that is functioning to building code. It just can’t happen through rent abatement.



But I’ve seen this played out. Tenants go to court thinking that repairs not being done to their satisfaction will get them a free pass from eviction from a judge. This is just not the case. They find out quickly that their repair issues (even if extremely legitimate) are a moot point in an eviction hearing; these arguments are not heard because it’s not the place for them to be arbitrated. In an eviction hearing, it comes down to one question, “Do you have payment or proof of payment?” If the answer is “yes”, the tenant wins. If the answer is “no, but”, they don’t.



Rental payments and repair work are two separate issues. Tenants are obligated to pay by contract. That’s it.



You don’t have to like Obama, but you don’t want to try not paying him!



Brett Furniss is the President & Owner of BDF Realty (“Charlotte’s Most Innovative Property Management & Investment Company”), and Rent-To-Sell Realty (“When You Need a New Solution to Sell Your Home”) which specialize in rent-to-own (lease options) and rent-to-sell homes. His newest book, A Real Estate Agent’s Complete Guide to Representing Rent-To-Own (Lease Option) Tenants (Delight Clients, Fill Vacant Homes, and Earn $2,250* Upfront! (*Minimum!)

Charlotte Property Management Weekly: How To Handle Evictions And The Reasons To Avoid Them

Handyman: I was over working on your property and your tenant seemed to be really happy.




Owner: You would be too if you were living rent-free.



When tenants don’t pay, it is not good for anyone. Inevitably, things get put in motion. The owner gets upset and wants to know why they haven’t gotten their money. The property manager is spurred to issue threats to lower the hammer on non-payers. The tenants typically try to go “dark” (incommunicado), as Jack Bauer (and those in the spy game) would say.



I think of the Tupac song that I was mistakenly listening to a few years back. It talked about the deep pride he felt about having the ability to pay the rent. I believe that people do want to pay, but they can’t give what they don’t have. Life happens and things cost money. If the rent is not getting paid, it is never the only expense that is being neglected.



Unfortunately, there really isn’t much to do as a landlord but file for eviction if the rent money doesn’t come in. However, due to the costs, stress, and actual time, it is something o be avoided if at all possible! There are two common avoidance techniques that have minimal success:



1. Payment plans to catch up on rent: I’ve been burned on these! If the tenant is on a fixed income and is living paycheck-to-paycheck, there is really no way for them to get out of the hole. The plans seldom work. I really have to have history with the tenant and think highly of their character to entertain these.

2. Negotiated exits: this allows the tenant to leave without an eviction and saves the owner money for the court stuff. The only problem with this is, “How does the tenant have money to pay another landlord when he’s not paying you?”



So, how does one file for eviction as a private landlord? Well, in NC, this is how a normal eviction goes:



1. Make sure the tenant always receives a rental statement with what’s owed on the first of the month (this is your “demand for rent” letter). We e-mail them.

2. The first day evictions can be filed is the 11th of the month. You’ll need to go down to the courthouse with a copy of the lease, a few stamped envelopes, and cash. Ask someone where evictions are filed, go there, wait in line, fill out the paperwork and envelopes, and give these items to the clerk.

3. Once you receive the nod from the clerk, exit stage right (or left); just get out of there. Hanging out at the courthouse isn’t that fun. Or cool (unless you’re a high-priced lawyer working for Lockhart-Gardner).

4. Wait for the eviction court date to arrive in the mail in one of the envelopes you provided. The show up to court on that day 20 minutes early to fill out the paperwork that you’ll need for the trial. Do what the judge says. You should “win”.



You are now thinking, “Yeah! It’s over! I won! I knew I should have forgone mortuary school (stupid “Six Feet Under”!) and been a lawyer instead!” Uh, no. Not quite. The next steps which cost more money and take a month to complete are as follows:



1. Wait 10 days to file a “Writ of Possession”. This can be accomplished at the same desk at the courthouse. Please bring a new stash of stamped envelopes, cash, and the eviction notice you received in the mail from the court. You’ll repeat basically the same process for the eviction in step #2 with the new “Writ of Possession” paperwork.

2. Get out of there. Don’t mingle. Your head needs to be down and a beeline made for your escape vehicle. Pretend to be talking on your cell phone while speed walking. Wipe profusive sweat off of your brow. Wear a hood to cover your head, if weather appropriate.

3. Wait for the sheriff to call you to let you know when they will be at the house to change the locks. This takes a week or two. After they call, you’ll need to call a locksmith and schedule them to meet you at the house when you meet the sheriff.

4. Show up and be really uncomfortable. Watch the sheriff remove tenants from the home and the locksmith change the locks. Give the locksmith cash after he hands you the new keys.

5. The tenant now has 10 days to remove their things. They will call you to schedule a time for you to let them in the house. If their things are not removed within 10 days, you are required to store anything of value at your expense if they want it later (because you’re so nice (!) and it’s the law).

6. Begin the process of fixing up the house to get it in market shape.



I hope this is enough evidence showing that evictions are not desirable! To avoid these costly evictions, utilize thorough tenant screening procedures upfront!



Brett Furniss is the President & Owner of BDF Realty (“Charlotte’s Most Innovative Property Management & Investment Company”), and Rent-To-Sell Realty (“When You Need a New Solution to Sell Your Home”) which specialize in rent-to-own (lease options) and rent-to-sell homes. His newest book, A Real Estate Agent’s Complete Guide to Representing Rent-To-Own (Lease Option) Tenants (Delight Clients, Fill Vacant Homes, and Earn $2,250* Upfront! (*Minimum!)

Charlotte Property Management Weekly: Talking To Your Tenant Will Cost You Money

“Talk is Cheap.” (Keith Richards)




“Talk can be expensive!” (Property Manager)



There are “hands-off” owner clients. And then there are the “hands-on” varieties.



The “hands off” clients just want to know the rent money is in their account on the day they expect. If there are repairs that are going to cost them money, they want to know that too. They just want the bare bone facts with no fluff. That’s fine.



Then there are the “hands-on” owners. They want to be continually updated if there is any news at all about their properties. “What repairs are needed now?” “Is the tenant caring for the lawn?” That’s fine. “How did Felicia do on her math test last Friday?”



What??? Who’s Felicia?



As I pull the property folder and scan through the lease, “Felicia” is listed as an 8-year old occupant. Unfortunately, no math test scores were listed. Darn!



As a property manager, we work for the owners. However, we want to have good relationships with our tenants as well. When executed properly, we serve as a cordial buffer between them. That is a valuable service!



However, we can’t get too friendly with tenants, as much as we’d like to with many of them. We don’t work for them. If we get involved talking about their families and what’s going on with Felicia, we can’t do our jobs effectively. For example, what happens when they don’t pay rent and we need to evict them? The relationship gets really personal; personal to the effect of your “friend” calling you screaming that you’re heartless, they can’t understand why you would evict them when you know she lost her job, and how we felt about Felicia being homeless? Yeah, that’s not a good conversation.



Any decent property manager (with any length of experience) quickly learns to keep a professional distance so this type of scenario doesn’t happen. Dealing with these types of situations where bad things happen in our residents’ lives is part of the job (not a good part!). But we know how to deal with them.



This is where the “hands-on” owner sometimes gets in trouble. They decide to contact the tenant in their home and forge a bond. Instead of relying on the property manager for home updates, they go straight to the source. And this is where talk leaves the “free zone” and becomes expensive. Here are a few examples:



1. The owner calls the tenant regularly and asks how things are going. The tenant brings up any minor issue with the home. The owner feels compelled to ask us to send a repairman there.

2. The property manager asks for a rental price increase. The tenant calls the owner directly and makes their case on why they can’t afford it. The rent stays the same.

3. The tenant is late paying rent and the eviction is scheduled to begin. The tenant calls the owner and swears to pay soon. The owner asks us to call of the eviction. This usually doesn’t work out and the owner loses more money.



My favorite all-time story on this topic is the owner who called us about rescinding a rental increase planned for his tenant. When we asked why he didn’t want the extra money, he said:



“It’s not worth it to me to hear him griping night-after-night about it. To even it up, he’d just make me pick up more rounds at the bar anyway.”



When owners talk to tenants, it takes their relationship from a business to a personal one. And it’s tough for most to say “no” to a friend, even when it means taking a financial loss.



So save some money and resist the urge to talk to your tenant. Rest assured, Felicia’s very capable math teacher is doing her job!



Brett Furniss is the President & Owner of BDF Realty (“Charlotte’s Most Innovative Property Management & Investment Company”), and Rent-To-Sell Realty (“When You Need a New Solution to Sell Your Home”) which specialize in rent-to-own (lease options) and rent-to-sell homes. His newest book, A Real Estate Agent’s Complete Guide to Representing Rent-To-Own (Lease Option) Tenants (Delight Clients, Fill Vacant Homes, and Earn $2,250* Upfront! (*Minimum!)