Every Tenant Has A Story

Every tenant has a story to tell. Especially when it comes to trying to get into a rental, or not being able to pay the rent. How do you deal with it as a landlord?

Some landlords have been burned a lot, or have heard the war stories and have become incredibly cynical. They don’t have any patience for tenants, no matter what the story. They never give them the benefit of the doubt.

It is a shame when some people’s passion for helping others that got them into this industry burns out and just becomes replaced with cold greed. It’s almost understandable, yet it’s possible to have some balance.

You don’t want to be taken advantage of. You have to run your business profitably, or you won’t be able to help anyone else. So, how do you manage it?

Two Types of Tenants

There are two distinct types of tenants. On the one hand, there are the ‘professional tenants’. Those whose purpose in life seems to not only to get free rent forever, but to take as much as they can from landlords on the way. They’ll strip your properties, hit you with malicious lawsuits, and tie up your units.

Others though, truly run into hardship situations. Sometimes out of no fault or control of their own.

It can often be hard to tell the difference on the surface and when speaking to them. I believe if you want love, you have to give love. That can certainly apply to how you treat your tenants. Though you should pay attention to the facts too.

I see renters like the thousands of homeowners we have worked with on non-performing loans. They just need a place to stay and to keep a roof over their family’s heads. They mostly try to do the best they can. Though they can run into employment and cash flow issues.

Avoiding the Professional Tenants

I like to make it as easy as possible for good tenants to get into properties. And there are ways to streamline the application process and offer lease deals, without throwing away common sense and basic protections.

We look at a prospective renters’ history for the last 3-4 years. Specifically we watch for evictions. When it comes to professional tenants trying to play you, it typically shows up on background checks. You’ll see the clues.

We like to get as much of the person’s story upfront on application so we can gauge their strength, willingness to pay, and have some tools when there is an issue.

Mitigating Hardship & Lost Rents

When tenants do fall late on rent, we like to try to work with them and help as much as possible.

We align with a lot of churches with programs for tenants with hardships. They often help them with several months of rent to help them stay housed and get back on track.

There is also insurance for landlords that cover gaps in income from renters. So, just because the tenant is behind, doesn’t mean you have to lose. If you have government tenants on subsidies, then you can typically count on the government to cover it. Cash tenants who rely on jobs, the economy and their ability to show up and to work tend to have the most problems.

Lot of states are very pro tenant. If you’re in one, you may have no choice to find programs to keep vacancy rates low, keep tenants in place and try to attempt workouts before being heavy handed.

Still, we have to answer to our investors. We all have to answer to someone, even if it is our families or the other people that could be helped if we did a better job at managing opportunities. So, we try to help renters, but have to start eviction process at some point if they don’t get back on track.

Thankfully, in many cases, we can workout it out. If they give us a date when they will move out, and leave the property in good condition, we typically won’t chase them for debt. It’s not worth it.

When these things happen, evaluate what went wrong and how to solve it in the future, and put new checks and balances in place to mitigate risk and maximize upside potential.

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Photo by Erda Estremera on Unsplash