Hands On Real Estate Investing

One of the most critical events that can occur to a landlord is when the tenant stops paying rent. In our opinion, it is very important to assess how serious the infraction. There are 3 levels of severity:

1. Minor/Short-Term ( rent is a few days late)
2. Moderate (rent is a few weeks late)
3. Severe/Long-Term (rent is late one or more months)

Minor Rent Delay

Is the tenant a few days late paying rent, which might be due to unexpected bills, change in jobs, an oversight due to a death in the family or extended vacation? For example, we have a tenant who is a young woman. Her initials are RF. Her father passed away suddenly, and she left town to spend some time with her sister. After the 1st week passed, we looked at her rental application to get the name of her next of kin. We wanted to be sensitive since it is very painful to lose a loved one, so we found her sister on Facebook, and sent a Facebook message, which is less intrusive than a phone call. Within a week’s time, we heard from the tenant and she assured us that she would take care of the rent as soon as she returned home. We gave her the time she needed to grieve, and she caught up with her rent when she returned a few weeks later.

Moderate Rent Delay

A moderate delay in paying the rent means the tenant is a few weeks behind, and might be due to a job loss, bad financial management, or serious medical problems. Once a tenant gets a few weeks behind in paying the rent, it is very difficult to catch up. One case in particular involved a husband, wife, and 2 children. When we evaluated their rental application, we were concerned that the husband was a school janitor and earned extra income by delivering newspapers. His wife worked a couple of part-time jobs, and was taking night classes. We decided to take a chance on them since they were a young family. For a year and a half, they paid the rent on time, but when they wife became pregnant, we became concerned because we knew there would be a period of time where she would not be working, and all of the bills would fall on her husband. Sure enough, we started receiving the rent later and later in the month. On one occasion, they sent a check that bounced, and when we called to let them know that the check bounced, they said there must be a problem with the bank! Giving us a bad check was a stalling tactic to buy them more time. The last straw was when we received the August rent check on August 20th. At that point, we knew the September rent would be very late, so we waited until September 2nd, and filed for eviction due to late rent. By the end of October, they were out of our property, and we kept their full security deposit. We had a new tenant by mid-November, so we only lost 6 weeks of rent.

Severe Rent Delay

A major delay in paying the rent is when one or more months have passed and the tenant hasn’t paid rent. We had one situation where the tenant lost their job and kept stringing us along about the rent. His initials were CS. He was a kind and decent gentleman, so were really were trying to give him time to find a job. After 2 months, we decided to file for eviction. It took about a month for the court hearing. Once the eviction notice was posted on the door, CS moved out.

Another example of a severe situation is when the tenant stops communicating with you. We had a tenant who was a single father and had 3 children. His initials were RB. He paid the rent on time for a few months, then stopped. When we tried to call him, we learned that his phone had been cut off. When we sent letters, he did not respond. When we knocked on the door of the property, he would not answer. This situation was very stressful because we didn’t know what might happen. The fact that RB cut off all contact was very unusual. Therefore, after several weeks of no contact, we filed for eviction. RB did not show up for the hearing, so once we received the eviction order, we had to notify the Sheriff’s Office so they could force entry into the property. We also had to have movers ready to move out any personal belongings. What an uncomfortable situation. Fortunately, we’ve only had to do this once in 25 years as landlords.

To summarize, when a tenant stops paying rent, determine if it’s a minor, moderate, or severe situation. Try to make contact with the tenant by text, phone, email, letters, or knocking on the door. If you are unable to make contact with the tenant within 3 – 5 days, pull out their rental application, and start making inquiries to their next of kin. If you cannot make contact with their next of kin, start calling their 3 character references. As a last resort, call their co-worker reference and/or supervisor. By this time, a few weeks have passed. If you haven’t made contact with the tenant, and they haven’t made arrangements to pay the rent by a certain deadline, it is time to file the paperwork for an eviction. Don’t wait too long to file. The longer you wait, the longer before you can reclaim your property and put it back on the market for rent.

For beginner real estate investors, the tenant screening process is crucial. Personally call all employment, previous landlord and character references. For more details on screening tenants, click here.

 

The opinions expressed herein are solely those of the Author/WebMaster. Before taking any action, please consult your real estate, financial, and legal advisors.