By: Mark Frentz
www.akerahomes.com
mfrentz@akerahomes.com
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The Real Problem!
I'm sorry to do this to you (well... there's a good reason I'm doing it even while I'm sorry that you've had tenant problems), but I'm going to get it out of the way before I write anything else. The real problem with having problem tenants is YOU. You may think of yourself as someone who is extremely unlucky, but if you are completely honest with yourself you will admit that the reason you keep having problems with bad tenants in your property or properties is that you simply aren't very skilled at managing your property. What I'm not saying is that you are a terrible person or treat others poorly or that you lack intelligence or even that sometimes even the best landlords may have a bad tenant here and there. What I am saying is that if you really want to have better tenants you will take the time needed to learn how to be a great landlord. In reality there are both good and bad tenants and good and bad landlords. As you become a good landlord you will find that good tenants magically appear everywhere and are willing to rent your property from you. Following is a list of practical suggestions anyone can use to become a better landlord, which in turn will lead to better tenants.
The List
Note: Keep in mind that this is a cursory look at this issue. Each of these 5 tips should be explored more fully.1. Screen Properly!
Seriously... this is the best way to get rid of your tenant problems. There are always TONS of people and families who are excellent to rent to. They are responsible and will both take care of your property and pay you on time. The key is to find these people (I'll most likely post on this next week so that you have more to go on).
2. Work toward a good business relationship with your tenants every chance you get
This is often overlooked. Keep in mind that these people are basically taking care of an asset of yours worth enough to look after you in your retirement. A good rental property should be giving you a very good return on your investment. Is it not worthwhile to develop a relationship with the people living in the property? If there are problems, negotiate. If there are maintenance issues, take care of them in a timely manner. I personally like to give gifts to my tenants on occasion to thank them for taking care of the place (If a $100 gift once a year keeps my property safe and secure it is more than worth it in the long run and I consider these gifts investments). Remember that it is the small stuff that makes large differences in relationships. Having said all this... tenants are not your friends. This is a business relationship and should remain a business relationship.
3. Follow up on how this is a business, not a friendship... always both set and enforce boundaries in the relationship
Make it clear from the beginning that each and every time rent is late the eviction process will begin. Make sure there is a paper trail each and every time a tenant does not pay the rent. If tenants know you are serious about enforcing the contract then there is less room to push boundaries. Long term this will save you from tenants who may think about taking advantage of you, but won't because they don't believe they have any opportunity to do so.
4. Pay people to leave if things are getting bad
If relationship has broken down, it is now time to figure out a way to have the tenants leave as soon as possible without any more problems. I am more than willing to pay my tenants to leave having them remain is costing me money. A few hundred bucks can go a long way because money really does talk. A caveat here... If you are going to pay them to leave make sure they understand that they must first be up to date in rental payments and have vacated the premises before they will be given cash.
5. When all else fails, hire a landlord/tenant specialist in your area
Remember that you get what you pay for with lawyers and that paying for the services of a specialist will generally give you much more bang for your buck than a lawyer who is your parent's friend, and handles divorces, and helps with real estate transactions, and sometimes works on accident cases and getting people off of tickets. Why? The answer should be self explanatory. If things get to this point in the relationship between you and your tenant the previous tip of documenting each and every time rent wasn't paid on time or other responsibilities were not lived up to will come in handy. Remember, if it isn't documented, it didn't really happen.
Summary
The most important point I want to make is that each and every property you own is a miniature business and should be handled as a business; professionally. I am consistently told by people or overhear others stating "real estate is a terrible investment because of the tenant headaches". I would respond by stating that often real estate investing ends up being terrible because of all the terrible landlords that exist. If you are one of these terrible landlords, take heart; It is a fairly simple process to learn some skills that will make you a great landlord.
Lastly, running a property while you are building your portfolio should not be a charity. I'm not saying you should be a jerk to people. My dream is to have a large portfolio and then help people with problems and sometimes give people breaks that I might not now give because there will be less risk to my entire portfolio at that time. Until you can miss a few months of rent and it doesn't put your portfolio at risk, you'll need to be shrewd (in the healthy sense) with your portfolio and make sure that you take good care of yourself so that you can better care for many more families later in life when losing a few thousand dollars simply doesn't make a big difference to you.
Here's to your future of risk-averse investing!
If you would like to learn more about investing in real estate please
contact me at the email address listed at the beginning of this article
or go to my website at: www.akerahomes.com/investing-in-real-estate.html
