3 Tips to Keep You Out of Landlord Rehab
I recently came home from work and saw my teary-eyed daughter sitting defeatedly on the couch. This was abnormal for her and signaled something was wrong. She is tough, handles stress well and has been an athlete playing high level golf since age 14. If any game can break you, its golf, and last night was her breaking point. Trying to qualify for her first tournament as a college freshman, she started strong on the first three holes with a series of great shots. Things started to crumble on hole no. 4 with a shot into the lake. This rattled her so much that over the remaining holes she struggled and ended up scoring her highest round of golf since her freshman days in high school. As she sat there looking back at me, suspecting her score wouldn’t help her qualify, she said “it’s just too hard, I want to quit.”
If you’ve been a landlord for any amount of time, you may have felt like throwing in the towel at some point. Last week, one of my tenant’s children decided to get on the roof and pour gas down two stories to a mobile firepit. The neighbor was watching and filmed the entire incident. (I love having a relationship with the neighbors of my tenants). No adult supervision and balls of flames crawling up my walls; definitely grounds for an eviction. I sent the video to my tenant and told them our relationship had come to an end and that they would be receiving notice to leave. Can you guess their answer? “I have CoVid so you can’t evict me.” If there were ever a reason to give up on being a landlord, this might qualify.
As a private investigator and seasoned landlord, I ask myself, “how did I get here?” This same family has been a consistent tenant for over 10 years, never missing a payment. I screened them well, followed best practices and even after all of that, I find myself in a situation where I have lost control of my own property because of a regulation passed by our local, state, and federal government.
Knowing what I know now, would I do it all over again? Absolutely! Even when we do everything right, sometimes things still go wrong. You have a right to be mad, stomp around, and even feel sorry for yourself; but then you’ve got to get over it. If you are a struggling landlord right now let me suggest three things you should think about if you are dealing with a tenant who is not paying you and feels entitled to be in your property.
- Hire a Team of Professionals -
- Form a great relationship with a Landlord/Tenant attorney. Most of the good ones can be found through your local landlord associations. These professionals follow all Federal and local laws and have the resources necessary to manage different requirements coming from different jurisdictions. Time and time again I have seen people panic over a new regulation, only to find out the regulation was already in force by a federal rule or really did not have any impact at all. For example, Louisville just came out with a city ordinance adding individuals with criminal histories as a protected class, only to take away any “teeth” from the ordinance by exempting any crime that would affect the health and safety of the landlords. I don’t know a landlord who would penalize an applicant for underage drinking 5 years ago, but robbery or drugs is another story.
- Get with a professional mortgage broker who understands your landlord strategy and can help maximize your returns with the right type of loan.
- Align with a collection agency and create a program to send delinquent tenant accounts to collection and put it on their credit. There are no rules requiring tenants to be out of the home in order to send their file to collections.
- Establish a relationship with a professional realtor who can analyze if selling your home would bring you a great sales price.
- A professional accountant can let you know how refinancing or selling your property will affect your income, capital gains etc. Let the professionals do what they do best and guide you through this process.
- Analyze Your Onboarding Practice
Do you have a specific criteria? If not, get one today. We have samples at Rent Perfect that will help you design an efficient onboarding process. If you do not have a criteria, then everyone qualifies, and you know that just can’t be true. The whole onboarding process starts with putting your criteria on paper.
More than ever, a call to your potential tenants last two landlords is critical. Though painful and time consuming, do not skip this step. How they left their prior homes is probably how they will leave your home. If you can’t reach the landlord and have doubts about what they are telling you, require cancelled checks or bank statements proving they paid rent for the last 12 months. If they paid rent through this CoVid 19 crisis, there is a good chance that will continue. We can’t afford to make a mistake during onboarding.
- Remember Why You Became a Landlord
No other business allows you to buy something, have someone else pay for it, and at the end you still own it (with maybe even a little cash flow on the side). A declining mortgage and appreciating asset are your ticket to long-term wealth. A recent TV show called “Undercover Billionaire” dumps each contestant into a random city where they receive $100, a phone and a car, with the challenge to create a business worth 1 million dollars in less than 90 days. All three contestants chose real estate! That’s why you became a landlord. Don’t ever forget that!
Sitting on the couch, sulking because the last year wasn’t fair won’t get you anywhere. So, get up, align yourself with professionals, review and modify your onboarding practices, and get in the game to grow your wealth. My daughter knew deep down that quitting was not an option. She was too invested to walk away (BTW, she shot one of her best rounds ever a few days later), and you are too.
About the Author
David Pickron is President of Rent Perfect, a private investigator, and fellow landlord who manages several short- and long-term rentals. Subscribe to his weekly Rent Perfect Podcast (available on YouTube, Spotify, and Apple Podcasts) to stay up to date on the latest industry news and for expert tips on how to manage your properties. His company, Rent Perfect, an Investigative Screening Company, helps clients onboard tenants from the initial background check to leasing and payment collection. You can learn more by visiting www.rentperfect.com or calling 1-877-922-2547.