Burnout…one of the major reasons that owner landlords like me end up leaving the business. They get tired, frustrated and overwhelmed by the whole thing. But tenant issues — amazingly enough — are what really drive them to the brink. They can handle the rehabbing, accounting, and maintenance/upkeep but it’s the psychology of tenant management that eludes them.
Through my 15 years of real estate investing, I’ve made more than my share of tenant management mistakes, which have cost me thousands of dollars. In today’s economy expecially, we need to make every dollar count. Uncollected rent results in frustration on the part of the landlord, but can ultimately result in foreclosure as well. If your income from that rental doesn’t cover the mortgage payment, you’re no better off than the thousands of people who’ve already lost their homes. But smart tenant management can prevent this from happening.
When I began my career, I chose to think the best in people and situations. I’m an upbeat, positive person, and there’s nothing wrong with that. However, when it clouds your judgment, it’s a recipe for disaster. My tenants, many of whom were struggling to make ends meet, would often get behing in their rent payments.
“Barb, my car broke down and I had to get it fixed so I could go to work. Can I catch up the rent in two weeks when I get paid again? I’m sure I can pay it then.” And of course, I agreed. Two weeks later, something else would come up. Again, no rent. And so it goes. I’m sure you’re thinking, “Oh, I wouldn’t let people slide like that…” Well, when you know they’re basically good, hardworking tenants, you try to give them the benefit of the doubt more often than not. And before you know it, you’re hundred of dollars in the hole on that unit. And your nonpaying tenants are still there!
The other thing I heard way too often was “I sent the rent already. The check is in the mail. You should have it by now.” The solution for that problem is to have them cancel payment on that check and reissue you another one. Or if they sent a money order, make them show you the receipt.
After years of trial and error (lots of error) I learned how to handle the late rent situation in a way that would benefit me while giving my tenants a chance to remain in the home if they could work things out in a timely manner. Now, when they don’t have the rent I say something like this:
“I feel badly for your situation, but I can’t wait for this payment. I’m going to have to file eviction on you tomorrow. But if you can get the money together before your court date, I’d love to have you stay. I hope you can get it worked out.” This way, they’re not totally stripped of their dignity and know I’m leaving a window of opportunity for them to stay if they can scrape the money together.
Tenant issues (such as the hassle regarding rent collection and nonpayers) are what drive landlords crazy and cause burnout. Having a good plan for handling late rent will alleviate most of the frustration.
A certain number of tenancies simply don’t work out, and this is just part of the business. Handle the late rent situation quickly, get the nonpayers out, and know that — especially in this economy — another tenant will come along.