Investment Real Estate ownership comes with a ton of responsibilities, one of which is tenant relations. When a unit is vacant you certainly want to fill it, unfortunately in your urge to fill the unit you may move in tenants with issues. Issues that prevent them from paying the rent. If you are lucky that’s their only issue. Sometimes said tenant will be such a nuisance, they will actually ‘drive off’ other tenants from the property; sadly this happens every day.
The above referenced issues have legal, not always pleasant , but legal remedies and that’s not really what this article is all about. Right now I’d like to address the tenant that has been on the property for many years, and for whatever reason (as long as it’s not against Fair Housing Rules) needs to go. This requires a strong property management strategy to regain control of the property.
I’ve had clients call me and tell me that their Mother leased the property to it’s current resident 30 years ago but, “The tenant doesn’t respect me anymore.” OR “The tenant never pays on time… they pay, but I always have to chase them down and I’m sick of it.”
The ‘go to’ for most people in these situations is eviction. They are so tired of what’s been going on, and so emotionally involved that they want to throw them out on their ear (and if it was legally possible they would personally kick them to the curb).
I counsel a different approach, it’s called Cash for Keys. I learned this during my years as an REO listing agent for Fannie Mae. I used to have to go out to peoples’ homes… unexpectedly I would knock on their door and inform them that their home no longer belonged to them. I would offer them cash to move out, or they would face eviction by the Sheriff.
In most cases they were somewhat miffed, usually not surprised, but miffed (which is a nice way to say ‘pissed’) But 90% of the time they would accept the cash, and I learned as long as you treat people with dignity and respect, they will come around to do what’s right for them.
As an investment property owner you need to weigh the cost of eviction verses the cost of Cash for Keys. When determining how much to offer a tenant, use your head. Generally, two months rent and a little something for a moving truck will pique their interest. Your inital offer should be just a little bit less than that. When they come back with a higher number, you can come up a little and they will feel like they really worked you. I submit that Cash for Keys will cost less than an eviction, especially if they contest it. The reason being? The tenant will be able to maintain their dignity. Dignity might sound trivial, but if somehow they lose their dignity, if they feel disrespected, chances are your unit (that they were/are living in) will be thrashed. The cost of repairing a thrashed unit can sky-rocket… how you treat people (tenants) is your choice. Choose CFKs!
I hope you had as much fun reading it as I did putting it together, if you’ve got specific questions about how this can work for you… please give us a call… Until next time!