How to Manage the Landlord - Tenant Relationship
It's frustrating to deal with problem tenants and the issues they create on your property. Everything they do wrong costs you money, because it's your property, so it's extremely frustrating and people can get emotional. So, in order to be a great landlord, you need to manage your relationships with your tenants.
Be a Professional Landlord in Order to Increase Your Rent Income
If you do find yourself in a bad situation with a tenant, make sure you are professional and always send notifications in writing. Always do everything in writing (here you can find a ton of free landlord forms)
Perhaps some of my tenant's follow my blog because as I was writing this article one of my worst tenants literally left a pie in their oven and nearly burned down one of my properties. It's almost like they wanted to get revenge for talking about how to deal with people like them!
I was fortunate that another tenant was home and called the fire department. There was absolutely no damage to my property and nobody was hurt. I'm sure the smoke ruined most of the tenant's furniture. I'm glad for once I'm not the one paying for their dumb mistakes.
Alright, so back on topic. The first thing you need to do is separate the concept of Investing from Property Management. Investing is buying rental property and receiving the cash flow from those investments. Property management is taking care of investment properties. They are related but are clearly not the same thing.
Investing and Rental Property Management are Not the Same Thing
There are property managers that own no investment property and there are also investors who can't even manage their sock drawer, never mind a rental property. There are also a lot of people who do both with varying degrees of success. Ultimately, you will need to decide if you should manage your properties, or if you should hire someone to do it. Either way, you know they are not the same thing.
YOU DON'T HAVE TO DEAL WITH TENANTS
The first point I would like to make is simply that you really don't have to deal with tenants if you don't want to. So the first answer to the question "How to deal with the tenants" is "Don't, if you don't want to to." OK Eric, great advice....
Related: Is Real Estate a Good Investment?
Different Types of Investors
Alright, but you're a new investor and you have some spare time and want to pocket those property manager fees. So, how do you deal with these problem tenants?
No two people have the same skills, life experiences, or personality. So, why would there be only one way to deal with tenants? I would say first and foremost, always be professional. Next, you need to identify what kind of investor you are and then use that to your advantage.
The Numbers Guy
You carry around a pen, paper, clipboard, and scientific calculator everywhere with you. Maybe you don't even need the calculator. Oh boy can you analyze an investment - you bought the best one in the city, the true hidden gem with the highest ROI. But, you missed the fact that it was in a D-neighborhood. Great, now you have bad tenants renting your investment property.
Bad tenants will always find every weakness and exploit it. They may constantly call you and bother you to fix this or that and even threaten to withhold rent, if they are still paying you that is. They know you will always hire a licensed professional, so it's blowing your numbers out of the water and this hidden gem investment is really a lump of coal because of your tenants from hell.
I recommend everyone always has a good tenancy agreement, but you need to take it to the next level. Learn every law, by-law, regulation, ordinance, and zoning requirement and make sure you reference them in your tenancy agreement. You know the normal 3 or 4 page agreement most landlords have? You turned it into a 20 page behemoth. You're already carrying around that clipboard, so toss that agreement on it. Eventually when the tenants bother you and you reference the agreement every two seconds they will do one of two things:
- They will leave you alone. They signed their life away and you know every line-item by heart anyhow, so why annoy you over frivolous things?
- They will leave. Even better! You can fix the place up, raise the rent, and screen some new tenants and put great people into your investment property.
Related: 9 Ways to Avoid Bad Tenants.
You bought a true fixer-upper for an investment and got a great deal on it. You spent some time, but you got it up to par and now you're making some decent rental income. You listed it on craigslist and were doing some showings when a tenant showed up with 2 months rent, cash in hand. They wanted to move in this weekend! Great! You needed the cash anyhow and they need a place to stay because their house is closing and they need to move out. At least, that's what they told you.
You can fix anything, but forgot to implement a good screening process or to have strong cash reserves to get you through the vacancies. Oh well, now how do we deal with these people now that they are in there and everything in your investment property seems to keep breaking?
Professional tenants know the laws better than you do. They know if your state requires all plumbing work to be done by a licensed plumber, or for all electrical work to be done by a licensed electrician. They know if the work on your investment requires permits.
When your faucets, toilets, and outlets break, railings need to be replaced, or stairs need work, they are keeping track of what you are doing. Don't be surprised if the health department gives you a visit, or city building inspectors drop by and give a cease and desist order.
The handy-man needs to know when hire professionals to deal with the problems until the bad tenant leaves. Trying to fix everything yourself will just add to the problems.
Related: My First Flip Didn't Go So Well.
I know they are three months behind, but the father just lost his job and the kid has a stomach condition and the mother has bad knees and can't work. They will get a job soon and catch up, that's what they told me!
Everyone has a story. It's the nature of life. with bad tenants, the stories are fake 70% of the time, but the other 30% of the time they are very sad and true. Unfortunately, I don't run a charity. It's cold-hearted, but the reality is that I did not buy this rental property to be generous. I'm an investor and I bought it to provide for my family. If you can't pay, you need to leave. They can move in with parents, a sibling, a relative, a friend, anyone or anywhere, but not my place unless they can pay.
When I first started I was a pushover and I let some tenants not pay me for months. They were always so nice to me and the mother was looking for a job desperately. Over time I realized she never left her house to actually look for a job. Also, one day my wife asked her to clean something in the hallway and the woman yelled at my wife until she actually cried. WOW! Truly she is taking advantage of me.
Now, I've heard every sob story in the book and I rarely believe them. Perhaps I've become jaded in my years of being a landlord, but I know the tricks and the rules.
If you are a pushover, you can do one of two things. If you have a lot of money, then learn your lesson by losing that money. You won't make the mistake once you have no savings!
Or, you can find a friend, business partner, or spouse who can put their foot down for you.
You are great at dealing with bad tenants. They would get more reaction from a stone wall than from you when they tell their sob-story. You have that rental agreement on lock-down, and you know the numbers backward and forward.
They are a day late with rent? $100 late fee, thank you!
Two days late? Evicted.
But now two out of your four units are empty and the other two will be moving in the next few months. Why is keeping tenants so hard?
Your problem is that you think every tenant is a bad tenant. You don't know how to keep the good ones!
Personal Relationships are an Art
I have created the caricature of different personality traits and types of tenants to get my point across. To be a successful landlord and deal with tenants, you need to balance all of the above. You should have firm rules that you don't bend on, but you also need to know when to be tough, handy, or just focused on the numbers. I never recommend being a pushover though.
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