Eviction Archives - SMARTERLANDLORDING

100% occupied. Sounds great right? That is just what we want to hear when we are looking to purchase a multi-family building to add to our portfolio. However, not everything is always as it seems.

Trying to sell a building is easier if you can tell perspective buyers that the building is 100% occupied. The buyer thinks that there will be less work involved in taking over the building when the sale closes. They will not have to advertise, they will not have to do showings, they will not have to spend money rehabbing the apartment to make it rent ready. There will be a smooth and easy transition.

But, as I said, not everything is as it seems. Sure the building may be 100% occupied. But, what if the current owner rented the last few apartments to anyone who could fog a mirror just so they could say the building was 100% occupied? What if the people they placed in the building had been evicted from their previous residence just a few months before?

Don’t think the above happens? It happened to me when I bought a four-plex several years ago. Yes, I did my due diligence and reviewed all of the leases and the income and expense statements. Everything looked fine. But if I had bothered to check a simple and free database I would have noticed that one tenant had just been evicted and had a drug arrest as well. No one in their right mind would have rented to this guy, unless you were trying to say 100% occupied.

So what happened? You guessed it. As soon as we closed, he stopped paying. Four rent free months later, after going through the expensive and lengthy eviction process I had a dirty and damaged rental unit back in my possession.

On the bright side, I learned a valuable lesson. Check out the current tenants as best you can before you close. The court and criminal databases are free here as they are in many jurisdictions. It is as simple as typing in a name. If you do find something odd, go back to the seller and discuss and if you need to, renegotiate. It would not have been so bad kicking the guy out if I had gotten a little bit better price.

Tenant screening is one of the most important things that a landlord can do. You want to make sure that you selected people to live in your properties that can pay, will pay, will pay on time and will not tear up the place and cause trouble. However, no matter how well you screen your tenants, every once in a while you will have a tenant that cannot pay.

Perhaps the tenant lost their job, or had some other unfortunate circumstance happen. Whatever the reason, when you have a non-paying tenant you want to get them moved out and a good paying tenant moved in as soon as possible. It is not that you are a mean person, but you have to eat as well and the bank really does not care that the tenant has stopped paying you, the mortgage payment is still due.

The first thing that most people think of when they have a non-paying tenant is the eviction process. Yes, you can go that route, but it can be expensive, time consuming and just downright nasty. It creates ill feelings on both sides. Plus, crafty lawyers will be sending your tenants advertisements telling them how they can stop that eviction with a bankruptcy (and they can for several months!)

Rather than eviction, I prefer to use the cash for keys method. What is cash for keys? It is simple really. You pay the tenant to move out and hand you the keys.

Why would anyone do that? Shouldn’t the tenant be paying you the back rent? After all, they owe you money. Yes, that is correct, but by the time they get to the point where they cannot pay the rent they have likely exhausted their resources. They may want to move, but do not have the money to do so.

So it seems to me that it is better to pay them a little bit of money, maybe even as little as $50 or even as much as $300 to get them to move their stuff out and give you the keys. By using the cash for keys process you have control of the incentives. You can even get the tenant to clean the place before they leave so they can get their money. Evictions use the threat of the courts and we all know cash today is much more effective than the threat of a judge sometime down the road.

Plus, when using the eviction process you are going to have to pay a lawyer. How much will that cost? $300, $400? Did you figure in the filing fees, process server fees, writ fees and set out crew fees as well? Now which one makes more sense?

I know it can be hard to swallow giving money to someone who may owe you a substantial sum. But the best thing for everyone is for the tenant to move on and for you to get possession of your property back so you can get it re-rented as quickly as possible.

One last thing, before you had them the cash for their keys, be sure to get them to sign a release to the rights of possession. Otherwise you could be in for more headaches down the road.