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Author: Nicholas D'Agnillo
Dealing with late and non paying tenants.
People that consider investing in real estate all have one common fear. The fear of having to deal with a nonpaying tenant. This simple fear keeps many people from exploring real estate investing, and costs them a lot of money by limiting their investment choices. When people ask me about what I do, I tell them I am a real estate investor, they usually respond with a horror story they heard of or a comment about dealing with non paying tenants. I am going to help to explore and confront the situation of the non paying tenants in the hopes of extinguishing the fear.
First we need to accept and acknowledge that some people will have hardships and some will just choose to not pay the rent. We should expect it to happen from time to time. Sometimes you will get lucky and not have the issue come up for a few years, but other times you will have multiple non paying tenants at the same time. The best thing to do is prepare for the situation and treat it the same every time.
I hear stories from other landlords telling me they haven't been paid in months or even a year by a tenant, this is usually caused by the landlord's failure to act. Sometimes people will tell me one of the tenants stories as to why they can't pay. Death in the family, job issue, or any number of other random stories. I know that if I call the bank when the mortgage is due and tell them a story, when I get off the phone the mortgage will still be due. A story never changes the amount of the rent or the time that it is due!
A landlord must take action as soon as the local law allows. In Rhode Island after rent is 15 days late you can send a 5 day demand letter to the tenant and after those 5 days if payment is not received you may file the eviction case in court. You must act as soon as possible and always prepare for an eviction. This way all tenants are treated fairly, you can't let one tenant stay without paying because they told you a sob story and then evict another tenant right away because no story was told. I urge all landlords reading this to follow my advice. Never let a story change the simple fact that the rent was not paid. I know many people avoid confrontation and stressful situations as do I. The way I handle these situations is to explain that I am running a business and to uphold fairness I must treat all tenants equal, so nonpayment will be addressed as quickly as allowed by local law with no exceptions. I tell them it is not personal and that I understand they may be going through a hardship, I explain exactly what events will transpire in the future. I tell them they will receive a demand letter, and shortly after court papers will be filed. I tell them how much court fees will add to their balance and that they must be paid to bring current. So I will reiterate, you must act as soon as the law allows and prepare for an eviction as soon as rent Is not paid. Finally I will explain some steps to avoid eviction before rent is even late.
One place to explain the eviction process and provide steps to avoid it , is in the lease. I explain the entire eviction process in the lease. I spell out when they will receive a demand letter and when court papers will be filed. However I also spell out a forgiveness clause that states if the tenant cannot pay the rent they may move out before the end of the 5 day demand period and all back rent and fees will be forgiven and there will be no need for court or police involvement and credit bureaus will not be notified. I have had a number of tenants move during the demand period after I explained the forgiveness clause, this benefits all parties. The landlord has possession of the unit early and may begin advertising and the tenant avoids negative credit reports and eviction judgments.
I hope you use this article to confront the fear of dealing with non paying tenants and decide to move forward with your real estate investment plans or use the tips provided to manage your property more efficiently. Thank You
Dealing with late and non paying tenants.
People that consider investing in real estate all have one common fear. The fear of having to deal with a nonpaying tenant. This simple fear keeps many people from exploring real estate investing, and costs them a lot of money by limiting their investment choices. When people ask me about what I do, I tell them I am a real estate investor, they usually respond with a horror story they heard of or a comment about dealing with non paying tenants. I am going to help to explore and confront the situation of the non paying tenants in the hopes of extinguishing the fear.
First we need to accept and acknowledge that some people will have hardships and some will just choose to not pay the rent. We should expect it to happen from time to time. Sometimes you will get lucky and not have the issue come up for a few years, but other times you will have multiple non paying tenants at the same time. The best thing to do is prepare for the situation and treat it the same every time.
I hear stories from other landlords telling me they haven't been paid in months or even a year by a tenant, this is usually caused by the landlord's failure to act. Sometimes people will tell me one of the tenants stories as to why they can't pay. Death in the family, job issue, or any number of other random stories. I know that if I call the bank when the mortgage is due and tell them a story, when I get off the phone the mortgage will still be due. A story never changes the amount of the rent or the time that it is due!
A landlord must take action as soon as the local law allows. In Rhode Island after rent is 15 days late you can send a 5 day demand letter to the tenant and after those 5 days if payment is not received you may file the eviction case in court. You must act as soon as possible and always prepare for an eviction. This way all tenants are treated fairly, you can't let one tenant stay without paying because they told you a sob story and then evict another tenant right away because no story was told. I urge all landlords reading this to follow my advice. Never let a story change the simple fact that the rent was not paid. I know many people avoid confrontation and stressful situations as do I. The way I handle these situations is to explain that I am running a business and to uphold fairness I must treat all tenants equal, so nonpayment will be addressed as quickly as allowed by local law with no exceptions. I tell them it is not personal and that I understand they may be going through a hardship, I explain exactly what events will transpire in the future. I tell them they will receive a demand letter, and shortly after court papers will be filed. I tell them how much court fees will add to their balance and that they must be paid to bring current. So I will reiterate, you must act as soon as the law allows and prepare for an eviction as soon as rent Is not paid. Finally I will explain some steps to avoid eviction before rent is even late.
One place to explain the eviction process and provide steps to avoid it , is in the lease. I explain the entire eviction process in the lease. I spell out when they will receive a demand letter and when court papers will be filed. However I also spell out a forgiveness clause that states if the tenant cannot pay the rent they may move out before the end of the 5 day demand period and all back rent and fees will be forgiven and there will be no need for court or police involvement and credit bureaus will not be notified. I have had a number of tenants move during the demand period after I explained the forgiveness clause, this benefits all parties. The landlord has possession of the unit early and may begin advertising and the tenant avoids negative credit reports and eviction judgments.
I hope you use this article to confront the fear of dealing with non paying tenants and decide to move forward with your real estate investment plans or use the tips provided to manage your property more efficiently. Thank You
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