Once a Bad Tenant, Always a Bad Tenant
I have been beating myself up lately over my bad tenants. In the last 30 days, I have had to evict one tenant for non-payment of rent after only 6 months, ask another to leave at the end of the month after repeated police calls (and probably not collect their past due rent), and threaten another with eviction because of non-payment. Plus I have another one or two that are on the edge of eviction for non-payment.
If you remember back to January, I had made an Investment Property New Year’s Resolution to reduce my bad debt expenses. Unfortunately, like my personal goal to lose 10 pounds, I am failing. I decided to do some research and pulled all of my past and present tenant files and tried to find some common theme amongst all the “bad tenants”. I realized that while many of the problems are with the tenants, it appears I am the one enabling their bad behavior. Here is what I found.
If it walks like a duck and sounds like a duck, it is probably a duck.
While I rarely see a tenant that has a great credit report, the tenants that have problems paying their rent on-time (or ever) have typically shown a history of financial and/or rental problems on their background checks. The ones that have several items in collections especially seem to have issues with rent. I guess paying late and/or not paying a bill is in some ways like criminal activity or drugs, once you get past your first time, it just gets easier each subsequent time to not think about the consequences.
Bad tenants apply here
Over the last 30 days, I have been in full leasing mode as many of my leases expire either May 31 or June 30. Just like someone that leaves one abusive relationship and falls into another abusive relationship (often because they don’t feel like they can demand better), I found that I keep wanting to make exceptions for prospective tenants that have bad traits (I am in no way minimizing the plight of someone in an abusive relationship, I am just making a point). Although it is easy to deny the applicant that lies to you about the recent eviction, it is tough to say no to a single mom who is working 2 jobs but only takes home about $980 per month and wants to rent your $750 per month apartment. Can she and her child live on only $230 per month, even if she claims it is not a problem?
Lose a month of rent or have bad debt because of an eviction-which is worse?
Although I am not a fan of having a vacant rental unit and losing a month’s worth of rent, I believe that is an easier one time event than having to constantly call and hunt down your tenant for your rent. Plus, when you have a tenant that is bad at paying, each month you are also wondering if you are going to see the rent or if this will be the month you need to evict.
Realizing and admitting you have a problem is the first step in solving it. I am committed to demanding better tenants. Here are a couple things I am going to do differently:
- Never book an apartment showing without spending a couple extra minutes on the phone and asking them about their income, rental background, and other details. I think I have been quick to just set up an appointment because I am in a hurry when they catch me on my phone or because I just want to get bodies through the unit.
- If they have a history of bills in collection, run the other way.
- Ask for additional damage deposit if I feel like taking a risk on the person.
- Sticking to the rule that the prospective tenant must make at least 3 times the rent in documented gross income per month.
- Commit to doing a more thorough background check via phone calls to previous landlords and employers.
- Not accepting incomplete tenant applications or missing data.
I have been successful up until this point, but I want to improve my business and strengthen my cash flow by reducing my non-paying tenants. I also want to reduce my work and stress load by having tenants that always pay on time.
This is actually helpful as my tennant pays late and does pay the fees but I end up expending energy chasing the rent etc but getting the fees. In hindsight I would not have accepted this tennant but so far I can deal and the fees are caught up. Still if I started over i’d get a vancacy for a month over the ??? I overlooked due to wanting to get my house rented. I think in the long run i’m good but that’s luck so the rule should still be followed by new landlords.
I now understand the strictness of my godmother who owns several apartments in our place. Our neighbors used to call her as “excessively nosy” on the families who are interested in renting her apartment. Reading your post made me realize that my godmother is doing the right thing. She is just doing those interrogations to screen and check the capacity of tenants to pay.
I am tired of people who seem to be ready to move into my property, only to blow me off at the last minute – close to the end of the month, when it slows down for potential renters. David Joseph Neawedde sent back my rental application, then ignored my requests for the firt month’s rent and security. I held the apartment for him for a week, which cost me a week in showing the place.
Once you get a bad tenant don’t forget to report them to http://www.bad-tenant.org. This way other landlords will know not to rent to them. I list all my bad tenants here and always check to make sure my next tenant is not listed here.
Gabby Gomez »
Interesting. I need to think about the liability of posting negative information about a tenant on a public site.
Until I have a signed lease and a check for the first month’s rent and the deposit – I continue to advertise and show the house. I would have told David Joseph Neawedde that I have run his app and he’s accepted, can he meet me that evening to sign the lease and pay the money. If he said no – I would have told him I was not going to take it off of the market.
Oh how very true! If it does walk like a duck and talk like a duck…..IT IS A DUCK!
Finding good tenants really seems to be the key of this business. Thanks again Scott for this info!
Your comment – Interesting. I need to think about the liability of posting negative information about a tenant on a public site.-
Just remember as long as you tell the truth and stick to the facts there is no liability.
There is no such thing as truth in a disagreement. Plus, truth is in the eyes of the listener.
If I say “they were very dirty tenants”, which may be true by my standards, but they may not see it that way.
Who is right? I think you have a case for slander.
I would personally not post onto a public site that sort of information. It is only inviting problems and potential lawsuits. Just my two cents.
Yes! Run don’t walk away from a tenant if you have a bad feeling about them BEFORE you get them in your house or apartment! Trust your gut – it will be right EVERY time.
While I understand and respect your problems with bad tenants, I also think some of your criteria are a little extreme. By your standards I’m a “semi-bad” tenant (judge for yourself):
1. I’m usually a few days late, as I get paid on the 3rd. Sometimes my Direct Deposit Advance is suspended for 2 business days due to being overdrawn the month before, so I am occasionally as late as the 8th, considering mailing time. However, I always pay the rent on my own (even if late) without the landlord having to chase me down.
2. I’ve NEVER had the police called to any apartment I’ve ever lived at.
3. My credit rating is a shambles and I have several debts in collections, but none rent-related. Housing always comes first in my order of bill payments.
4. I have holes in my rental history from being homeless off and on, but it’s always been due to my leaving places voluntarily due to financial problems or harassment from neighbours, not eviction.
5. My income is $1,000 a month, going up to $1.063 in Jan. 2009. A rigid three times rule would leave me either homeless or in a rooming house where neighbour problems would probably drive me homeless.
6. I don’t care about cleanliness and I live like a pig. I don’t feel it’s anyone’s business *while* I’m living there. Now, when I move out that’s a different story. I do clean up places when I’m moving out of respect for the next tenant, since I understand and respect that most other people care. I do not wreck or destroy places.
7. I am on Social Security disbility for mental issues. Some landlords have discriminated against me solely on that ground, which is illegal. I can understand judging on the *amount* of income but it’s just plain wrong to judge someone by their (legal) source of income.
Knowing these facts about me, would you judge me as a “bad tenant”? Or can you see that maybe good/bad isn’t a binary issue but a gradient? I wish there were “credit scores” for tenants. That way maybe some people who fall into the middle between good and bad might get a fair shake even if a little extra caution was involved….
John Charles Wilson »
Thanks for the comment. I am replying and asking questions with all due respect.
I will try to reply in order:
1. Paying by the 5th is still considered on-time according to my leases. If you called me and told me you were paying on the 8th and did, no problem, no late fee. It is the tenants that I have to hound for rent that are the issue.
2. Great!
3. Great that you pay your housing first. The payment of rent does NOT show up on a credit report so unfortunately, you can imagine that simply looking at a credit report that shows lots of items in collections can make a landlord wonder and have concern if he is going to get his rent.
4. As long as the “holes” were not evictions and your past landlords were satisfied with the notice that you gave prior to moving out, that is fine. If you moved out with 2 days notice, not acceptable regardless of reason.
5. At $1000 per month income, do you have other means to pay a $650 rent bill plus $150 per month in utilities and still eat? By your own admission my rule may only leave you homeless not because you could not afford it, but because of your choice to be homeless instead of working out the issues related to neighbors.
6. I am not your mother so cleanliness only concerns me when it is damaging or destroying my property/building or creating an unsanitary condition (such as one that generates rodents or insects). If the unit is restored to the same condition it was in prior to you moving in, then everything is fine and you should receive your deposit back. Often tenants that live like “pigs” [your term] do NOT restore the property to its original condition.
7. You are correct, discriminating based upon many protected classes is illegal. I am not sure I understand your question. Do you mean ‘legal’ source of income in that you have ‘illegal’ sources of income from ‘illegal activities’?
Simply knowing only 7 items about you is not enough for me to judge you as someone I could not/would not rent to. It is based up filling out a rental application, the specifics of what comes back on the rental application, confirming income and rental history. All of those background issues are combined to make a decision.
I would be all in favor of a “credit score” for tenants. I would make my life easier. Then I would see very quickly how a tenant from Chicago should be, despite being lied to from their previous landlord that they were great and always paid their rent on time, gave proper notice to move, had no police calls, and left their apartment spotless (only to find out all those items were completely false 60 days into a lease-resulting in an eviction and $3000 in repair bills and lost rent).
Lastly, if you asked my tenants, I think they would absolutely say that I give most people the benefit of the doubt. Usually I am wrong.
That last comment you made, Scott “Lastly, if you asked my tenants, I think they would absolutely say that I give most people the benefit of the doubt. Usually I am wrong”
Absolutly right. We rented from you for two years. We ran into some trouble shortly after moving in, resulting in late rent payemnts a few times. Instead of getting upset, you were willing to work with us on everything, and even handing out advice every now and then.
If we hadn’t moved across the country, we would still enjoy renting from you. And if we wver need to move back, I would hope to rent from you again.
Perhaps a good start would be to no longer rent to tenants with criminal backgrounds. I am looking at the arrest reports published by the Eastside Defender and have seen a minimum of 3 of your properties housing persons who were arrested in March. That is only 1 month, and I am not even done reading the report. If a tenant has a crimimal background – probably going to commit crimes.
Olivia-
Thanks for the message. I don’t rent to anyone with felonies, gross misdemeanors, recent criminal convictions (regardless of degree). I do full background checks (for criminal, credit, and rental history) on all adult applicants.
The several incidents are very frustrating to me and are not individuals on the leases. One is a nephew of the tenant who was been banned from the property for another arrest back last summer. After this last incident, I informed that tenant that I am not renewing their lease. The second one is similar in that this person is not on the lease, but his mother is. When he get’s out of jail, he re-offends and uses his mother’s address as his permanent residence (when he gets arrested). Unfortunately, she is on Section 8, which complicates evicting her for the actions of her son.
Trust me, I don’t like seeing my name in that email (I receive it every week also-so I can keep an eye on what goes on). I own 6 buildings in NE Minneapolis (14 rental units), I spent $1000s in the first 2 years of owning those properties cleaning out the problem tenants from my buildings including drug dealers, convicts, and generally dead-beat tenants.
Have you checked out the website http://nopaytenants.com/ for people you don’t want to rent to?
hi Scott, I have refinanced several properties for a friend of mine in St Paul who has several rentals in como and he has shared a few tips in no particular order:
1. If they don’t have first and last plus damage deposit available in a cashier’s check, walk away before showing.
2. Make rent due by the 5th with a reduction for paying by the 1st. (i.e. rent is 950 due on the 5th, rent received before the 1st is only 900)
3. Under no circumstance be lenient with a tenant. This only encourages and ok’s future bad behavior.
4. Allow tenants to make any repair for under 25 dollars (or 50 or 100 depending on the tenant) to your property and deduct it from the rent with a receipt. Have heard that people will call you, as the landlord, for a light bulb burnt out. Having a policy like this for small items saves you time.
I hope these tips help you and your readers.
One other good tip…if the renter does not call you and doesn’t completely trash the place then they get their damage deposit back in full, no questions asked. Having this policy will free up more of your time than it will cost you in money so you can focus on finding the next investment property in MN to buy.
I love your article, and couldn’t agree more! It is very hard to take personalization out of the equation when renting an investment and keep it purely business. The same hot buttons hit me when it’s a single mom who can’t afford the property. If they can’t afford it, they are making a poor business decision by even trying and any landlord who lets them in is doing them a disservice. It may not seem that way, and it’s easy to make excuses to that end, but just say no.
I’ll also throw in there, because I didn’t see it in the article. Screening tenants is vitally important. An applicant can lie all the way to sunset on their application and seem nice as can be. They can say they have always paid their bills on time all their life and they are a perfect citizen. But their screening reports may tell a different story. Always screen all adults moving in and if the screening results differ from the application they filled in, it’s a HUGE red flag.
I forgot all about the post I made previously to this board, just thought I’d clarify some of the issues I brought up.
(I’ll be using the same numbers from my original post so some numbers are skipped as I feel no need to comment on them):
4. I’ve always given proper notice to leave a place. I’ve lived mostly in residential hotels (zero notice required) and month-to-month tenancies (30 days required). The few times I’ve been stuck on a lease, I’ve somehow stuck it out. I’m on a lease now but I’m in a *good* situation, no desire to leave.
5. I wouldn’t even try to rent at $650/mo. + $150/mo. utilities on my income. My current place is $449/mo. + $14-70/mo. utilities depending on the season, and I have a hard time but I’m making it. However, a rigid 3 times rule would limit me to $333/mo. (at the time I wrote the original; $354/mo. now). That would leave me no option but a rooming house, exactly the kind of place where I have neighbour problems. The problems I’ve had with neighbours weren’t the kind that could be “worked out” because the neighbours hated and harassed me for who I am intrinsically. I did my best to get along with them. I find the only feasible places for me to live are where people mind their own business. It seems the only way to get that is a self-contained apartment with its own kitchen and bath because shared facilities force “social” interaction.
6. I admit I have problems in this area, but it’s not that I’m *deliberately* nasty, I just don’t have a “clean” mentality. I’m just “wired differently” in this regard. “Keeping up” a place
day to day is just too taxing for me (the best metaphor would be how someone who doesn’t exercise would view doing a daily gym workout). That said, I intellectually understand that most of society cares and I *try* to accommodate that the best I can, but in practice that usually means when I leave.
7. I don’t have any illegal sources of income. The reason I put (legal) in parentheses is that I understand there are legitimate reasons to discriminate on the basis of illegal income. For example, you probably don’t want to rent to a drug dealer. Of course there may be other types of “illegal” income (in the sense of “unofficial” or “undeclared”, not necessarily where the activity producing the income is inherently criminal or disruptive) a tenant might have… which is another reason why the “three times rule” bothers me.
Some other comments based on comments other people have made:
A. What if someone has an eviction or something else bad but it was a couple of places back, and they did everything right at their last residence? Should that be taken into account?
B. What if the circumstances that caused the past problems have changed? For example, someone who had trouble paying rent due to low income in the past but recently got a major increase in their income? Or someone who caused trouble due to drugs or alcohol who is now clean and sober?
3. As to criminal pasts, what if it was long ago and appears to not be a current pattern? I know someone who was denied an apartment because they stole a car *14 years ago* even though they’ve had no trouble since. Is that reasonable?
With all your questions, I am fine with most of those issues if they have been in the past (more than 2 years prior). The only one that I still would not rent to is a violent crime felon, regardless of time in past (maybe with the exception if it was 15+ years prior with no other issues on his/her application).
Sure would like to keep this post alive! I have a question though. I have been so disgusted lately about the amount of rent-chasing, excuses, and middle-of-the-night move outs. I have stumbled upon bad-tenants.org and wonder if that is the best/only free reporting agency available. Do any of you use this service or do you use another? Thanks for all the great info!
I have never used this service. Quality of tenants is many factors. Most significant is the location of the property. Tenants in North Mpls are very different than Edina. Not to say there are not bad tenants in Edina and great ones in North, but they are just different. Also, I have found that the amount of rent and the quality of the property also drives how good of a tenant you get.
Lastly, make sure you are doing a very thorough screening. If at any time, something doesn’t smell right, do not rent to them.
Thanks for writing this article. I too have experienced a bad streak in renting one of my units. The last tenants trashed the place after I evicted them through the courts, the previous tenant reached a settlement before going all the way through an eviction, and also trashed the place (2 full interior paint jobs in 8 months for me). I am almost ready to turn the place into a sober living house, put 4 beds in each room, charge 700 for each bed per month. And make sure that the just paroled drug program tenants have chores, along with painting and cleaning. Abide by the rules or leave. Since the neighborhood has turned to crap anyway, us landlord should take advantage of the situation. So, for a 3 bedroom house, thats 12 beds, with a rental value of about 6 times the average monthly rate for the area. Most of the tenants will be leaving since they will violate parole, and the state of california will pay for their stay.
In my Columbus, Ohio neighborhood, the landlords I know have a nearly 100% failure rate with tenants. This is because responsible people buy and people with problems rent. Then the landlords stop putting money into the houses and they rapidle deteriorate. When houses in a neighborhood go rental, it means the end of that neighborhood as a nice place to live. People see real estate shows on TV, drink the kool-aid and think they’ll get rich being landlords. All they do is wreck properties and lose their money. Its a fool’s game…
It is defiantly hard to say “NO” when you’re leases are expiring. Especially when evicting others for non-payment. Nice writeup.