Dec 28

Landlording and the unavoidable eviction…

Landlording-The unavoidable eviction!

Landlording-The unavoidable eviction!

Landlording  and the unavoidable eviction…

When I tell people that I buy cheap houses, fix them up and rent them out, known as the buy and hold strategy, people usually light up and I hear a lot of similar responses, “Oh, I have always wanted to do that! The thought of fixing houses and giving people a chance when no one else will and making it easier for someone to put a roof over their head, has always appealed to me. You are so lucky!”

Before you become a landlord, ask yourself this one question:

“Could you evict a single mother with 4 kids, on Christmas?”

If you answered NO, landlording is not for you!

It may sound harsh, but the reality of owning rental properties is not all rainbows and butterflies like most guru’s and Hollywood reality shows, lead you to believe.  Dealing with tenants is not far off from dealing with children. You must set the rules (a lease), and follow through with consequences when those rules are not followed (eviction). I don’t know many people that start a business to do people favors, most people start a business to make money.

Most landlords hate filing for eviction because it cost them money and my response to that is, “I’m glad you can afford to support them!” By not filing an eviction on a tenant that is not paying rent, that is exactly what you are doing, supporting them.  Would it be acceptable for someone to steal merchandise from a store?  Absolutely not and it is even less acceptable for tenants to skip out on paying rent.

Landlording needs to be run as a business, controlling income and expenses. Some of the tools that have helped me minimize loss, I have implemented from Mike Butler’s, Landlording on Auto-Pilot: A Simple, No-Brainer System for Higher Profits and Fewer Headaches. I give my tenants a welcome packet that explains normal wear and tear and the life expectancy of items in the house, such as sheetrock, paint, light fixtures, carpet etc. and point out that if they are destroyed during their tenancy that the cost to fix or replace the item will be deducted from their security deposit. I also like, and incorporate his move out check list into my business. Not only do I mail this for tenants who give notice but also mail it to tenants who are being evicted. I must say it is a great tool for minimizing turnover costs. I give my tenants a notice on the effects an eviction can have on their credit score for non-payment of rent. This seems to encourage tenants to give proper notice, which helps to keep expenses down.

This is a business and you will have expenses, evictions are one of them.

When I do a lease signing with my tenants, I sum up the lease in two sentences, “if you don’t pay, you don’t stay!” and it’s really as simple as that! I also tell them, “you understand how hard it is to support one family, well if rent is not paid, do not expect me to support yours, the eviction paperwork will be filed on the 3rd if rent is not received by the 1st.” Most tenants understand and are not surprised when the eviction paperwork shows up on their door on the 4th.

Not every market is the same. I happen to invest in areas where it takes no more than 40 days to evict a tenant who is not paying rent. Between court costs, loss of rent (2months), and turnover costs you are looking at a $1,600 loss if you file the eviction right away; add another month’s rent for each month you wait to file. At a $1,600 loss do you really want to wait to file an eviction?  Don’t be afraid to set rules and follow through with consequences. A tenant can always pay the rent and court costs before the court date, cancelling the eviction. Most times that is all it will take to ensure they pay on time in the future.

Remember to set rules, have consequences and follow through with them. Evictions should not be avoided, and are a key component to running a successful real estate business.

~Happy Investing!

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