End of Year Housekeeping – Old Tenant Debt
Posted by Bill Gray on December 18, 2009
[tweetmeme source=”your_twitter_name” only_single=false http://www.URL.com%5DWhile the end of the year is a very busy time of the year for most of us on a personal level, it is usually a slow period for landlords. Many of us spend this time working on our taxes, cleaning out our desk drawers and preparing for the New Year.
One often overlooked piece of housekeeping that impacts your profit is old tenant files which still have balances due. All too often, landlords simply file them away and forget them. By storing these files without taking any action, you are literally throwing money away. You may think it’s impossible—that you’ll never see a dime of the monies owed, but some percentage of the debt you are owed is collectible. It may not be collectible today, but over the next seven years, some of that money most likely will be paid.
Take the time to do some end-of-the-year housekeeping. Start by separating old tenant files which have no balance due from the ones that owe. One by one, go through the files with balances to make sure each contains a signed lease; then, make a breakdown of what is owed.
There are three different options to select from when collecting your lost profit. Each has its pros and cons.
- Got to court and sue the previous tenant for the balance owed. This option can be expensive and time consuming, but with the proper outcome, it can be an effective way to collect tenant debt.
- Hire a collection agency that specializes in collecting tenant debt. If you do not have an agency, spend an hour online and find one. If you don’t know what to look for in an agency, read my blog article on how to hire a collection agency to collect tenant debt. “How do I Hire a Collection Agency to Collect my Tenant Debt?”
- Report the debt to the three major credit bureaus, Experian, Equifax and TransUnion, as a collection account. The ding on your previous tenant’s credit report should remain there for seven years after they move out. There are several online resources for reporting tenant debt to the credit bureaus. It’s worth your time and effort to research them.
Too often, I hear landlords advising other landlords to forget any debt they are owed and move on because it is not collectible. From experience, I can tell you this is not true. While all of it may not be collectible, a percentage of it is, maybe not immediately, but over time, you can recoup some of your profit.
There’s only one way to ensure that you won’t collect any of the debt, and that’s to do nothing, storing the files away and resigning yourself to accept the loss. Trust me when I tell you that doing nothing will cost you profit.
Email me with your tenant screening and tenant debt questions.
The Landlord Doctor