Bill Gray – The Landlord Doctor

Insider Advice on Collecting Tenant Debt and Screening Tenants

Ten Common Landlord Mistakes

Posted by Bill Gray on January 3, 2010

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Effectively Dealing With Tenant Delinquencies And Eviction Proceedings

By Jon L. Farnsworth, Esq.

(Editor’s note: This article was initially published in the September 2009, Minnesota Real Estate Journal, and has been edited and reprinted with the author’s permission.  While the article mentions Minnesota law, and includes commercial leasing issues, the discussion points are generally applicable in other states and to residential lease matters.)

The poor state of the economy threatens tenants’ ability to satisfy their lease obligations. Unfortunately, landlords are feeling pinched by tenants’ mounting delinquencies.

Some tenants lack the cash flow to make lease payments, while other tenants voluntarily withhold rent for business reasons (i.e., conserve cash flow; obtain a lease modification with more favorable terms for the tenant; etc.). This article summarizes ten common mistakes made by landlords when dealing with tenant defaults and eviction proceedings as well as offers insights of how to effectively manage tenant delinquencies.

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New York Times – The Landlord Doctor

Posted by Bill Gray on December 31, 2009

[tweetmeme source=”your_twitter_name” only_single=false http://www.URL.com%5DThe New York Times recommended this blog as a resource for “Accidental Landlords”.  Here is a link to the article: “Resources for Accidental Landlords”

Thank you for continuing to visit my blog, leaving comments and suggesting topics for future articles.

Bill Gray

www.thelandlorddoctor.com

Bill@thelandlorddoctor.com

Tenant Debt & Screening Forum www.theinformedlandlord.com

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Tough Economy Makes Tenant Debt Tough, but Not Impossible, to Collect

Posted by Bill Gray on December 28, 2009

[tweetmeme source=”your_twitter_name” only_single=false http://www.URL.com%5DThe downturn in the economy has caused many landlords to lower their credit requirements for new tenants.  Of course, lowering credit requirements increases financial risk. Renting to a tenant with little or poor credit increases the likelihood that the tenant will at some point leave owing the landlord money.

This change in rental criteria is understandable, considering the need to keep all units rented.  But know that when you lower your standards and in turn incur debt, this debt will be tougher to collect than if you had rented to a tenant with good or great credit.  If you use a collection agency to collect the debt, you should also lower your expectations about how much you feel they should collect.

Collection agencies are reporting that they are receiving many more files than two years ago.  The average amount of debt in these files has also increased.  Relaxed rental standards, coupled with the high unemployment rate, have put collection agencies in a tough spot.

The American Collectors Association reports that the collection industry debt recovery rate is down 30-40% over last year.  Angi Pusateri, National Sales Manager for RentDebt Automated Collections, confirmed that her company is experiencing a similar decline in debt recovery.  However, RentDebt Automated is weathering the storm well and has added employees in the last year at their offices, which are located in Nashville, Tennessee and Dallas, Texas.

Jeff Cronrod, the President of Rent Recovery Service, a national collection agency specializing in the collection of tenant debt, estimates that nearly 40% of the debtors his company is trying to collect from are unemployed.  “It is not that these debtors do not care about the debt or their credit. They simply have no means to pay the bill,” Cronrod explained.

Saul Wertzer, President of Rent Recover Solutions in Atlanta, Georgia (not to be confused with Cronrod’s Rent Recovery Service), told me that his company has also seen an increase, not only in the number of collection files, but also an increase in the average amount of each file.  I have heard this from every company I have spoken with, in every corner of the country.  Wertzer went on to say that it is important for landlords and property managers to think long-term about debt they are owed by previous tenants.  Over time a good percentage of tenant debt is collectible.

If your collection agency has served you well in the past, stick with them, even though recent recoveries may have dropped.  Trust me, every agency is experiencing a tough time collecting debt.  Don’t jump ship and hire another agency, because eventually the economy will improve and many of these tenants who owe previous landlords will get back on their feet.  When they do, they will work to clean up their credit and pay their debt. But don’t wait until then to do something about it.  Now is the time to make sure the debt you are owed is reported to all three major credit bureaus. Whether your collection agency reports the debt or you report it via an automated service, make sure every dollar you are owed is reported.

Doing so will greatly increase the odds that you will get paid the debt your previous tenant owes you.

Email me your tenant screening and tenant debt questions.

Bill Gray

www.thelandlorddoctor.com

www.theinformedlandlord.com

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Tenant Debt & Screening Forum www.theinformedlandlord.com

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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.

  1. 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.
  2. 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?”
  3. 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.

Bill. Gray

The Landlord Doctor

www.thelandlorddoctor.com

www.theinformed.com

Bill@thelandlorddoctor.com

Copyright 2009

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New Landlord Forum – Tenant Debt and Tenant Screening

Posted by Bill Gray on November 25, 2009

[tweetmeme source=”your_twitter_name” only_single=false http://www.URL.com%5DThanks for reading my blog.  I try hard to respond to every email I receive, but I receive more and more every week.  It is getting hard to keep up.  I started a forum that will address tenant debt and tenant screening issues to help answer the commonly asked questions.  Please help me get the forum off the ground by registering and posting your questions.

The forum url is: www.theinformedlandlord.com

Thanks,

Bill Gray

Bill@thelandlorddoctor.com

www.thelandlordoctor.com

Copyright 2009

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Do not Make These Mistakes When Screening New Tenants from Abroad!

Posted by Bill Gray on November 22, 2009

[tweetmeme http://www.URL.com] Screening possible new tenants who have recently come from another country can be challenging.  Even those who may have been in the U.S. for some time may be a challenge — if you are not judicious enough to very carefully read what they have submitted on their application.

1. Dates: When most Americans write a date, they normally put it in month/day/year order.  In other countries, however, often the month and day are inverted so that dates are printed day/month/year.  The American military also uses a dating system that shows day/month/year.

Also be aware that the numbers themselves may look different than the way you are accustomed to seeing them.  Many other countries put a hook on the bottom of a ‘9’ or a line through the middle of a ‘7.

Since several types of screening reports are matched to birth dates, you can understand that entering the wrong date could hinder your ability to receive complete data about your applicant.  I prefer a rental application that clearly asks for the day, month and year.

2. Hyphenated names and spelling: Other than possibly nicknames, most of us print or write out our name the same way every time.  Not so in some other countries.  Often the name is

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Are Landlords Increasing Occupancy: Or Are They Increasing Tenant Debt?

Posted by Bill Gray on November 21, 2009

[tweetmeme source=”your_twitter_name” only_single=false http://www.URL.com%5DThe poor economy has caused landlords and property managers to take drastic measures to lease units and keep them occupied. Some of the measures are understandable, considering the circumstances, but others make absolutely no sense at all.

This week I reviewed approximately 80 files from previous tenants who left a large residential property in Sarasota, Florida, owing money. I sat with the manager and discussed how the residential housing market has been turned on its ear, and in some ways seems to be in a downward spiral. I noted that not only had the number of debtor accounts more than doubled, the amount of the average debt had increased by at least a third.

The manager explained that the property had tried to increase its occupancy by allowing tenants to try and work out payment arrangements. As I looked at her over this mountain of files, I asked her, “How did that work out for you?” She understood my sarcasm and explained that the owners of the property had pressured her to do something to keep their residency rates up. She agreed that allowing tenants to pay late had only delayed the inevitable and increased the amount of bad debt the property must now write off.

I would argue that in such cases, if closely analyzed, the cost is actually even higher. The tenants she allowed to get behind on rent grew accustomed to management’s tolerance. When she finally drew the line and required payment, she was then often forced to file eviction proceedings before these tenants would leave the property. The cost of filing these evictions must be added to the lost rent and damages, etc. What if she had evicted the tenant after the very first month the rent was not paid and found a new tenant that did pay the rent on time? I realize this question is easy to ask in hindsight, but it is a question that should be asked when these kinds of management changes are considered.

I explained to her that not only had the new policy cost the property money in bad debt, the policy had also made the debt less collectible. As the amount each debtor owes increases, so do the odds that they will never pay. The amount becomes so high that many debtors will simply throw up their hands and live with the debt, rather than come up with a plan to pay it.

I understand that these are very trying times and difficult decisions must be made; but please make decisions with your eyes wide open and with an understanding of what the subsequent consequences could be.

Contact me with your tenant debt and screening issues.

Bill Gray

http://www.thelandlorddoctor.com

Bill@thelandlorddoctor.com

Copyright 2009

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Homeowners Could Quickly Become Renters, While Mortgage Companies Become Landlords

Posted by Bill Gray on November 18, 2009

[tweetmeme source=”your_twitter_name” only_single=false http://www.URL.com%5DChris Thorman from www.softwareadvice.com/property-management/ recently posted an interesting article about a program that could possibly turn thousands of homeowners into renters.  The twist is homeowners could be renting their own home from their mortgage company.  Here is a link to Chris’ article: http://www.softwareadvice.com/articles/property-management/breaking-down-fannie-maes-deed-for-lease-program-1111609/

This article interests me in two ways.

1.  I own a home in Florida that I can not give away. I would be VERY happy to rent it from my mortgage company.

2.  If this program takes off it could be a windfall for property managers of single family homes.

Since I work exclusively with landlords regarding tenant debt and tenant screening, the idea of renting my home from my mortgage company raises some interesting questions.  Will I be screened and if so, by what criteria?  Could my mortgage company evict me if I am late on my rent?

As this program unfolds please email me anything you learn.  I am also very interested to hear from property managers as how you intend to capitalize on this opportunity to increase the number of rentals you manage.

Bill Gray

www.thelandlorddoctor.com

Bill@thelandlorddoctor.com

Copyright 2009

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Don’t Miss an Important Component to Screening New Tenants!

Posted by Bill Gray on October 7, 2009

[tweetmeme source=”your_twitter_name” only_single=false http://www.URL.com%5DA vital part of tenant screening requires more than learning about applicants, their employment and credit history—it’s learning everything you can about theirtele-interview2 previous rental history. Yes, former landlords who have rented to this tenant before have a wealth of information which should be weighed carefully before you approve an application.

Think about it. For six months or six years, former landlords have received or not received payments from your applicant. They know how the tenant left the property and about any complaints made when they leased it.  Their file and recollection can provide you with more insight than you’ll find by calling employers or ordering a credit report.

Start with the end in mind and weed out any applicants who might not treat your property with a gentle, kind, and caring hand. Was their former landlord impressed with the condition and cleanliness of the property when the tenant moved out?  Or were they overwhelmed and disappointed with the lack of attention and personal consideration they showed by leaving the unit a mess?

Screening former landlords can reveal much more, though, and the information you gain is worthy of your time. Does the tenant have a history of short-term housing, indicating problems with payment or other terms of the lease? Was the tenant a nuisance to other tenants? Did the tenant honestly disclose past information to previous landlords, and did that information hold true?

I should note here that all applicants are not Honest Abe.  Dishonest applicants know that telling the truth on applications could hurt their chances of being

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Landlords Who do Not Screen are Shooting Themselves in the Foot

Posted by Bill Gray on September 23, 2009

[tweetmeme source=”your_twitter_name” only_single=false http://www.URL.com%5DemailOf the 20 to 30 emails I receive per day from landlords with tenants who owe them money, 5 or 6 are from landlords who did not screen their tenants before they rented to them and are now upset that the tenant burned them.  I shake my head when I read these requests for help.

For whatever reason, the landlord rented to someone who “looked okay” and then got upset when the tenant burned them.  Would these landlords buy a used car sight unseen?  Or show up at a dog shelter and say, “give me any dog, I don’t need to see it or know anything about it.”?  Of course they wouldn’t.  As absurd as this sounds, it is basically how they run their rental business.

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