[tweetmeme source=”your_twitter_name” only_single=false http://www.URL.com%5DOur country’s current economy has had a severe impact on the real estate and housing market. The nightly news covers the blight of communities impacted by a high number of foreclosures and the emotional stories of people who are facing such a crisis. Unemployment, lack of medical insurance, and the credit crunch caused by sub-prime mortgages add to the crisis, making the current real estate market grim. As a result, the downturn of the economy has also significantly affected landlords and property managers, presenting them with an unprecedented number of challenges.
As ‘The Landlord Doctor,’ I’ve reviewed over 70,000 cases of tenant debt, encompassing more than $200 million dollars. Every day, I witness the negative impact of our economy on landlords and property managers across the country who seek my advice and instruction in reducing or collecting tenant debt. As I sit on boards of professional associations and talk to the people who attend my conferences, I’m astounded by the increased spark of questions and concerns raised by landlords because of the economy.
As more people are displaced from their homes, those questions and concerns will continue to rise. The need for extensive tenant screeningcollect tenant debt will increase as people become victims of the economy, and the need to will be a pressing issue for landlords. There has already been a tremendous increase in landlords seeking my assistance in these areas, which is why I thought I’d share two common questions which have been posed in the past few months.
“My tenant is three months behind on rent. He’s always been a good tenant, but has lost his job. What should I do?”
First, like you, I sympathize with your tenant’s situation. However, three months is a long time to receive free housing. Remember, while you’re trying to be a nice guy, being a landlord is still a business. My experience shows that once a tenant is allowed to become two months in arrears on their rent, the odds are slim that they will become and stay current. In fact, these tenants usually owe much more than two months rent when they leave. When you first become aware of a change in their financial situation, make it clear that while you empathize with their dilemma, you cannot afford to allow the rent to go unpaid. Be straightforward from the onset, notifying the tenant that carrying a balance due on rent is not an option. Additionally, a good attorney will advise that past case law has indicated that routinely allowing tenants to pay late sets a precedence which could force you to continue accepting late rent payments. Even worse, allowing one tenant to pay late, while refusing other tenants the same latitude, may cause a Fair Housing lawsuit, as all tenants must be treated equally.
This situation can be more complex. While it’s certainly something no landlord wants to encounter, it happens. Though this situation is more common during tough times, efficient property managers have learned to minimize it by applying good business practices from the time the prospect walks through the door, until he or she moves out of your rental. If it happens, I recommend that you take pictures and document all damages. Follow your state law regarding proper notification to the tenant about the application of their deposit. Insofar as collecting the debt, you have three options: 1) sue the debtor in small claims court; 2) hire a collection agency (only an agency that specializes in tenant debt), or report the debt to all three credit bureaus and attempt to collect it yourself.
While I know that each of those situations has its own unique set of circumstances, a common theme prevails—an increasing number of landlords and property managers are experiencing a rise in cases of tenant debt. These new challenges should make us more aware of the need for prevention, education and remedies in screening and the collection of tenant debt.
Use this difficult time to hone your skills as a property manager and your focus on the details. Improve your business practices by making small changes and improvements. As a result, you’ll decrease incidences of tenant debt and increase your profits. These are critical areas landlords must address to survive in any economy.
Email me your tenant screening and tenant debt questions.
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