Evict vs collections?

Question

Hi everyone! We have two properties in IN.  In one property, the tenant wasn’t paying rent and upon inspection by the PM, the property had significant damage, so we asked them to move out and their account was put into collections.  To date, nothing has been collected and I’m sure at this point it won’t be.  But after a few months, after the damages were repaired, the property is back on track with a tenant.

More recently, our other tenant has stopped paying rent and the tenants communication with the PM is very sporadic.  Lease ends at the end of March. At this point, the options are to ask them to move out and go to collections again, evict, or potentially cash for keys (but have not done this yet either). We have never had to go down the eviction route, so I wanted to understand our options and what additional headaches we may come across.

Obviously would love to minimize our losses, but also realize at some point we may need to cut our losses.  Would love some advice!

Nathan Gesner · Answer

Account Closed What are you paying the property manager for? They should already have a process developed to handle this situation. they should be calling you and saying, "Anita, your tenant has stopped paying rent and communication is sporadic. We would like your permission to..." It sounds like they're asking you for guidance which is an amateur move.

Definitely start the eviction immediately. Most tenants will disappear once they know you're not messing around. If they hang on, you can push them out through the court. You can only collect up to the point of eviction, but at least you'll put a stop to any additional damages.

How long was the first tenant not paying rent before your PM decided to act? How long since their last inspection? When a tenant stops paying rent, I'm setting up an inspection to see if they're trashing the place, packing up to leave, etc. Your PM has got to get it together or you should be looking for a new one.

Karl B. · Answer

I don't mess with collections, who tend to either charge a high percentage or buy the debt outright for cheap.

If a tenant isn't paying, immediately begin the eviction process.

I evict and sue the tenant for money owed (In my PA market it's done at the same hearing which is nice) and 30 days after the judgement I go to the prothonotary's office and get a lien against the tenant(s). That way if they ever receive a judgement (or an insurance settlement) or they sell a property I'm first in line to get paid.

Greg M. · Answer

What do you mean "put into collections"? Have you actually sent it to a professional collection agency?

I would file the eviction for the existing tenant. Why wait? You're not collecting rent and the end of the lease is two months away. What makes you think they are leaving at the end of the lease? They got free rent right now! A tenant that is not paying you rent will just as easily be willing to overstay their lease.

File the eviction and in court seek a judgment for all monies owed to you.

Account Closed · Answer

@Karl B. thank you for this information! I will definitely be looking into this.  We have filed for eviction for tomorrow morning.  I feel a load being lifted.  I hate the expense of it all, but the cost of doing business I presume.

Account Closed · Answer

@Nathan G. thanks for the info.  Yes agreed we need a new pm.  It’s a long story with so many moving pieces and we should have done it sooner, but we will absolutely be looking for one. Most of the time I feel as though we are guiding them.  Especially since we don’t know the laws of the state, I spend too much time doing their job.  Thanks for the info.  Much appreciated!

Account Closed · Answer

@Greg M. thanks for your reply.  I could have sworn our PM said once eviction begins, no additional money can be collected.  This helps.  I appreciate it!

Scott M. · Answer

To me, you are asking about the wrong two things with eviction vs collection.  They are not mutually exclusive and if you are going to pursue collections you generally do that after an eviction or some sort of judgement is in place.

Instead, at least to me, I would look at these two issues 1) Possession   2) Money owed

You always need to start the delinquency process that ends in eviction the day the tenant is late.  Your PM should have a process in place already, if not, new PM is needed for sure.  You start the legal process that ends with you getting possession to give both parties an end date for the games.  The longer you delay the start of this process the longer the process takes and the more money you are owed.  This also gives you or the PM leverage with the tenant to get the money that is owed.  Maybe they pay, maybe they don't, but at least you have protected your downside by starting the process early.

Collections can have several meanings.  Collecting late rent while a tenant is in the home or collections on a judgement after the tenant is out.  Maybe you meant trying to collect late rent while a tenant is in the home VS filing for evictions?  If that is what you mean they are not mutually exclusive.  You start one (eviction) to give you leverage on the other (collections)

Carini Rochester · Answer

Tenant screening.

Since I started doing a better job with screening/selection, my problems with tenants have almost disappeared. Let me guess. The PM again? The PM may be to blame, but who is actually responsible for this property, for showing a profit, for your sanity?

Evict vs collections?

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