Tenants Using our SFH as a Hostel

[Vi Huang]

I just fired my previous property manager and during the transition to a new property manager, we just learned that our tenants have been using our home as a hostel. One of the tenants is a manager at a restaurant and lets his employees stay at our home. They have 7-8 adults in our home every night. We have given them a 60 day notice to vacate but the tenant asked us to reconsider b/c the location of the home is convenient. They've significantly worn out the carpet so we'll need to replace all the flooring in the house. They also don't use the vent when they shower so the lights in the bathroom are rusted and the place is filthy. Because we'll need to redo the backyard and have significant repair inside before we find new tenants, I'm considering letting them stay if we can increase the security deposit significantly and charge a higher rent to offset the accelerated wear and tear on the home. This will help delay the all the repair costs. Is this a bad business decision? I am concerned with potential squatters and CA law isn't landlord friendly. Just trying to figure out if there's any benefit or risk we should consider if we let them stay assuming we can charge higher rents.

[Michael Smythe]

May not be a bad strategy if they are paying on time.

You'll also want to get credit apps for every adult that may be staying in the house and add them to the lease. So, if you have to evict, you know who to put on the paperwork.

[Steve Meyers]

@Vi Huang personally I would get them out sooner rather than later, by the time you get them out it will be Spring and you will need some time to get the place up and ready for new tenants and by that time it will be end of Spring/Summer, prime time to rent it out again. Don't give them a reason to squat and make it harder for you to get rid of them.  If they know they only have a year or so left they may try and figure out a way to squat, but just my opinion.  Part of the reason I don't own rentals in CA

[JD Martin]

Quote from @Vi Huang:

I just fired my previous property manager and during the transition to a new property manager, we just learned that our tenants have been using our home as a hostel. One of the tenants is a manager at a restaurant and lets his employees stay at our home. They have 7-8 adults in our home every night. We have given them a 60 day notice to vacate but the tenant asked us to reconsider b/c the location of the home is convenient. They've significantly worn out the carpet so we'll need to replace all the flooring in the house. They also don't use the vent when they shower so the lights in the bathroom are rusted and the place is filthy. Because we'll need to redo the backyard and have significant repair inside before we find new tenants, I'm considering letting them stay if we can increase the security deposit significantly and charge a higher rent to offset the accelerated wear and tear on the home. This will help delay the all the repair costs. Is this a bad business decision? I am concerned with potential squatters and CA law isn't landlord friendly. Just trying to figure out if there's any benefit or risk we should consider if we let them stay assuming we can charge higher rents.

🙄 Man, sometimes I just have to shake my head at the things people say. Who cares if the house is convenient for the tenant turning your house into a flop house? This guy isn't letting these people stay for free; he's charging them per night, there's a reasonable chance half of them or more are not legal residents, and they're wearing out your property. 

My prediction is eventually the manager will be fired or quit the restaurant and you will have 8 squatters in your house that you are then trying to evict. So you either bite the bullet with one guy now or 8 guys later. 

[Theresa Harris]

you will also have a problem with your insurance having that many people live there.  I'll also bet he's making money off the deal.

[Mathios Yonan]

Quote from @Vi Huang:

I just fired my previous property manager and during the transition to a new property manager, we just learned that our tenants have been using our home as a hostel. One of the tenants is a manager at a restaurant and lets his employees stay at our home. They have 7-8 adults in our home every night. We have given them a 60 day notice to vacate but the tenant asked us to reconsider b/c the location of the home is convenient. They've significantly worn out the carpet so we'll need to replace all the flooring in the house. They also don't use the vent when they shower so the lights in the bathroom are rusted and the place is filthy. Because we'll need to redo the backyard and have significant repair inside before we find new tenants, I'm considering letting them stay if we can increase the security deposit significantly and charge a higher rent to offset the accelerated wear and tear on the home. This will help delay the all the repair costs. Is this a bad business decision? I am concerned with potential squatters and CA law isn't landlord friendly. Just trying to figure out if there's any benefit or risk we should consider if we let them stay assuming we can charge higher rents.

 Evict, Evict, Evict, this is just red flags all around, especially in this economy. Just takes the person to get fired and it'll cause a prolonged problem in court, especially here in San Diego

[Carlos Ptriawan]

Quote from @Vi Huang:

I just fired my previous property manager and during the transition to a new property manager, we just learned that our tenants have been using our home as a hostel. One of the tenants is a manager at a restaurant and lets his employees stay at our home. They have 7-8 adults in our home every night. We have given them a 60 day notice to vacate but the tenant asked us to reconsider b/c the location of the home is convenient. They've significantly worn out the carpet so we'll need to replace all the flooring in the house. They also don't use the vent when they shower so the lights in the bathroom are rusted and the place is filthy. Because we'll need to redo the backyard and have significant repair inside before we find new tenants, I'm considering letting them stay if we can increase the security deposit significantly and charge a higher rent to offset the accelerated wear and tear on the home. This will help delay the all the repair costs. Is this a bad business decision? I am concerned with potential squatters and CA law isn't landlord friendly. Just trying to figure out if there's any benefit or risk we should consider if we let them stay assuming we can charge higher rents.

I don't know, for me I would increase deposit to another 40% and increase rent by 30%. I see this issue as blessing and biz. opportunity. 

[Colleen F.]

@Vi Huang   What's your replacement tenant look like?  Are you ready to rehab this house?  What kind of complaints do you get from your neighbors?  First thing I would do is replace the switch in the bathroom with an occupancy switch so they don't have a choice the fan just goes on when they are in there.  
Ask yourself is it worth it to keep them in there until when you plan to rehab.  I would raise the rent and decide when you want to have them out so you can rehab. Budget for flooring and whatever else you will need and then decide.   Target a good replacement tenant and time rehab accordingly.  

[Marci Stein]

My states who is living there . I would not be comfortable with strangers sleeping in my home. This is a violation of the lease.