What to do if tenant falls a month behind

Question

A few questions below:Are renters in general bad at managing finances? My unit cost 3k/month to rent but you can get cheaper units for much less. My tenant is constantly late, which is a clear sign of financial issues. He is too prideful to admit he doesn't have the cash and even had a family member send part of his rent for one month. Now he has a baby on the way, so I know there will be more expenses. His lease is expiring soon. Is it wrong for me to end his lease considering he has a infant?Lastly, if he ends up failing to pay rent and is one month behind on rent, do I make him pay both months together as one payment or accept 2 different payments (one for each month)?

Mike Dymski · Answer

In my lease, rent is due on the 1st and late on the 6th (and I file eviction on the 10th).  Poor rental payment history is a common cause for non renewal.  Some owners like collecting late fees.  In my experience, late payers often become non payers; so, I stick with the practice above.

Nathan Gesner · Answer

First, I don't let them get a month behind on rent. Late fee is charged on the 5th, I start eviction on the 11th.

Second, you don't have to use the court to remove someone and you don't have to wait until their lease is up. Tell him he clearly can't afford the rent and things won't get better. He can leave voluntarily and on decent terms, or you can evict him.

Theresa Harris · Answer

I'd add a late fee to the lease renewal, but if they are struggling to pay rent now, when the baby comes, they will be down one income for a bit and then have child care, so will likely have more problems.  As soon as they are late, you need to send them a notice and if they don't pay, start the eviction process.  Also talk to them and see if them paying on the 1st and 15th works better for them (if they are paid twice a month), but explain that the late payments need to stop.

If you don't renew their lease, check your local laws to see how much notice you need to give and what the rules are.

Marcus Auerbach · Answer

We also have a firm policy, always enforce late fees and deliver a notice to pay or vacate on the 6th. But we also seek to understand and collaborate. If the tenant has a reasonable explanation and a solid plan on how to recover we will work with them.

You are asking the right question: how are you planning to pay double rent next month? What's the plan? We are almost always able to work out a good plan and somtimes that is to move out voluntarily. In that case I write off the lost rent as cost of doing business, but I prefer that to the expense and hassle of an eviction, which typically ends up costing us more and takes longer, even though Milwaukee is still pretty landlord-friendly.

I have also done cash for keys, but typically very conditional. A tenant lost his job at the same time as his wife, I met with them and found out they had family in Atlanta thay could move in with, but didn't have the money to get there. So I offered to pay for the flight, if they returned a clean and empty house. They were absolutely ecstatic and super grateful. Within 3 days they were on their way, the house was empty and very clean and we had it posted for rent the following weekend.

That is the best case scenario, of course sometimes you get lied to and stalled, that's why it is important to always emply a double strategy and stay a step ahead.

Rick M. · Answer

If a tenant is constantly paying late and there seems to be a clear sign of struggle in finances, wouldn't I be doing a dis-service by offering the tenant to renew their lease and continue the vicious cycle?

James Mc Ree · Answer

@Rick M. It's not your responsibility to figure out what's best for your tenants. In fact, that can land you on the losing side of a lawsuit. If you were to say to them, for example, "I see you have a baby coming, so I'm not going to renew your lease since you are regularly late paying now....", just sign the deed over to them. You just discriminated against them based on family status.

It's good to have a heart-to-heart talk with them about what they can afford and see what they want to do. Let them convince you they are going to pay on time, but it can't be "We'll try harder." type of convincing. Maybe adding a parent a lease co-signer (and payer) might help.

Bill B. · Answer

You are preparing to give them $3,000/$6,000/or maybe $9,000 when they stop paying. Decide how much money you would willingly flush down the toilet.

Ps. As I’m sure you’ve noticed by now. You could have hired a PM and been financially and mentally better off. If you’re right and this tenant would have passed their screening. Then right away the first time they were late they would have been hit with late fees and a pay or quit notice. Do you really blame them for paying people threatening them with late fees or repossession before you? You’re just sitting in the corner asking to please be paid.

Please reach out to a couple local PM’s and see how much rent they would charge and what it would cost you. On a scale of 1-10 this tenant problem is barely a 6. If you get hit with an 8 or 9 you’re going to lose $10,000 or more, not $3-$6k.

Gregory Chadwell · Answer

I've had renters pay me late too.  Most of the time they have an explanation.  If its legit i tell them to include the late fee. Some people are just bad with deadlines.  Try to get the whole story as to why they are paying late. Sometimes Christmas rent is late because you know. (Big screen box in the garbage) I used to golf with a fellow landlord who used his late fees for golf... To each their own.  But if there is a job loss and can't pay then do the notice and or cash for keys program.  I would only renew MTM then also.

Rick M. · Answer

Thank you, I did screen all aspects and everything looked good in the beginning but the biggest problems seems to be the renter big off more than they can chew. Why do renters do that when there is cheaper around?  He had no evictions, good credit, rental history and now he is facing an eviction. I can't imagine someone with this history so fiscally irresponsible!

Kim Meredith Hampton · Answer

Rick

Treat this like a business. I think you are letting your feelings get in the way of making bad business decisions. You really should non-renew them now and let them find something more affordable. Be extremely cautious when processing your next applicant, this one seemed doomed from the start. I use the 3x rent for my first barometer, steady employment, good credit, and of course 3 years of rental history. Stick to these tools, and you should be significantly happier with your next renters