What would you do? Please help!

Question

My tenant's lease expires May 31st and when I asked them about renewing they informed me that the father had lost his job. They are asking to do month to month until he finds another job.

What would you do in this situation??

I'm tempted to allow it because they have been good tenants, but the father has only been at that job for a year (he was just starting it when they moved in last year) and I am starting to wonder if he has problems holding down jobs.

I would love some perspectives here.

Jacob Forbis · Answer

@Stephen S. @Chris K. Thanks for chiming in. I think I am going to allow the month to month but chat with them, and ask that they give me a heads up if they are not going to pay rent. I do think that they are good people, and I really don't want to have to mess with an eviction.

I'm also going to try to figure out my plan if they end up not being able to pay. Part of me wants to sell and get out of the area, but I would probably have to take a net loss if I did that, and it's hard for me to swallow that. If I rent for a few more years I'm hoping I can come around with a net gain.

Chris K. · Answer

I only do month to month anyway so that wouldn't be an issue to me. Even if you made them do a year lease and they were unable to pay they would move anyway.

Bill S. · Answer

@Jacob Forbis I'm sure you already know this but they may not have a good grasp of their own financial situation but will undoubtedly assure you all is well.

If it were my place, I would give them notice of the end of the lease and tell them you will write the check for the SD when you get the keys at the end of the month. I would then tell them you will give them a good LL reference if they cooperate with showings between now and then. I would then start looking for a new tenant, today. Their job situation is going to drag you down. If they can't afford a new place, they can't afford to stay in yours, and they need to find family or friends to stay with.

For people living hand to mouth, which it sounds like they are, even 2 weeks of lost income sinks the ship and means some bills don't get paid. Rent is a big chunk so that often is one that hits the chopping block. Better for them to face the music now while there is time vs when the Sheriff is at their door and the stuff is being tossed to the curb. I would tell them that.

Jacob Forbis · Answer

@Bill S. You make a very solid point. I plan on sitting down and talking with them to see if they really will be able to make rent. I will remind them of the eviction process as well - and that I can't afford to subsidize their rent.

Bill S. · Answer

@Jacob Forbis for me the lease vs mtm and the rent increase is a mute point. How will you get paid in the future if they stay? Based on what you have said, it's doubtful they will be able to pay rent. Might be time for them to move and you find a new tenant even if it costs you a months rent. I doubt they will make June rent. Call me the skeptic.

Doug Minton · Answer

@Jacob Forbis Understood! Also, mistakes are good as long as you don't repeat them. Consider them learning experiences. When I first started, I made mistakes as well. One costed me over 40k in losses. If I didn't have an exit strategy, it could have been much much worse. With that said, you may want to think exit strategy if you think it's going to be a challenge renting if the unit turns into a vacancy. Reach out to other investors in your area for their advice in that market. They may even be able to take the property off your hands if you are looking to exit.

Whatever the case, don't get discouraged. Just keep rolling with the punches.

Jacob Forbis · Answer

Thanks @Doug Minton , @Sam Leon , and @Craig Brouillette

The alarm system was to give them peace of mind after the home was broken into around Christmas time last year. Also, the outside AC unit was stolen last september. I feel like the alarm system benefits both of us, and it is a month-to-month system with easy self install, so it was a relatively low cost expense.

I am worried about them being able to make rent, as to be honest they were probably cutting it too close even with his job. He is seeking unemployment.

I am not sure about "easily renting it out to someone else" as to be honest this turns out to be not the greatest area.

Ok, I admit it, I made quite a few mistakes with my first rental. :/

Sam Leon · Answer

You can raise the rent for a variety of reasons.  Such as converting from a annual lease to a month to month, or to catch up with market rent rate for that neighborhood...but I wouldn't raise the rent because their chance of paying rent on time is now relatively lower than before the father lost their job.

I would do whatever it is necessary to convey to them paying rent should be their #1 priority, before they pay for their leased vehicles, before they pay their cable TV bill, before going out to dinner...

What would you do? Please help!

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