Investor · Cumming, GA · Member since 2016 · 153 posts · 34 votes
Okay, so my wife is reading about the horror stories of bad tenants and tells me that "We've been lucky". My thoughts are that a horror story is more entertaining than a story about boring perfect tenants that take care of the property and pay rent on time, which is why you normally hear about the horror stories.
So, here's the question:
Of X tenants in your time as a landlord, how many were horror stories? Present it as a percentage (Horror Story Tenants/Total Tenants).
I say 10% are wonderful tenants, i.e..always pay on time, never complain. These are the type of tenants that if I saw them on the street, I wouldn't recognize them as I never talk to them or see them. Then there are the 10% who are a nightmare. Constant calls with nonsense such as my cereal is stale and Its the landlords fault because the humidifier isn't good enough or the cat next door meows too much or the handyman smells. However, most tenants fall somewhere in between. So it's a bell curve.
Great question. Lots of people have horror stories about tenants or investing in general. But how common are they? I would say the better property management or screening you have in place, the lower the percentage it will be. I have been using property managers for about 10 years and I would say the bad tenants would be 10% or less. My rentals would mostly be considered mostly B or C class.
I say 10% are wonderful tenants, i.e..always pay on time, never complain. These are the type of tenants that if I saw them on the street, I wouldn't recognize them as I never talk to them or see them. Then there are the 10% who are a nightmare. Constant calls with nonsense such as my cereal is stale and Its the landlords fault because the humidifier isn't good enough or the cat next door meows too much or the handyman smells. However, most tenants fall somewhere in between. So it's a bell curve.
There's a rule or some such in business that you can expect 2% of your customers to be difficult or complain, no matter what - even if your service and product is great.
I'd say, once I learned how to screen well and got rid of the nightmares I inherited, the difficult tenants fell into that 2%.
And, the difficult tenants are more quickly gotten rid of, when you do month to month agreements.
But, I'd say, that no matter how great you are at screening, 2% of high-maintenance PITA tenants will still squeak through your great screening.
And the worst things they ever did was let some insane BF/GF move in and create crazy drama, or sneak in a pet rabbit. Nothing super horrendous. And I became good at negotiating them out of the building in a way that they didn't leave the place trashed in revenge.
But, the better your screening, coupled with M2M agreements, the fewer nightmares (or at least long-lasting nightmares) you will endure.
In the past about 10% of mine have been bad tenants.
Most were inherited but with tighter screening it has been reduced considerably. By anticipating the type of person or family situation that could develop into a problem it is reasonably easy to avoid most but it takes a great deal of experience and zero emotions when screening.
It does mean rejecting higher risk applicants that most landlords would not even consider a risk.
Until I took over managing, I'd say 60-70% were bad tenants. After I took over it dropped to say 30%, after we put in serious screening it's negligible.
I'd have to give that some thought, but after 20+ years of managing our own residential units (now at 17 units), I could almost count the really bad ones on one hand. We've had three evictions and three move out on their own who would have been evicted if they had stayed. So, 2% might be about right. But none of those were really horror stories. I've been able to sleep at night.
Depends where you buy and how strict your screening criteria is. At the end of the day, people are unpredictable and leasing anything to anyone is a little bit of a gamble.
I would say 80% of applicants are horror stories. It is up to you or your "manager" to screen the bad ones out but even at that you are going to have the 2% that are difficult. Once you have the property tenant screening is one of your most important jobs!
That this the great thing about this business, this is totally under your control.
People who have problems invite them by the type of property they purchase or type tenant they rent to. People who do a bad job managing their properties have nothing but problems.
Thanks for all the responses. I'm glad it's not all as bad as some forums make it sound. Good screening is definitely key. I have some tenants who believe the 5 day grace period before late fee is added is a rule and that they should postpone up to the day before the late fee almost every month and mowing is not their top priority, but I guess if that is the worst I get, I'll be happy.
I hadn't really considered M2M leasing agreements for ease of removing "non-performing tenants" (did I just coin a new phrase??), as the banks I use seem to want to see a 12 month lease to consider the income as "stable". Even when I had a tenant that went from a 12 month to M2M for 3 years, the bank wanted to see a 12 month lease for a Refi.
I hadn't really considered M2M leasing agreements for ease of removing "non-performing tenants" (did I just coin a new phrase??), as the banks I use seem to want to see a 12 month lease to consider the income as "stable". Even when I had a tenant that went from a 12 month to M2M for 3 years, the bank wanted to see a 12 month lease for a Refi.
I've never had a mortgage lender ask to see our rental agreements/leases. For single family homes or for our multiplexes. We prefer M2M. Our longest term tenant has been on a M2M agreement for 28 years. Since tenants will move when they want to move, I don't see how a bank would think a 12-month lease is any more stable than a M2M rental agreement. Our lenders much prefer to base their decision on our tax returns and credit worthiness.
Maybe it's just Quicken's underwriting process. I'm still in the phase where I'm doing conventional loans.
Me too, I'm also asked for my leases by the bank. They've never specified it needs to be a one-year lease, but that is typically what I have anyway.
I'm still a "small potatoes" REI gal but, out of the 9 tenants I've had, only one was really bad (10ish %). I also had a bad experience with tenants who signed a lease, but then changed their mind on move-in day and wanted their deposit back. Took me to small claims court. I didn't count them in my 9.
I have B-Class rentals. Even the "bad apples", although I was infuriated at the time, weren't a really bad horror story. Moved out in the middle of the night, one day after rent was due, still owing me a little from the previous month rent and for utility bills. My bad for not kicking them out sooner. They caused about $600 in damage, though nothing deliberate, and were filth monsters. They also stole about $200 worth of property out of the unit. But my biggest cost was the six weeks it took me to have new tenants move in. With 2-3 weeks of that just getting the unit rent ready.
Two other tenants consistently have/had trouble paying on time and I have/had to nag every time rent is due, but it was still always paid within about 5 days of the due date. One of them I still have. In fact, their rent is due today. Time for my friendly e-mail reminder, lol. Don't usually e-mail my tenants about rent on the same day it is due, but these folks need it (sigh).