Inherited Tenant Problems at my first property- need advice!

Inherited Tenant Problems at my first property- need advice!

Investor · New Windsor, MD · Member since 2016 · 28 posts · 23 votes

Hi, I just bought my first rental property 2 weeks ago (I'm in Maryland), and I'm feeling a little overwhelmed with my inherited tenants- any advice would be greatly appreciated!

The property is a 3-unit building. 2 of the units came occupied, 1 was vacant. After purchasing the property on the 12th, the seller was supposed to send me prorated rents for July. I received a check for 1 tenant's rent, along with a note indicating the other tenant had not yet paid. The seller told me before the sale that this tenant had been there 5 years and always paid on time, and in the Estoppel agreement, it was indicated that he had paid July rent on July 5, which was not true. I knocked on the tenant's door to address this issue, and found out there was more to the story than the seller had told me (surprise, surprise.)

It turns out, the original tenants were the current tenant's parents. They lived there for 5 years and paid on time. At some point, they had let their son, who was homeless, move into the common laundry area in the basement. A few months ago, they moved out, and the son moved into their apartment and took over the payments. There was never a written lease. This tenant only makes $1200/month and the rent is $710 (which is also under market). He clearly cannot afford the apartment, but he's convinced he can afford it, even thought he missed last month's rent because he was apparently in the hospital, or something. Also, I ran a background check and found a court date coming up soon, which I asked him about. Apparently the police searched his apartment and found a crack pipe? He claims that he's a recovering addict and the pipe was "old". These tenants also never paid a security deposit.

Before I found out about the crack pipe and some of the other issues, I had told him that I would waive July's rent if he agreed to sign a biweekly lease with auto-pay on his paydays, starting August 4, and the rent would be raised to $380 biweekly. I told him he'd need the first 2 weeks rent, plus a security deposit, and that he'd need to pay $250 on August 1 with the remainder on the 4th, at which point he could sign the lease. I regret telling him that... I'm new to this, and I know I made a mistake. I was trying to work with him because I didn't want another vacancy right now while I'm renovating the 3rd apartment, and I also don't want him to cause problems if I try to get him to leave.

Anyway, I'm just wondering if any more experienced landlords have advice on what the best course of action would be from here. I have not taken any money from him yet. If he doesn't pay me the $250 tomorrow, do I give him a notice to pay or vacate, or a different type of notice since we never even had a lease? If he does have the money, can I back out of what I told him and tell him he needs to leave? Should I try cash for keys, and if so, how much time should I give him, and how much cash? Thanks for taking the time to read, sorry for the long-winded explanation :)

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Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
9y

Just start the eviction now . he will try to play you , he has already started  with the excuses . Now if you keep him you have to drop your standards for all the tenants to what you have accepted from him or someone could cry discrimination .  File the papers tomorrow .

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  • La Mirada, CA · Member since 2017 · 33 posts · 11 votes
    9y
    Sounds like a bit of a mess. If you can afford the mortgage payments without relying on the rent, I'd say don't renew the lease (based on your states regulations) and find new tenants. Reading this I couldn't help but feel like there is no good ending to it, either you pay a bunch of court fees for eviction or you end up with a tenant who you don't like and who doesn't like you
  • Investor · New Windsor, MD · Member since 2016 · 28 posts · 23 votes
    9y

    I can afford the mortgage payments without the rent, but that shouldn't be a problem anyways because the other tenant pays enough to cover most of the mortgage, and the vacant unit should be rented out soon as well. Also, this tenant has so far been very friendly and non-threatening, which is why I was trying to work with him. 

  • Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
    9y

    Just start the eviction now . he will try to play you , he has already started  with the excuses . Now if you keep him you have to drop your standards for all the tenants to what you have accepted from him or someone could cry discrimination .  File the papers tomorrow .

  • Investor · New Windsor, MD · Member since 2016 · 28 posts · 23 votes
    9y

    @Matthew Paul, you're right, that's what I need to do. Since you're from Maryland, do you happen to know what the first step would be- should I go straight to the courthouse tomorrow, or do I need to give him a notice to quit first? Also, if he offers me the $250 tomorrow, should I take the money or refuse it? I guess my question is- if I accept a partial payment tomorrow, does that prevent me from starting the eviction?

  • Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
    9y

    I am in a different county . Since this sounds like your first time at thes , leave nothing to chance , pay an attorney , go to court with him  , get copys of all the paper work and do what he or she says .  Dont waive anything , dont cut him any deals and only take money for PAST DUE rent .  Make sure you give him a reciept stating it was for past due rent , but check with the attorney first . Sounds like a druggie , they will push every button they can asking for second chances ...............forever . They have an excuse for everything .  The longer you wait the harder it will be .  I have dealt with them , I am also in construction and deal with them . I am a guy , emotions dont come into play in this , he will try to play you   I will bet  a dollar on this 

  • Real Estate Investor · Catonsville, MD · Member since 2016 · 90 posts · 49 votes
    9y

    Emily did you meet Jeff Tapper last week at the weekend meeting?  He specializes in landlord issues and does all of my collections etc.  Check your email.

  • Investor · Vancouver, WA · Member since 2013 · 3k+ posts · 4k+ votes
    9y

    Baptism by fire. So sorry you're in this situation. Many landlords get into this business without adequate preparation or knowledge. Some by accident, some by intention. I feel for you. It's a much easier path if you start off with good tenants.

    This sounds complex and tops what one would learn in Landlording 101. Can you find a local experienced landlord to mentor you? Join your local landlord association. Glad you're reaching out here on BP too. You're going to have to be on the fast track to becoming an efficient and effective landlord.

    Here are my thoughts;

    1. Payments from seller to buyer typically are made at closing, often facilitated by an escrow officer. This includes turning over pre-paid rent and security deposits to the new owner. Anything you didn't get at that time will be difficult to recover. Try to recoup what you can, but be willing to let the rest go. Move on.

    2. When acquiring a new property it is best to transition existing tenants to your rental agreement as soon as possible. In the meantime you need to operate under the terms of the tenant's existing agreement.

    3. Start with month-to-month rental agreements, especially with inherited tenants. Since the problem tenant (I'll call him Sonny) doesn't have a rental agreement with the previous owner nor you, you will be operating under verbal and assumed terms of agreement until something more formal can be put into place. However, if Sonny's parents had a written lease or rental agreement, it may still be valid and if so, they may be held accountable.

    4. You can choose to terminate the tenancy in accordance with the landlord-tenant laws for your jurisdiction. You can also choose to enter into a new rental agreement. If a tenant is polite, respectful and honest I am more likely to work out a solution with them. If the opposite, I am more likely to set in motion the process for legally terminating the tenancy as soon as possible.

    5. At this juncture, it sounds like Sonny has not paid rent for July 12-31 which should be paid to you. Don't worry about rent for July 1-11 that was not paid to the previous owner. Sonny is unlikely to pay August rent on time, if at all. But he still has tenant rights, including right of tenancy for August if he pays. Prepare yourself to serve proper legal notices. Since you are new to this, you may benefit from some assistance from an experienced landlord to find yourself a qualified attorney. Work with an attorney who is efficient and effective. The money you invest will get you the results you need and an education at the same time.

    6. When a new landlord takes over, new tenants often don't know how to react or what the new landlord's expectations are. As the new landlord, you need to inform your tenants about you and your expectations. They need to learn your management style and the terms of tenancy that they are expected to follow.

    7. Serve legal "notice to enter" for both units to inspect. You need to establish a baseline on the condition of the property when you first acquired it, establish rapport with the tenants and introduce your terms of agreement for going forward.

    8. I agree with others who advise to start the process to terminate Sonny's tenancy. He doesn't seem like a good prospect and unlikely to meet your minimum criteria as a tenant. Since you are new to this don't delay and be sure to work with a qualified attorney.

  • Investor · New Windsor, MD · Member since 2016 · 28 posts · 23 votes
    9y

    @Beth H. I just emailed you back saying I was thinking about calling Jeff Tapper tomorrow before I saw this, haha. I didn't realize you use him too. Sounds like that's the best option, I'll call him first thing tomorrow! Thanks!

  • Investor · Jasper GA · Member since 2015 · 1k+ posts · 1k+ votes
    9y

    @Emily McCabe In addition to the above suggestions, have you contacted the previous owner to collect the July rent that he claimed had been paid?  I wouldn't let him slide either.

    You are not running a rehab house.  

  • Investor · New Windsor, MD · Member since 2016 · 28 posts · 23 votes
    9y

    @Matthew Paul I have zero sympathy for him and I am not going to let him play me. The only reason I was trying to work with him is because I am new at this and I was hoping to avoid an eviction, at least until I finish renovating the 3rd unit. I didn't know he was a druggie when I bought the property almost 3 weeks ago, and I didn't know he was behind on rent either, but at this point I just want to do whatever makes the most sense financially. This is my business, not running a charity. Thanks for the advice, I'm calling a lawyer first thing tomorrow!

  • Investor · New Windsor, MD · Member since 2016 · 28 posts · 23 votes
    9y

    @Marcia Maynard Thanks for the advice! I did recently join a local landlord association and I'm going to call the attorney they've recommended tomorrow. I was hoping to avoid lawyer fees at this point, but it sounds like it's probably worth it in this case.

  • Investor · New Windsor, MD · Member since 2016 · 28 posts · 23 votes
    9y

    @Bob B. The tenant admitted that he never paid July rent when I spoke with him. His mother filled out the estoppel agreement for him, and lied for him on the form. The seller didn't tell me this until 8 days after closing, at which point the rent was 21 days late. I know we should have collected prorated rents at closing, but that didn't happen.. lesson learned. The funny thing is, the seller sent me a letter asking me to send her her portion of July's rent once I collect it. As if the tenant is going to magically have July and August rent in 1 week, when he barely makes enough in a month to afford the place..

  • Property Manager · Saint Petersburg, FL · Member since 2016 · 113 posts · 87 votes
    9y
    @Emily McCabe I say lawyer up this time, cause you are new. consider the fee an educational expense. watch very carefully and next time you can do it yourself. and if you stay in the business, there will be a next time. it will seem insignificant when it is behind you.
  • Real Estate Agent · Baltimore, MD · Member since 2014 · 215 posts · 123 votes
    9y

    @Emily McCabe I would be nice but lethal. I file a failure to pay with the court the minute they are late. I also use a website called Myrentcourt.com which will file all the paperwork for a fractional cost. Depends on county but I pay less than $50 for Baltimore city/county. There's also a couple other similar sites. These sites will save you a ton of time and headaches when dealing with rent court. 

    Additionally, I explain to all my tenants in a nice and courteous way that the notice that they will receive in the mail is only a notice and everything will go away as soon as I get the payment in full. 

    Side note, if tenants offer partial payment, I would take it! You can still cancel the eviction process after they pay the rest but hopefully you'll be out of pocket a little less if you do have to go through with it. 

    Lastly, don't spend money on attorney's just yet. I'd give one of these eviction companies a call and explain them your situation if you need any more support but you'll  see a big change in responsiveness from tenants as soon as they see the eviction notice. It works like magic sometimes. 

    If there is anything else I can do for you, please let me know. I'd be happy to connect you to some attorneys as well (if it ever gets to that point).

    Best of luck!

  • Real Estate Agent · Jacksonville, FL · Member since 2015 · 102 posts · 65 votes
    9y

    I agree with everyone above, this situation has danger written all over it. Find the best way to move on, whether it's a firm conversation with him (in which he agrees to vacate) or sicking a lawyer on him. Sucks that you are in that position but at least you are recognizing the problem early on and taking steps to deal with it. Good luck! 

  • Investor · Columbus, OH · Member since 2016 · 139 posts · 136 votes
    9y

    Without reading the rest of the replies, congratulations on buying your first dump. We've all done it, and unfortunately, you'll be dealing with crap tenants most of the time. 

    It sounds like you have compassion, and they smell your weakness. Start the eviction process now, get a clean slate, and stick the right tenant in there. 

  • Investor · New Windsor, MD · Member since 2016 · 28 posts · 23 votes
    9y

    @Account Closed why do you say it's a dump and I'll be dealing with crap tenants most of the time? It's a good property in a good area, just wasn't managed well after the last owner died. I don't have a problem evicting the tenant, just want to make sure I don't break any laws along the way. Definitely don't think the tenant "smells my weakness" either.. If anything, I think he's terrified of my husband. I think he just can't afford the place and his life is a mess.

  • Investor · Columbus, OH · Member since 2016 · 139 posts · 136 votes
    9y

    At closing, you should have received pro-rated rents for July based on your closing date. The agreed sale price, would actually be discounted based on rent you're owed, and property taxes due, as the new landlord. 

    I'll rescind my assumption that the place is a dump, as I know nothing about it. You do have a crackhead living there, and no tenant is scared of a landlord. The laws are on their side. My comment about smelling your weakness is based on your statement of waiving July rent. Once they know you'll bend because you're new, they'll roll right over you. 

    I do wish you the best of luck in getting the crackhead out, and make some cash along the way. 

  • Investor · New Windsor, MD · Member since 2016 · 28 posts · 23 votes
    9y

    @Gabriel G. thank you! I like that approach, "nice but lethal". I did make it very clear to him that if he doesn't pay me August 1st eviction papers will be filed that day. I was kind of confused about how to handle July since the rent was owed to the previous owner and not directly to me, and I wasn't sure how that would play out in court. I also talked to his mother today, and she claims to have $200 of his money that she wants to give me tomorrow, which I'm sure is unlikely to actually happen but if she shows up, I will take it, consider it a partial payment for past due rent, and still file eviction papers tomorrow.

  • Shawn AckermanPro Member
    Real Estate Entrepreneur · Mid West, East Coast · Member since 2015 · 3k+ posts · 1k+ votes
    9y

    Hi @Emily McCabe Sorry to hear about your ordeal.  I'd suggest cutting your losses with this tenant immediately.  I would not accept a dime from him.  I'd start the eviction process tomorrow first thing.  Not sure about Maryland landlord tenant laws but if there is not a "squatter" situation in play then take him down.  Or a simpler way to do it, which usually cost you less in rehab and turnover costs would be to do a "cash for keys" deal.  Basically pay him to leave.  I'd dangle $400 big ones in front of him with the promise of cleaning up the unit before vacating.  If he's an addict, then you can probably get him to go for less.  Best of luck to you.  Always remember to persist and you will WIN!!!!

  • Investor · New Windsor, MD · Member since 2016 · 28 posts · 23 votes
    9y

    @Account Closed yes I do have a crackhead living there, but I'm sure I'll be rid of him soon and replace him with a crack free tenant :) I've lived in this area my whole life and my own house is  10 minutes from this property.. I feel confident that I can find good tenants. And to be clear, I agreed to waive July's rent on the condition that he pays a security deposit AND I raise his rent by $115/month, permanently. It wasn't just an agreement to let him out of a month's rent. And that was before I knew he was a crackhead

  • Investor · New Windsor, MD · Member since 2016 · 28 posts · 23 votes
    9y

    @Shawn Ackerman thanks! If I try cash for keys, how long do you think I should give him to get everything out? He has a LOT of stuff.

  • Newark, NJ · Member since 2017 · 16 posts · 7 votes
    9y
    Just evict or offer $500 1 week to leave that's what I do
  • Investor · Birmingham, AL · Member since 2016 · 446 posts · 305 votes
    9y

    $1200/month and the rent is $710......How will he pay utilities and buy food? Probably from selling crack.....

    Get him out quickly.

  • Investor · New Windsor, MD · Member since 2016 · 28 posts · 23 votes
    9y

    @Anastasia Jordan lol, I think you're exactly right. When I explained to him that he can't afford the apartment, he mentioned something about "side money". He should never have been allowed to move in in the first place. He definitely needs to go asap..

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