Partial Rent - Should they stay, or do they go now?

Question

All, hoping to get some feedback from the forum.

I purchased a duplex last summer and inherited tenants in both units.  The tenant in one unit is on section 8, which covers 75% of the rent payment.  The tenant has been late in the past but always caught up, including late fees.  The tenant is now 2  months behind.

Normally I would follow my process, of a late notice after 3 days, and then start the eviction process.  There are a few reasons I have yet to start the eviction process.

1. The unit will need a few thousand dollars in renovations before it can be rented again.

2. Winter is a very tough time to rent a unit in the area and may sit empty until Sprint

3. The property is very high cash flow, even with the partial rent payment the cash on cash is above 25%

4. The tenant does not make trouble, other than late rent

5. There is a security deposit that is more than the outstanding rent, and would cover another month of partial rent.

I am continuing to reach out and work to set up payment, and I am within the rights of the lease to start the eviction process.  The cost of the eviction, renovation, and vacancy while finding another tenant will cost more than the lost rent, even if it continued for the remainder of the lease.

I could start the eviction process immediately, or wait until Spring when finding a new tenant will be easier, or get what I can and let the lease run out until September.

Let me know what you think, thanks.

John Underwood · Answer

Sounds like you are not in the red yet so I would have a conversation with the tenant and let them know that if you report them to the section 8 office they will likely loose their free money, be evicted and be banned from the program. Tell them they have x days to start making payments on the back rent. I would tell them if they appear to be trying then I would work with them, if not they are going to be evicted. The choice is theirs.

That being said if they don't pay is it worth it to loose the section 8 portion and have to do repairs to the empty unit and loose at least one months rent.?

Account Closed · Answer

As soon as I posted my last reply I knew what needed to be done.  I let the tenant know they have until Friday and if they are evicted they will lose their section 8 voucher.

It is not just about the money, I am dedicating too much time one tenant, as evidenced by this post.  I truly appreciate the feedback because it reinforced what I maybe already thought I should do.

Thanks again for the replies, they did help.  I will let you know how it turns out.

Account Closed · Answer

Thanks for the thoughts so far, appreciate the feedback.  @Corby

@Corby Goade the situation I am considering is not about the eviction itself.  I have over 100 units and have no problem evicting someone, that has happened a number of times over the years.   My hesitation in this specific incident is about the bottom line.  It will cost me more to evict and renovate than I would potentially lose if the tenant pays partial rent for the remainder of the lease.

To more accurately define my decision, do I make the decision based on the best financial option (which would be to let them stay), or on principal and evict them anyway.

Thanks.

Corby Goade · Answer

Two months late is not "late," that's not paying rent. I don't know your intention in being a landlord, but I have to assume you are trying to run a business. Keep in mind, you can have civil and compassionate conversations with a person about this issue and still get your point across. If they are on section 8 and paying you late- where is their money going? Are their car and credit card payments up to date? Do they eat out every meal? If you want to be compassionate, give them some hard truths- if you pay your car payment before your rent, you will likely end up living there. Tell them, if you can't do X by an agreed upon date, I HAVE to evict you, even if I don't want to. Ask them to work WITH you to avoid that so that you can both avoid the stress and expense. Be clear that the eviction is their choice, not yours.

You may also have some luck working with section 8, let them know the tenant has not been paying their portion and you'd like some advice on how to deal with the situation, they may put some pressure on the tenant for you.

I've used this strategy, mostly successfully, quite a few times.

Good luck!

Wesley W. · Answer

I hear what you are saying about not being cashflow negative, but be very careful about buying into the "sunk cost" fallacy.  Once this tenant gets too far behind, my opinion is that they will never be able to catch up and that money is permanently lost.

The other side of the coin is, by the time you successfully evict them and renovate it will be spring.

Ultimately it's a business decision, but project out each scenario beyond the winter and see where you might end up either way.

Partial Rent - Should they stay, or do they go now?

Most Popular Reply