Tenants rehabbing your property....... good idea?

Question

Hello BP friends,

I hope you’re all stay safe during these times.

I was looking forward for these messy tenants to move out this past March right before the pandemic hit. They lost their jobs, couldn’t move to their next place and well you know the rest of the story. …Here we are in mid-May and they told me they just got their jobs back. It’s been a struggle for them all along, they currently owe me over $6K in back rent which will be deferred for who knows how long. They definitely want to stay for another year which I might consider especially because I know they’ll never pay me what is owed plus have enough savings/ deposit money for their next place.

My plan was to renovate the kitchen and bath after they left to get more rent. My question is do you think it’s a good idea to allow them to do the rehab being the husband is handy to make up for the back rent so that they can catch up? I would provide materials of course. Sorry I hope this is not too confusing.

Thank you.

Nathan Gesner · Answer

@Sergio Martinez I think you're making a mistake. First off, the majority of unemployed are actually making more than they were when employed. If your tenant is unable to pay anything for rent, they are very unique. Unemployment, stimulus checks, and other assistance is available.

It sounds like they were already bad tenants and now they're leveraging the COVID-19 scare to play you even more. I would figure out how to legally remove them from the property and start over. I would not negotiate a payment plan or any other benefit. Just because you can't evict today doesn't mean you can't evict at some point and hold them accountable for everything.

I would give them written notice that you expect everything paid in full or for them to move out. If they refuse either, hit them with an eviction the first opportunity you get.

You're in a tough city to deal with problems like this. Good luck.

John Warren · Answer

@Sergio Martinez the answer would be no on all fronts. Get as much as you can out of these people in rent, but I would cut ties with them. I use contractors for remodeling, and I have tenants pay rent. I do not mix these items. Even having your tenant do maintenance items around the complex may or may not make sense. As I have grown, I have learned to have tenants be tenants and have everything else subbed out.

John Teachout · Answer

Unless the person is a professional, I would say no. I think that likely this is going to go from bad to worse...

I did have a tenant change a water heater once but he was a professional plumber and I was out of town on a trip. I didn't take it off the rent, I paid him for the install and reimbursed the purchase of the heater.

Sergio Martinez · Answer

Hello BP peeps!

Sorry for the delay, thank you all for the helpful advice. I did have my doubts for such a venture and now it’s clear…It’s a no-go on all fronts!! Thank you! Either way I’m stuck with them for at least a year before things are normal here in NYC. A typical eviction can take 12 months in normal times now in today's world who knows ... But hey, this is what I signed up for when buying in this market. I’m just going to stay positive and work out a payment plan with them and see where goes. I wish you all to remain safe and healthy and keep moving forward in RE!!

Michael Noto · Answer

@Sergio Martinez This is a common ploy by people who are looking to make up for the fact that they can't pay rent. Exchanging services for rent. Problem is the work will almost always be not up to par. What do you do then?

Sarah Brown · Answer

Never allow tenants to do repairs or upgrades.  HUGE liability risk.  I would be concerned of the ability to pay for another year.  They are already $6 behind in rent, and COVID was really just getting started in March.  I question if they were really affected that badly that early.  I think there is something else at play here and you need to step back and analyze the situation a bit more.

Stone Saathoff · Answer

Doesn't seem like a great idea unless your tenant does that type of work professionally, and even then..

Best bet is to continue trying to get them out if they have been a headache. Can't say for your city but I know in San Antonio evictions are still halted and I don't know when the resumption date is.

Jon Kelly · Answer

@Sergio Martinez At the beginning of COVID-19 problems (~March), I considered allowing tenants with potential payment concerns to do cosmetic improvements (e.g. paint, light landscaping, etc). Luckily, it never got to that point. I would never consider a major renovation such as a kitchen remodel.

In my opinion, there are two other considerations in addition to the concerns many already mentioned:

1. Evictions are still halted in NY, and there's no definitive timetable on when you will be able to evict. In other words, you are stuck with "bad" tenants...

2. Why would you renovate a unit while "bad" tenants are still there? You mentioned "it's been a struggle for them all along," "messy", "over $6K in back rent." You might spend another $5-10K on the kitchen and then it could be ruined by the time you are able to evict them...

Tough situation for sure and I wish you the best of luck!

Tenants rehabbing your property....... good idea?

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