Low income lease

[Michael Johnson]

I have a 6 unit building with low income tenants. After a tenant's one year lease converts to month-to-month is there any incentive for the landlord to sign a new lease? I'm not seeing a benefit. My thought is that a tenant could leave without notice and my only recourse is to keep the deposit. I could sue the tenant, but for what? They have no assets. At least if they're on a month-to-month I only have to give them a 30 day notice if I want to bring in somebody new. I can also raise the rent when necessary and not have to wait a full year. Can someone disagree with me and explain why I should sign a new one year lease? Sorry if this is a no brainer, but I'm trying to understand the pros and cons. Thanks!

P.S. I'm in Colorado if that affects your answer.

[Michael Johnson]

Brandon W. -- One thing to remember is that low-income renters are not bad people. Just like you get mid-income and high-income scammers, you have a minority who try to game the system. That being said, I think there is certainly more risk renting to low-income tenants because they have less (or nothing) to lose.

1.) I don't suffer from frequent turnover. Out of 6 units 5 have been occupied by the same tenants for at least one year. The 6th unit just turned over and I have a section-8 (good tenant) in place for the next year. I have also, in the past, had a single family home that rented out to low-income tenants for 7 years with only two months of vacancy over that time period. I manage my own properties so I don't have any rental fees. As far as turnover goes, I don't see a lot of it. Most people honor their initial leases (i've had two busted leases in 7 years) and only 1 person in 7 years actually damage the property.

Most of my tenants want to avoid any kind of legal issues. Most of these people do not want to attract attention to themselves and only want to live in peace. If your a fair and just landlord and you charge a fair rent for the property than you shouldn't have many problems with your tenant. That being said, I would like to point out that I feel there's a distinction between low-income tenants and welfare abusers. You'll have to get a feel for the difference. The first group is fine, the latter is nothing but a headache.

2.) Normal wear and tear is something we all have to deal with. Paint, carpets, etc. will wear out. A lot of landlords try to limit costs by putting in cheap carpet and wind up needing to replace it every 2-3 years. The previous owner of my building put tile in some of the units and I'm kind of digging it. I did put new carpet in my most recently rented unit, but I got a good deal on high quality carpet left over from another job. You can lower your maintenance costs by being proactive in fixing small problems before they become big problems. Also, if you're renting to low-income, chances are that one of your tenants is, or know someone who is, handy with different types of work (roofing, landscaping, carpeting, etc.) To finish this answer, tenants will usually not trash a unit unless they feel they are being mistreated. They're angry and/or frustrated and venting that anger against you by trashing the unit. Good communications and people skills will go a long way towards preventing that. If you're worried, call their previous landlord (verify that it's not their cousin, friend, etc.) and see what kind of tenants they were.

3.) Unless you brought in a scammer, you're probably not going to have this problem often. Most low-income tenants don't want to go out of their way to bring legal trouble into their life. Having said that I did have a tenant once who trashed my house (they were disgusting people) and were living in a swarm of cockroaches that I couldn't get rid of because they lived like pigs. When I tried to kick them out they wouldn't leave because they had no money for a deposit anywhere else. They asked for their deposit back and I laughed in their face. In the end, however, I ended up giving them back half their deposit just to get them out now, before going to court. It pissed me off to no end, but this is business, not personal. $450 now is cheaper than court costs and another mortgage payment with rent coming in. In the end, I feel it's rare, but you can usually buy people out of your way faster than you can evict them. Now, in a multi-unit property, that's a different story. I can cover expenses with only 3 units turning in rent. So, I'm not as inclined to wheel and deal like I was with a single family property. Here in Colorado, it takes about 6 weeks to evict. California is much worse. The point I think I'm trying to make is, eviction is not always the only solution. Be creative, put aside any ego that may get in the way, and find out what the tenants real issue is. Chances are, they're just stuck and not trying to screw you on purpose.

Sorry for the book. I tried to answer the questions as completely as possible. :)