Keep the tenant or don’t?

Question

Hey everyone!

So I’m in the process of buying my first investment property. It’s a duplex and one side already has renters. When I get a renter for the other side (which already have a few lined up) it will be cash flowing $800/month.

the current tenants on the other unit have completely destroyed the place. It’s structurally great, but just freakin disgusting in there. They are in violation of their lease due to not keeping up with maintenance and apparently they have two cats which is not allowed.

So here’s my question: do I take the cash flow from them for the remainder of their lease (11 months) and store that money so I can pay to get the place professionally cleaned and get new appliances when they leave, or do I evict them now and go through that process and risk not having a tenant for a few months and risk them destroying the place even more?

Thanks in advance for any advice!

Paul De Luca · Answer

@Lindsey Pinkham

Have you gotten confirmation that the tenant has been paying their rent? Assuming they have been and will continue to pay rent, this is a tough question to answer. If you let them stay for the remainder of their lease (while they are violation), it's possible they may continue to damage the unit beyond it current condition. If you choose to evict them right after you close, you'll be incurring those legal fees and more potential damage from the tenant.

Before you go the eviction route, I would first recommend doing cash for keys to see if you could get them to leave. Something like "Hi, I'm the new owner of the building and my plan is to complete renovations to your unit. I understand your lease expires on xyz date, but are you able to move out sooner"? If they say no, try to incentivize them by offering cash for keys.

Chris Seveney · Answer

Do you want to go through a year of pain and misery and possibly also lose the tenant next door (which is probably why the other unit is vacant), or deal with the problem now. I know what I would do - get rid of them, but others may view it differently.

Phillip Austin · Answer

@Lindsey Pinkham This is a great question and covers an issue that often stumps landlords!

You've already determined the tenant needs to go, it's just a matter of when.

In most cases, it's better to act now rather than waiting around and for a few different reasons:

1. Damaging property (costs you more to repair once vacate)

2. Nuisance to new tenants moving in next door (great way to lose good tenants)

3. HEADACHE

4. Unit is most likely under market value (get the bad tenant out, repair, and get market rent)

With that said, you have to abide by the provisions in their lease agreement. You cannot simply evict. For any lease violations, you must provide them a notice to cure which will allow them x days to cure the lease violations. If ALL of the violations are not cured within the timeline, you proceed with the eviction process while at the same time offering the tenant a move out option. For example, you offer the tenant to relinquish possession and in return, you drop the eviction. Once you get keys and confirmation the property is vacant, you cancel the eviction. DO NOT cancel the eviction without first regaining possession.

Nathan Gesner · Answer

Question: Which is going to cost you more?

Answer: keeping the Tenant is likely to cost you more.

They are likely to cause more damage, eat up more of your time, and create stress. In the end, they may decide to stop paying rent, resulting in an even more costly eviction.

Did you know that the majority of Tenants will leave when you start the eviction process? I get rid of dozens of tenants every year and I've only stepped foot in court a few times in the last 10 years.

Theresa Harris · Answer

If they've been there three years, get them to try and clean up to avoid pests and when the time comes (30-90 days whatever is required for your area), tell them you are not renewing their lease.

Erin Church · Answer

I like what Richard is saying!

If there are violations or damage that they caused (how long have they been there), then I'd let them know they will need to pay for the repairs now... not out of their security deposit. This can't be housekeeping (unless that's in the lease), but can be holes in the wall, stained carpet, damaged cabinets, etc. You'll need to be able to prove that they did it and didn't move into the property this way. So, either a property condition report that they signed off on, or pictures at their move-in.

For the cats, definitely cure or quit. If they magically become ESA's, let them know they have to have ESAs registered through petscreening.com.

I'd also let them know that if they would like to move out, you won't charge the break lease fee (if that's in the lease) or hold them responsible for the remainder of the lease if they give you 30 days notice. (I've had good luck with this particular approach as it's allowed the tenant plenty of time to move out, but end their lease earlier - which was great for me.)

If your lease has the option for early termination, you could also do that.

A lot of the "best" or "pretty good option" paths depend on what the lease says and your financial situation - if you can carry the property through a renovation or if you need to save up.

Also, keep in mind the impact on the new tenant if you're renovating. It sounds like there will be some "louder" things happening. Does this person work from home? Or work nights and need to sleep all day? You don't want to end up with a completely empty duplex because they weren't considered.

Congrats on your duplex purchase!! :)

Tim Miller · Answer

Congrats on getting your first investment property!! Now the fun begins. LOL

This is business, so from that stand point what are your finances like? Can you afford to go through the eviction process now and not have any income for a few months?  If your answer is "No" then you have to wait to evict. Get the other unit rented as fast as possible.

If you can afford it, start the process with all the legal notices. Make sure you dot your "i" & cross your "T". You want to go to court once and not give the tenant any leverage to delay. Good luck!

Todd Jones · Answer

Evict with notice due to a violation of the lease.

If the tenant left it like that and didn’t care enough to where they got two cats, it’s going to get worse in those 11 months.

How? Imagine the 11 month accumulation of cat  urine, insects, additional damage, etc.

But like everyone says, is the $8,800 worth the 11 months? Are they paying on time? Can your finances cover all the repairs?

Keep the tenant or don’t?

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