MTR Early termination - what do you do?

Question

Hi BiggerPockets community,

We have a house that we are furnishing as an MTR and STR between guests. I had a question from a potential tenant yesterday about our early termination/cancellation policy. On our LTR and previous MTR tenants we have used 7 day written notice and one month rent as the early termination fee. Her fear was that the hospital would unexpectedly cancel the contract in the middle and she would be stuck with a big loss of $$. I am a huge proponent for following the lease 100% so I wanted to see what other people did....

Thanks!

Steve & Kim

here's our furnished finder listing if you're interested: https://www.furnishedfinder.co...

Bonnie Low · Answer

Hospitals and staffing agencies can and do cancel and change contracts at will fairly regularly. It is determined by patient levels and availability of travel professionals Account Closed. It rarely has anything to do with the "fault" of the medical professional. Each of my guests has been a travel medical professional and have provided copies of their contract in which it states that they can amend or cancel at will. So you have to understand that it is a common practice and likely something you'll eventually come across. My first travel nurse had a 13 week contract that paid $X weekly. 5 weeks into her contract the staffing agency revised the contract and offered her approximately 1/2 her original contract amount. She could choose to accept the revised contract or terminate. She chose to terminate. She gave me one week notice. Because it was my first, I wasn't prepared for it. She had been so good to deal with, I didn't want to charge her for the remaining 2 months' rent so I just re-listed it and quickly filled it again. However, I did change my policy so that I now have a refundable and non-refundable deposit. The non-refundable covers cleaning and the refundable is for damages and/or loss of rents due to early termination. So at least if they have to cancel early I have recourse by keeping all or a portion of the refundable deposit. So far I haven't had to use it. One of things that has changed for me is that my last several guests have been traveling physical therapists employed by the same hospital that modified the first nurse's contract. According to my first PT guest, PTs are in much higher demand that nurses so their contracts almost never get cancelled. I've fallen into this particular niche and it's working well. It's helpful to understand the nuances of this niche because it can help you determine which reservation requests to accept and which to pass on.

Kim Parker · Answer

Account Closed I'm a nurse so I can see it from both sides. I have heard of contracts being canceled if the hospital census is low or if an incident occurs. The prospective tenant I was talking to said that another traveling nurse was let go after a patient fall at the facility they are going to work at. Which is probably not the whole story...I can remember one patient fall in my entire nursing career.

This is her first time using furnished finder as opposed to a hotel etc. so shes not used to signing a lease. But I have options and quite a bit of interest so if I don't feel right about her I won't move forward.

So one month as early termination fee seems reasonable to you?

@Theresa Harris

I think she's just leery because she's signing a lease as opposed to staying in a hotel. I basically told her exactly what you said. Let me know as soon as possible.

We are semi new at MTR/STR and so I'm refining my process as I go. I wanted to make sure my lease wording was appropriate and if I should shorten the early termination fee to two weeks etc.

Account Closed · Answer

@Bonnie Low: Thanks for the input. That changes things. I'm not used to contracts being canceled before they are fulfilled, with no consequence. 

That really puts traveling nurses in a precarious position. If the hospital can cancel the contract if the nurse doesn't accept 1/2 pay instead of full pay, it would seem to be breach of contact. Not nice.

With that, I'd now be aware up front and choose either to accept the problem and deal with it accordingly or find more stable sources of guests. 

I recognize the problem. I have 3 aunts that are nurses and I know none of them would ever sue a hospital for breach of contract or other employment issues. It just isn't in their nature.

Nicole Heasley Beitenman · Answer

The pay revision doesn't make sense to me either, but the hospitals aren't including and utilizing cancellation and revision clauses without an intimate understanding of city, state, and federal laws. Otherwise, it wouldn't be a regular practice, and we'd see rampant breach of contract cases. I doubt it's a matter of nature. The nurses know that the hospitals are working within the confines of the law. My guess is that nurse in question simply picked up another job somewhere else.Increased income nearly always comes with an increase in risk and complications. You said it well--you either implement safeguards or a different strategy. If you're very risk-averse, the LTR space is probably a better fit.

Kim Parker · Answer

@Bonnie Low thanks for sharing your experience! I know a large portion of traveling healthcare workers stay in a hotel the first few days to make sure that the contract is as advertised. Very cool that you found a niche that has been beneficial for you. I will definitely keep that in mind when screening potential tenants. Having a healthcare background should help me understand what positions are harder to fill etc.

I think I am going to change my contract wording. For this lease I think I will put it at two weeks and I can always reconsider and change it next time. I'm also mindful that this is summer--I might feel differently in winter in Nebraska...lol.

This is a little into the weeds, but my original plan was to have the property on Airbnb for the summer because there are several events that drive people to Omaha. However, with travelers I can rent the main level and lower level walkout basement separately and make about the same profit or more than I would on Airbnb without as frequent turnover and vacancy stress. And coordinating vacancy times. Originally I had listed the entire property on Airbnb, but after doing some research I think I should make the main level and the lower level separate Airbnb listings so that travelers can reserve there as well. A Parent/child listing--or something similar? Learning as we go! It will be interesting to see what we are doing in two years from now with the property.

Bonnie Low · Answer

Unfortunately,

Account Closed · Answer

Has she been fired before for incompetence or neglect or abuse or drugs or something that she is worried the hospital will eventually find out about?

Nicole Heasley Beitenman · Answer

Thanks for the update! Glad you avoided a problem tenant. I don't recommend paying for TWN. Half the time, the information is incomplete or incorrect.

Kim Parker · Answer

I thought I would circle back--we ended up not renting to her. We did our standard screening (1 to 2 personal references if possible and work/contract verification etc). Without going into too much detail, we wasted two or three days and also learned that The Work Number from Equifax cost $110 to verify employment. Our red flags were contract dates changing and only getting a blurry picture of her contract. She had paused her contract to deal with a family medical issue and was coming back to finish it... Which she didn't initially disclose. It makes a lot more sense why she was asking about breaking the lease early.

Thankfully, we have had a lot of interest and we already have the property rented today. Super easy screening, feels so much better.

I did end up changing the wording to two weeks rent as an early termination penalty. Hopefully we don't have that happen, but I know that it does sometimes and I'm OK with that. We can either take a loss and let them go or stick with the early termination penalty depending on the situation.

MTR Early termination - what do you do?

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