08.22.14 Breaking Even on a Less than 2 Month Tenancy

The very first tenant we accepted back in 2010 stayed less than a month. We learned a lot by that experience.

This month we experienced another short term tenant. At least this time we were less impacted.

Back in June our nicest unit became vacant. Our strongest applicant was a family moving from California, with a family wage job in their field in our town. They had many attributes we were looking for and scored very high on our applicant scoring system. Once we accepted them, things got a little shakier. She was late to meet ups. The couple broke up. Once she moved in (on June 20th) she complained about the neighborhood and was afraid to sleep in the unit because of spiders. First month rent was late due to a snafu with her paycheck. Yadda yadda.

We were disappointed but not overly shocked when she gave notice. She gave notice in late July for an August 7th move out date. She understood that she was obligated to pay rent for all of August and did. Luckily we now have a clause in our rental agreement that for the first year of occupancy their deposit is forfeited 10% each month: “After additional deductions for cleaning and repairs necessary to restore the premises to its original condition (less allowance for reasonable wear and tear), along with deductions for any rent due (including rent loss during periods of restoration), late fee, caused inspection/eviction, utility, notice, legal and any breach of contract costs, the balance of the security fee shall be refunded pro rata as follows: 10% of the remaining balance for up to one month of occupancy; 20% for two months, 30% for 3 months, 40% for 4 months, 50% for 5 months, …and so forth until 100% for 10 months or more of occupancy. “ So she lost 80% of her deposit. She left the place clean and in good shape; she hadn’t really moved in or settled in.

We started tracking all of our time and direct costs we were incurring because of the turnover. The total ended up being close to $600, which was very close to the amount of deposit forfeited. We looked hard for a new tenant, we did want to refund them some money. We streamlined our application process to one page for each adult, hoping we might get more applications turned in. We had a lot of interest and did get more applications from people who wanted to move in right away, but not very many qualified people. We ended up accepting an applicant for an August 13th move in, and were able to refund the original tenant 13 days of rent.

Learning’s from the experience: We now take away even points on our scoring system for applicants moving more than 30 miles away. I feel that people from outside the area are less likely to stay in our area. We also give points if the applicants have lived in our immediate community for five years or more, because that makes them more knowledgeable about the neighborhood they are moving to. It’s also easier to verify rental and employment and find people after move out if they are truly local. One of our prior deadbeat tenants popped up as a Wal-mart greeter recently. We also now put more emphasis on address stability. We got a borderline applicant that indicated they want to stay for six months because they were looking to buy a house. Not willing to jump through extra hoops to get them qualified. Prior experience indicates future experience, so someone who has moved a lot will likely continue to move a lot. We also learned through this vacancy that our no pet policy at this unit is hurting demand significantly. We stand by our decision that a nice up/down with not much yard should not have pets, but we like to maximize applications to score.