Landlord nightmares, I lived through it or did I? Everyone presumes that all landlords make a ton of money. If you buy at the right time and get a low interest mortgage, you can make a lot of money. If that is all there is to rental property, it would be easy! Managing your business or investment is up to you! Rental property is a business, but that is just part of the story!
Rental property has a lot of pitfalls! Sometimes they are called money pits. If you do your homework before you buy, you can avoid most of the physical issues. Some of the things to consider before buying are location, deferred maintenance and income level of the building. Location determines how much you can charge for rent, maintenance and condition of the property will add to your annual expenses and don’t forget about problem tenants. Problem tenants will take up a lot of your time and decrease profits.
Owning rental property is a business and you will make or lose money based on income and expenses. What are some of the things a nightmare tenant might do to decrease your profits? Some tenants act very irresponsibly! They do not pay their rent on time or they bounce their checks. You can charge them fees for returned checks and late fees for being late. Irresponsible tenants do not care and will probably stiff you on the fees. Stick with you lease agreement and make sure you do what you said you would do if the tenant violates the lease. It becomes important, if you have to evict the tenant.
Some tenants who are irresponsible will also be noisy and do things that will drive your good tenants nuts! This is real dangerous because you will lose your good tenants. Having a good resident manager or management company helps solve these issues. Noisy parties can mean damage to your property. Noisy parties can mean damage to common areas and vandalism. Vandalism can be within the apartment or chairs around the pool, windows, doors or equipment in the common area. You cannot watch the tenants all the time and why would you want to?
All tenants are great on the first day when they give you the deposits and the first month’s rent. Things change because the tenant does not have a job or made very poor choices. When a tenant does not pay the rent, you should start legal action because it takes time. You can always stop it, but the clock starts when you start. It starts with a three (3) day notice, file the eviction paperwork, serve tenant, and file court documents. From start to finish in California, it takes an average of 60-90 days, if the tenant does not answer the complaint. Answering the complaint extends the time period. Some tenants will file for bankruptcy and that will extend the time period to 6-9 months.
All these things will reduce your income and could affect your other tenants as well. The non paying tenant may abuse the property and the good tenants may leave. Some tenants will think the bad tenant is getting away with something. You can get a judgment against the tenant, however it is hard to collect. Evicted tenants eventually will be locked out or will move near the end. You will have to fix the unit, paint and possibly replace carpeting or other things. These are things that will reduce your profits. Now you have a vacancy and you have an opportunity to avoid another nightmare tenant
What else could go wrong? Murder, crime or drugs or other issues! As an owner you have responsibility for your property. I am not talking about legal liability, but responsibility for avoiding pitfalls that could materially ruin your property. Tenants are renters and they do not have a stake in your property value. They may not report the water leak that can cost you in utility costs and much more if there is damage. That same tenant expects superior service all the time and will drive you crazy over a light bulb. What is an owner to do?
I wrote an article about how to avoid problem tenants which details how you should spend your time at the front end to avoid 99% of these issues. Many owners are cash strapped when they go through an eviction and grab the first tenant that shows up. This is a huge mistake! Screening tenants is almost an art form, but you can check for evictions and credit very easily. You should definitely see how they treat their current rental and you can check with their neighbors too. It is a lot of work, but it will avoid problems later. Have landlord nightmares stopped you from becoming a landlord?
Photo by: stevendepolo