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need advice from other landlords
Old 10-04-2008, 09:04 AM   #1
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need advice from other landlords

I know I could post this on mr.landlord, but I know you guys and thought I'd start here.

We have a townhouse we rented out due to being moved around for DH's work. It's our only home we own - we rent currently ourselves and plan to do this indefinitely.

We use a rental management company since we are about 2 hours away.

Here's the situation.

The check written for August rent bounced. We have required certified check for payment since. Renters brought in secured funds for August on Sept 9th. They were late for Sept rent - but pd it with secured funds a few days later.

Supposedly the renter's wife is expecting and her hours have been cut back. That's all I know on that.

They have been tenants since Nov last year and this is the first real problem we have had with them.

Lease expires Nov 30th, and they want to renew for a year.

They have set up automatic debit for rent which is to start Nov 1.

Here is what our mngmt co said regarding renewing:

"We can wait until Nov to ensure his withdrawal from his account goes through and decide then
You can let him stay month to month for a few months to ensure he isn’t late, then renew
Or we can renew him for another year with the co-signer

I know Holiday months are particularly difficult for renters. Our worst months for collections are December- February.

Let me know what you would like to do. He has always done what he has promised to do up to this point. I would wait until into Nov to make sure Nov rent is paid.

If you would like we can do a walk through in Nov to ensure the property looks nice and is taken care of."


The last time we tried to get a renter it took 6 months for the unit to be filled.

DH is concerned if we do month-to-month the renter can just up and leave. He's afraid if they leave it will be hard to fill the unit again, especially if they leave during the winter months. He likes the fact that if we renew for a year, we will require a co-signer again (who has good credit).

I'm thinking month-to-month makes it easier to evict them if they don't pay. I would think of doing month-to-month say through February, then sign the year lease with the co-signer then if they pay consistently.

Advice?
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Old 10-04-2008, 09:19 AM   #2
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We have never done anything other than month to month. thought has been that if a tenant runs out of money it's not worth our time & effort to chase them through the courts so why should we obligate ourselves to a longer term? I'd go with your management's suggestion.
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Old 10-04-2008, 09:19 AM   #3
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I am not a landlord but I have a question. Did the tenants express that they want a lease? Maybe everyone would be happier with a month-to-month arrangement. I don't think that their payment history sounds all that bad, since they are all paid up by now. But then, that is from a (former) renter's point of view.
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Old 10-04-2008, 09:29 AM   #4
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Quote:
Originally Posted by Want2retire View Post
I am not a landlord but I have a question. Did the tenants express that they want a lease? Maybe everyone would be happier with a month-to-month arrangement. I don't think that their payment history sounds all that bad, since they are all paid up by now. But then, that is from a (former) renter's point of view.

Yes, they said they want to renew for another year.
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Old 10-04-2008, 10:13 AM   #5
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I'm thinking that a couple about to have a baby in the middle of the winter isnt going to pack up and move at the same time.

Funny how leases are viewed differently on the two coasts. In New England it was common to sign a year lease and renew it, and both parties counted on that for stability. In CA, landlords dont want to sign leases at all but will do it up front to get a tenant, but recurring leases are very rare, most shift to month to month when the initial lease expires.
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Old 10-04-2008, 10:35 AM   #6
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Let the lease expire in November and then you will most likely automatically be on a month-to-month tenancy (Illinois does). If you renew the lease and they default, you have to go before a judge to evict them and you might get a bleeding heart judge looking out for their child's interests ahead of yours. On a month-to-month tenancy, there is no judge, you just give proper 30 day's notice and then the sheriff removes them if they remain. I own 12 f&c rental houses in my IRA and my son-in-law is a lawyer. Month-to-month is advantage landlord when you are not sure of the tenants.
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Old 10-04-2008, 11:16 AM   #7
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Quote:
Originally Posted by simple girl View Post
He likes the fact that if we renew for a year, we will require a co-signer again (who has good credit).



Advice?
Since you had a co-signer on the original lease he's probably still on the hook if the contract goes month to month. I'd go for a lease renewal as long as you've got a good co-signer though. Obligates him for a year vs. 30 days to give notice. I agree with Calmloki that it's not worth chasing tenants down but if you have a credit tenant or co-signer you'll be in a better position to negotiate the terms of exit should their financial situation get worse.
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Old 10-04-2008, 11:53 AM   #8
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Quote:
Originally Posted by simple girl View Post
The check written for August rent bounced. We have required certified check for payment since. Renters brought in secured funds for August on Sept 9th. They were late for Sept rent - but pd it with secured funds a few days later.
So the tenants had been there barely eight months when they bounced a check? Yikes.

Quote:
Originally Posted by simple girl View Post
Supposedly the renter's wife is expecting and her hours have been cut back. That's all I know on that.
This is not going to improve their cash flow. That's not your problem to analyze but the trend is discouraging and it's a good thing that they have a co-signer who's liable to pay the rent if they don't. Am I interpreting that co-signer comment correctly?

Quote:
Originally Posted by simple girl View Post
Lease expires Nov 30th, and they want to renew for a year.
The last time we tried to get a renter it took 6 months for the unit to be filled.
Six MONTHS?!? Holy crap.

It sounds as if your choices are to sign a lease risking months of eviction proceedings, or to terminate their lease risking months of vacancy. Or for an extra thrill you could go month-to-month knowing that in 30 days you'd be facing more vacancy. But CFB makes a good point that they're unlikely to leave with a new baby.

Faced with this smorgasbord of opportunity I'd have to go with the year's lease-- especially because of the co-signer. I like your idea of waiting a few months to see how they do with paying the rent. An extra option would be to go month-to-month until May and then sign a year's lease. That'd put the lease expiration back to a good summer moving month.

You could write a letter to the management company (perhaps a copy to the tenant) explaining that you'll go month-to-month. If rents are paid on time through 1 May with zero late or bounced checks then you'd be willing to sign a year's lease at $xxx/month with a co-signer. Otherwise you intend to terminate the lease. That'd help avoid finger-pointing down the road, and maybe even be useful eviction ammunition.

Quote:
Originally Posted by simple girl View Post
If you would like we can do a walk through in Nov to ensure the property looks nice and is taken care of."
Ideally a management company does walkthroughs at least annually with a camcorder to document the condition and what repairs/maintenance are due.

Does the management company pass through to you the expenses of the bounced check and collecting the late rent? That'd be a Schedule E deduction. But if they keep the expenses (and penalty payments) on their books then you wouldn't have that deduction. However you might have extra deductible expenses-- for example lost interest due to having to pay the mortgage while waiting for a rent check.
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Old 10-04-2008, 12:02 PM   #9
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As you already recognize, none of the choice are perfect.
I think you ought to have the Management Co do the walk through now to give you some insight into how they are caring for the property. Most states allow inspections at any time with reasonable notice to tenant.
If good care is demonstrated, I suggest more flexbility may be deserved.
Has the Management Company indicated what they think how long it would take to rerent? IF it is another six months vacancy, then a six month renewal looks pretty good, IF good care is being shown.
Good Luck
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Old 10-04-2008, 12:07 PM   #10
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I love when my tenants pay late as they incur at least $50 in late fees. One guy pays 5 days late every other month, I get an extra $75, and everyones happy.

I hope you have the same provision in your lease. I would tie them into another 1 yr lease if they wish and go from there...


Bottom line though is to go with your gut!
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Old 10-04-2008, 12:18 PM   #11
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The advice here seems pretty clear. Inspect the property now (you, personally, or the management company (who it appears you trust)). Go month-to-month for 6 months (and along about April, do another inspection, and if up to your standards offer a NEW 1 year lease) this would get the vacant/re-rent cycle more in your favor - 60 days to re-rent is not uncommon - get a clause in the new lease to allow you to show the property within 60 days of the lease expiration if the tenant does not intend to renew in the future, to further reduce the vacancy rate. Make sure the penalty for being late is clear and enforced.
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Old 10-07-2008, 06:45 AM   #12
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Thanks so much for the great advice provided. We have put the ideas together and decided upon the following plan:


Have a property walk-through done ASAP, with pics/video taken. IF all looks ok, THEN:
  • We will go month-to-month through May (so that if we need to, we can evict easier for non-payment)
  • Re-inspect property in March
  • If rents are paid on time through May 1 without any problems (i.e. insufficient funds), then we'd be willing to sign a year's lease with a co-signer again, continuing with automatic debit only.
  • include a clause in the new lease to allow us to show the property within 60 days of the lease expiration if the tenant does not intend to renew in the future (to reduce the vacancy rate)
This is what we sent our property mngmt company today. The renter has called several times anxious to renew. So, like someone said, I doubt they are going to up and move in the winter months with a new baby on the way. The month to month will protect us and give us time to see if this was just a brief rough time they were having or if they are going to turn out to be long-term problem tenants.

I will keep you all posted on how it goes!
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Old 10-09-2008, 08:59 AM   #13
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This is a no-brainer ... if you create a vacancy in November (not re-newing the lease), you'll be carying the unit vacant thru the winter. This is self abuse.

If they sign on, take it.
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