Getting Rid of Bad Tenants

 

Don’t’ rent to these guys!

On my Friday interview on the David Sutton radio show (KRSN AM 1490, Los Alamos, NM), David’s co-host Nancy asked me about one of the common fears of people who would like to own rental houses.

Can’t Get Rid of Tenants? 

She said,

“Once you have tenants in your rental house, even if you want to, you can’t get rid of them for at least one year.”

My response was,

“That’s not exactly right. The tenants may have signed a lease for one year, but that doesn’t give them a free pass to do anything they want to in your property. If they violate the contract (by not paying the rent, disturbing the neighbors, doing auto mechanics in the front yard, etc.), then regardless of how long the lease is for, you can remove them.

The bad news is, they can fight you in court if they don’t agree that they violated the contract.”

Month-to-Month Lease -The Bain of Bad Tenants 

The approach that my wife and I take to avoid extended, and costly, legal fights, is to have all of our tenants on a month-to-month lease. This allows us to scrape off bad tenants like barnacles. All we have to do is to notify them that we are canceling the lease, and they have to be out in 30 days. There’s no fuss, no going to court, easy as pie.

I thought that tenants might balk at having to sign a month-to-month lease, rather than having a long-term one, but every one just accepts it as normal. I explain to them that the advantage for a month-to-month is that it protects both the tenant and the landlord. If they are not happy in our rental house, we prefer that they leave.

We Remove a Bad Tenant 

My wife and I have only had to evict tenants once in our 12 years in this business.

The police informed us that they had the people in one of our rental house under surveillance for drugs because a lot of people were coming and going at odd hours. That was the final straw, since they weren’t model tenants anyway. We canceled their month-to-month contract and they left without any objection.

As we do with all tenants, we gave them a “Move Out Information Letter” describing the steps of the moving out process, which they followed.

Our Fondest Desire: Long Term Tenants 

Of course, our objective is to keep good tenants in our properties into eternity. (We’re exploring options to keep them as tenants, even in the afterlife!)

We don’t want them to ever leave, and we will bend over backwards to keep them happy. That’s how money is made in this business, by having good long term tenants.

We lose money when we have a lot of tenants move in and out, and the unvarnished truth is, we  do like to turn a profit.

 

Upcoming “Turn Your Home Into a Rental House ” Radio Interviews (most shows can be heard  on the internet)

Wednesday, July 31, at 8:15 (central time), I’ll be interviewed by Rich Petersen, KROC 1340 AM, Rochester, MN.

Tuesday, August 6th, at 8:10 am (central time), I’ll be on Bob Schmidt’s show, WLFN 1490 AM, Onalaska, WI.

Tuesday, August 6th, at 9:40 am (eastern), Greg O’Conner will interview me, WKHM 970 AM, Jackson, MI.

Wednesday, August 14th, at 9:15 am (eastern), I’ll be on Dave Kelber’s show, WRNJ Radio, Hackettstown, NJ.

Watch this space for information on additional interviews.

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10 Responses to “Getting Rid of Bad Tenants”

  1. [...] as possible. The best way to do this is by telling the tenant what you expect from them. We send a letter that clearly spells out the checkout process. This way there are no misunderstandings, we are all on the same page, wavelength, sheet of music, [...]

  2. Terry –

    If they are on a month to month lease, how do you handle the security deposit?
    Sharon Vornholt recently posted..EPA Lead Based Paint Renovation Guidelines; Get Informed or Get Out of DodgeMy Profile

    • Terry says:

      Sharon,

      We handle the security deposit the same way that we would for a long-term lease. The tenants would put down $750, for example, and they would receive it back when they move out, if the property is in ship shape.

  3. Untemplater says:

    Month to month gives both sides a lot of flexibility. I agree long term tenants are the best but having the option to boot out bad tenants with a month to month lease is nice.
    Untemplater recently posted..Saving The World By Working At Home: Five Arguments For An Increased Telecommuting WorkforceMy Profile

    • Terry says:

      Yes, flexibility is a definitely good thing to have.

      We started doing this after we had a bad experience with some tenants. We realized that we needed a way to quickly remove bad tenants without going to court to do it.

      And, good tenants don’t have any qualms about going with a month-to-month lease, since they know they’re not going to do anything that would get them ejected.

  4. Troy says:

    A while back a friend of mine told me an outrageous story. She rented out her basement to a young married couple who seemed fine at first. However, eventually the stopped paying the rent, but because of tenant laws she couldn’t kick them out. Eventually, the police raided the basement b/c of drugs.
    Troy recently posted..Why You Should Not Invest in CanadaMy Profile

    • Terry says:

      That’s a great example of the downward spiral that tenants can fall into. Landlords and owners need to be on the lookout for warning signs so they remove the tenants as early as possible.

      Usually, if a tenant violates the contract, such as by not paying the rent, that is sufficient grounds to remove them. Do you recall what state your friend had her house in?

  5. [...] completely unfamiliar with the eviction process to guarantee long, drawn out disputes with tenants. Don’t keep up to date financial records or [...]

  6. Terry,

    I am finally getting better at picking tenants. I spend all my time trying to determine ways to keep them in there, not worrrying about getting them out.

    I sign them up for a one year lease, but once the year is up I just remain quiet and they automatically go to a month to month lease. My lease says the rent then goes up by some amount, but I just don’t enforce that part and let them keep paying what they were. If we can make it past Nov and Dec 1 with full rents, then we will have made it the full year. 100% occupancy on 8 properties. We are very excited….I hope I did not just jinx it…….

    • Terry says:

      I like your technique of having the year lease automatically roll over into a month to month lease. I’m going to incorporate your technique into my year long leases too.

      However, I don’t use a year long lease unless it is a tenant that is really exceptional. If I have any doubts about a tenant, I put them on a month to month lease from the beginning.

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