Shit My Tenants Say

Before you read my post you need to watch this video. Being a landlord for me isn’t this bad but sometimes…

 

 

So I receive my January statement from my property manager and I noticed that both of my tenants are lagging big time on their portion of the rent.  The reason why I say, portion of the rent is because the two properties I own are occupied by section 8 tenants.  Meaning, my tenants are only responsible for a small portion of the rent.

 

The property number 1 tenant now owes me $447 and the property number 2 tenant owes me $150. These numbers aren’t big but they aren’t small either.  The problem I have is that I don’t want my tenants thinking it’s OK to not pay rent on time.  If your tenants start to think not paying rent is acceptable, then they will use any excuse to not pay you rent.

 

So, when I contacted my property manager with my concerns he specified that both tenants said they will pay all of the back rented owed with their income taxes.  I got a good chuckle out of this and that’s when I came up with the title of this post.  I won’t keep you waiting any longer let’s get right into it.

 

“I will pay you back with my income taxes”

 

How could I not start off with this one.  I was always taught that there was a clear hierarchy when it comes to things you need to take care of on a monthly basis.  Food, shelter, utilities are my top three things to makes sure I take care of on a monthly basis.  Apparently, my tenants think not paying rent is cool.

 

The funny thing about not paying rent or delaying rent when you’re on section 8 is that you’re playing with fire.  Most of these people need section 8 to survive in some capacity.  Getting evicted is a quick way to get booted from the section 8 program. Why even chance it?  Don’t answer that.  It’s the same reason why people go 100k into student loan debt to get a job that doesn’t justify the debt load or why people still have unprotected sex. Stupidity!

 

“I had to buy appliances!”

 

This gem came my tenant in property number 2.  I’m not sure if I shared this with you folks but, after I “cancelled that bitch” like Nino (did you catch the New Jack City reference?) aka fired my property manager from hell.  The new property manager and I found another home which fit the system.  The numbers made sense so we moved forward with it.  The tenant we selected for property number 2 only has to pay 150 dollars of her 825 dollar rent.  Meaning, the good ol’ government pays the rest.


 

So why in hell did she miss her first months rent!  I was really taken back by this one.  Are you serious? So you mean to tell me, you work full time and get government assistance but you can’t pay me 150 dollars?  Her excuse was.. “I had to buy appliances”.


 

Another thing many may not know is that in the area where we buy properties the landlord does not have to provide any appliances.  I could provide appliances and possibly charge a bit more for rent but, I would rather not deal with fixing the appliances. 

 

“I was sick!”

 

The tenant from property number 1 comes right back at you with another doosie.  You didn’t think tenant number 1 was gonna let tenant number 2 win with the appliance excuse now did you?  I think it was around the October time frame when I got the “I was sick” excuse.

 

I couldn’t stop laughing when my property manager told me this one.  I told him to tell her that I tried the “I’m sick excuse” to get out of going to school when i was in elementary school and my mom saw right through it so, what makes you think it will work with your rent?

 

I had just the right medicine for her.  I gave her a verbal warning that if she didn’t cough up the dough in 3 days she would be evicted.  I guess I found the cure for the  common cold because she found the money with the quickness!

 

Lesson learned:

 

Don’t trust your tenants as far as you can throw them.  I’ve learned that my tenants will try anything to get out of paying rent.  Tenant 1 is on thin ice.  If she doesn’t come through and pay all her rent when she gets her income taxes she will be evicted.

 

Since people tend to respond to incentives, after the tenants pay their back rent I plan on implementing an award program for paying rent.  The terms are simple.  Pay your rent in full and on time for 6 months straight and you will get 100 dollars cash.  I would rather give away 200 bucks a year then have to go through the eviction process and lose more money.

 

Side note:

 

I only spent 2 minutes on real estate activities this month.  Things tend to go a whole lot smoother after the renovation phase.  We are currently working on deal 3.  This deal is going to be the best deal yet.  If the guy sends over the contract.  I will have an entirely different post discussing it.  Stay tuned!

 

Readers Thoughts:

 

What are your thoughts on my incentive program?

 

What is the craziest thing you heard a tenant say?

 

Comments

  1. Jaymom39 says:

    I’ve heard them all before! My favorite is I had to help my daughter I’m going to double up next month, then they barely have one months rent when it’s time to pay. I’m a property manager and I’ve found that Section 8 tenants are the worst. Most tenants don’t understand how missing one months rent can quickly add up and things get out of control and they can’t come current.

  2. Catherine Norman says:

    I’m not an owner – just a general manager but I can tell you I don’t play around with the rent. There are no verbal warnings – if you don’t pay your rent by the 3rd of the month then you’re receiving a 3-day notice to Pay or Quit on the morning of the 4th. My tenants are quite aware that I don’t play any games when it comes to the rent and they all pay by the 4th or come to me ahead of time to make payment arrangements. I’ve heard every bs excuse there is and none of them work with me.

  3. My section 8 tenant lost her subsidy in February, ask for additional time to find a place. Just moved out at the end of June and has the audacity to leave me a voicemail asking when she would be receiving her security deposit back. Neither she nor Section 8 has paid her rent since January.

    • URFinanceSimple says:

      Wow!Keep in mind you can't just take the security deposit and apply it towards rents not paid. I'm facing the same situation. Let me know how it turns out.

  4. I have always considered rentals as an investment but late payments and other tenant issues somewhat scares me. However, $30k for a property that rents $900/month sounds like a great investment.

    On a side note, I missed a payment one time while renting in college. I told our landlord I mailed it 2 weeks ago. I issued him another check immediately and he didn't charge us a penalty. Turns out my check went to my bank. I was trying to be frugal by reusing envelopes my bank sends to mail credit card payments. I had no idea the small barcode at the bottom is for the return address. :-)

    • Oh wow.. I didn't know the return envelopes with bar codes did that either. I'll be sure to not re-use envelopes in the future. Yea, 30k that returns 900 is definitely not a bad deal at all. The tenants are just a mess sometimes. Glad, my property manager has to deal with that and not me.

  5. The incentive idea is a great idea even though it is sad that you have to do it. I would love an incentive program like that for my mortgage! :)

    • hahah.. yea an incentive for the mortgage is pay or get foreclosed on. Unfortunately, it doesn't make much since for me to evict my tenants. As long as the government pays on time they are ok with me.

  6. I like the incentive idea…definately worth it. I had to evict a tenant once in 2010. The process, time, money, and energy it takes to evict someone is definately worth $200 bucks a year…freaking deadbeats.

    • An eviction would definitely cost me more than 200 bucks a year. I would spend tons of money preparing the home for another tenant and once you factor in loss of rents eviction is definitely the last thing I would be thinking of. What happened with your tenants which required you to evict them? How are your new tenants?

  7. I don't own any rental properties myself, but I wanted to share this which kind of points to the story about setting a precedent for expecting a rental payment.

    My mother-in-law (MIL) sort of owns a second house (I say sort of because there are some probate issues involved), and she starting renting it out about a year or so ago. After about 5-6 months, they stopped paying rent. Cold turkey. I mean they literally were not paying one red cent.

    Well, my MIL continued to contact them and essentially beg for the money, but since the property is deeded to her deceased sister, she had no legal authority to evict the tenants. There is also no lease – either written or verbal.. This went on for several months until we were notified that another gentleman bought half of the land for $1,000. He contacted the tenants and told them that they needed to start paying him rent on the 1st of each month. Well, they have been sure to pay him promptly each month. My MIL has now paid him back his $1,000 and will be taking over the other portion of the property. They are planning to keep the tenants in the dark. and have them continue paying the other man and he will forward it to my MIL and keep a portion for service fees…

    • Elise that sounds like a nightmare! Why would she want to keep those tenants if they didn't pay for months? Does she have legal title to the property now? If the unit is profitable why would the guy sell it for only 1k?

      Would you be able to answer any of those questions?

  8. That's great. I used to work for a foreman that had a little black book of excuses. You could only use one if he hadn't heard it before.

  9. Greg McFarlane says:

    My God. Never mind the tenants, where'd you find this joke of a property manager?

    /reads post entitled "My Property Manager from Hell"

    /shakes head

    Kudos for being a hardass about this. I assume you're familiar with that chick who runs My Tenant From Hell or whatever it's called, and who made the mistake of being nice and letting things slide. Be freaking relentless, especially with these Section 8 idiots. Best of luck.

    • The funny thing is he wasn't bad at first. But, I think that was due to my inexperience. The more I learned the more I realized he wasn't going to be a good fit for my team. The tenants aren't so bad. From my 2 years of land lording I notice my tenants tend to get behind around Thanksgiving (Late November) then catch back up on the rent around March. No biggie for me since they pay the hefty fees. They also don't get behind enough for eviction to be a better option.

  10. I LOVE landlord Pearl! She kills me every time. One of my all-time favs!

  11. Instead of an incentive, how about increasing the rent to cover a reserve taken against late fees? Assume it's a 5% surcharge. Depending on how timely they pay their rent, they get a rebate or refund every six months. If they don't, you're covered anyway. I say this however without knowing the rules and guidelines of section 8 programs. There may be a clause somewhere that prohibits this practice.

    • With Section 8 properties you can’t just increase the rent. I am bound to a certain range of rent based on the number of bedrooms my home has. If I was to have the incentive program it would be a spit shake deal between me and tenant nothing formal because the tenant can get into trouble.

  12. wow, you really should not trust your tenants at all. There are a lot of shady people out there that will do anything to stiff you over.

    • You're 100% correct. Treat it like a business. Payments are due 1 day and if they are not on time analyze the situation and take the best course of action.

  13. I love the excuses. The only excuse I received so far is "Oh, I forgot!"

  14. I love it YFS! I see you're doing your thing man.

  15. It must be pretty stressful not receiving all the money you're supposed to receive. How long had they been your tenants? Did they have a history of making late payments or is this the first time? Some people receive plenty of assistance from the government so they can make their ends meet, but they also have to learn to be responsible. They can't rely on others to bail them out every single time. They have to learn to bail their own selves out sooner or later.

    • Stressful? Nope not at all. It's a business and sometimes miss payments happen. I've had tenant 1 for almost 2 years now and Tenant 2 is brand new (October 2011). My tenants all seem to have a history of missing payments around December and catch back up in February/March. My tenants have families and I call this the Xmas effect. No sweat off my back since they end up paying a late fee.

      I agree with you on the learn to be responsible bit. But, as a landlord I don't want them learning too much about savings/responsibility.. Heck, then they won't be my tenants. My property only cost 30k It would be cheaper for them to buy their own place especially for what they give me in rent.

      I figure it comes with the territory that I buy properties in. My customer base isn't the most disciplined bunch. If they were they would own their own place instead of pay me 900 a month for a property that I only paid 30k for :-)

  16. I recently had a tenant ask me to help him out by letting him slide until he got the money to pay me back. I said why don't you borrow money from your parents and he said that they said they didn't want to help. I said well then neither do I.

  17. People have the craziest excuses!

  18. Section 8 is always a tough crowd. It seems as if many of them do not have proper incentive to be on time, since the government is covering 80 to 90% of their costs (the ratio is even worse in some areas around here)!

    As you said, it should be their top priority, but instead they do everything else with their money, and expect you to be fine with it. Many people on section 8 will destroy an apartment, and cause you to raise the rent on the next tenant just to cover the expected damage.

    Of course, not everyone in this situation is like that, but when people are living on someone else's money, it's difficult for them to have an incentive to be responsible.

    • Fortunately, I haven't had any issues with tenants destroying my apartment. But, I agree with you on the point of people who receive some form of assistance finding it difficult to be responsible. I just figure if the game is rigged and I can charge 900 for rent on a property that cost me 25-30k why not play the game.

  19. You've definitely piqued my interest in Section 8 housing, despite those ridiculous excuses! Good for you for sticking to your guns in terms of late fees–you're absolutely right that you can't turn a blind eye to rent that's paid even a few days late. In this situation, if you give an inch, they'll certainly take a foot.

    • Section 8 is a great way to get money. The horrible thing about section 8 is the annual 3rd party inspections. You often have to fix stuff your tenants mess up before the government will release your rent. I had to make 400 dollars in repairs to one property and it was little ticky tack stuff that my tenant messed up during the year. My only way around this is by raising rent 10-15 dollars/month every year.

  20. Classic! Yeah, I've had some fun with tenants over the years. The incentive is a nice idea, but I'm not confident it will work. Sounds like an interesting investment strategy you have there, nothing really like that here in Australia.

    • Apparently I don't have to do the incentive program tenant number one send in a money order to cover all but $99 of the back rent. I guess it was the Christmas holiday that got her out of wack. She normal is good all year until December. Weird

  21. I like the idea of an incentive program for your tenants. It will be interesting so see if they respond positively to it. We are renting to family friends. I know… that could get messy, but they have been on time with rent and so far they have taken care of everything.

    • You're much braver than me by renting out to family and friends. I would hate to ruin a friendship over a business transaction. Good luck with the arrangement and I hope they keep paying on time.

  22. I think I like Joe's idea. Charge them a late fee. While the reward system might work, it seems to be encouraging them that the norm is to pay your rent late.

    • Corey,

      I assess a late fee of 5% of total rent due. These people have not problem paying late fees I can tell you that. There is a trend, around Christmas they tend to send in partial payments or don't pay rent and catch up entirely in February/March. They are perfect until Christmas for some reason.

  23. I'm hesitant to accept section 8 in my property for fear of crap like this! Is it worth it in the end?

    • Is it worth it? 100% Yes. 80-95% of my rent is paid on time via the government. My tenants will never leave, section 8 tenants on average stay 5-10 years, my tenants will never leave. The real problem with section 8 isn't the tenants. It's the annual section 8 inspections. The inspections are the worst. They make you fix the dumbest things and will withhold rent until you fix them.

  24. Aren't the two basic human needs food and shelter? So doesn't it make sense that these 2 things should be taken care of before anything else (even appliances!). I think part of the problem lies in the fact that many of those on government assistance are used to others taking care of them and so assume you (their landlord) will also. I understand having assistance in place to help people through a rough patch, but too many simply decide to continue on the dole. Why work when the government will take care of everything for you. It's gone too far.

    • I tend to agree with you that some people definitely take advantage of the system. I figure if the game is setup that way I will play within the system and try to capitalize from it. That's why I target government assistance tenants. These people will have 80-95% of their rent paid for and never ever move. Win win for me.

  25. Are you charging them late fee? Don't take any BS from tenants. It's a business.

    • Joe,

      Yes I charge a late fee. They are being assessed 5% of the total rent due. I am with you on not taking BS from tenants but like you say it's a business. There is a cost for every decision. Eviction and preparing the place for rent and lost rents are greater than dealing with them.

  26. My favorite: "I had to buy appliances." Funny. It should be: "I had to buy appliances for the place I will no longer live in anymore because I didn't pay the rent."

    • hahah.. I got a good laugh out of this one myself. The crazy thing was it was her first month in paying rent! :::blank stare::: Thank goodness it's only 150 and her portion of rent doesn't make ore break my cash flow. Her portion is icing. She was assessed a late fee also

  27. I understand your motivation for providing an incentive, but it sure is a shame that grown people have to be treated like children in order to get them to take their responsibilities seriously. I don't mind rewarding my children for good behavior, but I'd hate to think that they might still expect that type of motivation when they are adults.

    • I agree.. it is a darn shame that adults don't take care of the must haves first. You would be surprised how incentives motivate people. Do you think I should go forward with the incentive program? If not what is your suggestion?

  28. Amusing excuses. It's unfortunate that some people's personal finance views can be so off base. Many times it's due to something that they don't have full control over like a mental disorder or a drug addiction.

    I do like the idea of the incentive program. If it works out, it definitely would be worth saving the hassles of eviction.

    • I plan on implementing the incentive program once they catch up on rent with their income taxes. I'm torn between 50 or 100 dollars. What do you suggest?

      • Why not do both? 50 for the first 6 months, 100 for the next? And 100 for each of the next 6? If they miss it they're back to the base tier. Funny stuff you got here. And if the return doesn't pan out like you expect, you may have material for a book by the same name. :)

  29. One word…REITs (aka real estate investment trusts). Decent return. Zero headache. Lesson I learned after being a landlord for 5 years with 4 rental properties.

    • Unfortunately, REIT's do not have as much return potential as my rental properties. On the up side. Even if my tenants don't pay I still will be profitable. I made sure of that.

    • I will have to look into them! I don't have a desire to be a landlord, but making extra income is always nice:).

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