Tenant vacancies are often one of the biggest financial hits for buy-and-hold investors. Just one empty unit can wipe out a year’s worth–or more–of cash flow. It’s understandable why many landlords keep rents well below market just to avoid vacancy and turnover. However, there are times when letting a tenant go is necessary. My husband and I are currently celebrating the end of a tenancy that couldn’t have come soon enough.
This particular tenant rented an apartment from us in a 100+ year-old quadruplex in a quiet, suburban neighborhood. We rented to one adult and two children, although 6-8 people regularly stayed there for weeks at a time—most of them teenagers–and it quickly became a hotspot of disruption. People came and went constantly, sometimes at all hours, causing noise that disturbed nearby residents and tenants. Over the course of 10 months, police were called to the property four times, neighbors’ complaints piled up, and what had been a nice, easy property for us became a management nightmare.
Thankfully, this tenant wasn’t on the extreme end of the bad-tenant spectrum; she paid rent and avoided outright destruction. But she lacked any regard for us, her neighbors, or the quiet community around her. We took action, sending cease notices to address her behavior and offered to let her out of her lease without penalty. We were fortunate that she wanted to leave as much as we wanted her out, sparing us a lengthy eviction process.
Despite 15 years as landlords, we still learned many valuable lessons from this tenant:
- Take your time to find the right tenant: Rushing to fill a vacancy—especially after an extensive rehab or during a slow season—can lead to costly compromises. Consider move-in incentives or slight rent reductions before accepting an applicant who doesn’t fully meet your criteria. We have made a few calculated exceptions to our search standards in the past without issue, but this experience served as a reminder that we established tenant criteria for a reason.
- Ask better questions to prospective tenants: We should have asked what appealed to the tenant about the neighborhood and the apartment when she viewed it. She didn’t seem to have much of a reaction to or appreciation for how nice the apartment was (we had just rehabbed it, afterall).
- Emphasize key lease terms: During the lease signing, be crystal clear about lesser known policies, such as property quiet hours, guests and unauthorized tenant policies, whether businesses can be run out of the rental, candle and incense burning, laundry usage and maintenance, and smoking (including vaping) policies.
We were also able to implement our systems to minimize the potential negative consequences of this tenancy:
- We sent warnings to the tenant each time there was a complaint about noise or trash (even though she initially blamed these issues on “ghosts”). Create templates for standard responses.
- We quickly acknowledged and addressed complaints from other tenants and neighbors. Many complaints also resulted in an update or clarification in our lease.
- We engaged an eviction attorney to send notices to cease and of eviction when the offenses became repeat occurrences. Have your eviction attorney identified and any notices ready to send immediately. Be sure to follow your state eviction process precisely.
- We offered to release the tenant from her lease without penalty in order to avoid eviction.
- We required the maximum security deposit allowed by our state. In only 10 months, these tenants and their guests managed to do enough damage to the apartment to deplete most of that deposit (normal “wear and tear” repairs were paid out-of-pocket by us).
Not everyone knows how to be a considerate tenant or neighbor, but having strong systems for screening, onboarding, and managing your rentals can make all the difference when challenges arise. If you’re looking to strengthen your landlording systems, check out our Landlord’s Survival Cheatsheet for essential tips and proven strategies to help you manage with confidence