It can be tough dealing with bad tenants, especially for new landlords. In this episode, Charles discusses some strategies for dealing with difficult tenants.

Watch The Episode Here:

Listen To The Podcast Here:

Talking Points:

• As a landlord, having a challenging tenant is inevitable. No matter how good your screening is, it will happen. Occasionally, it is something you could have noticed or checked for beforehand, and at other times, it was unforeseen. Either way, you must manage the tenant and resolve the situation effectively.
• As a landlord for many years, I have encountered a number of management-intensive tenants and have grouped them into a few different categories:
  • Guests that don’t leave: You have rented to one person, and then, what do you know, you start seeing another person showing up (usually a boyfriend) who wasn’t present when the application and lease were signed. I have combated this by speaking to the tenant, who signed the lease, as soon as I noticed it. I would also confirm several times during the application process how many people will be living there. You might not know what is happening daily, but if you see them or their car regularly, I would speak to other tenants to see if they consider him living there. If they live there, they must complete an application, pay the application fee, and sign a lease.
  • Constant complainers: During the application and lease process, I always explain my expectations in addition to my responsibilities as a landlord. If there is a problem, I will address it within X days, and if there is an emergency, I will address it immediately. Maybe give them an example of each. Do a walk-through with them when you hand over the keys to ensure they confirm the unit’s condition upon move-in.
    • When the complaints start, I hold firm with my policies. If they want you to start fixing things that are not broken, this is not how they rented the unit; it was rented as-is. I will maintain the unit, but I am not making upgrades or renovations; unless something actually breaks, like a stove.
  • Always pay late: I always provide a lease coversheet outlining the lease’s main points on 1 or 2 pages in big print. One of these is how to pay rent, and I physically write in the late fee and when it is charged. I personally let my tenants slide on the first late fee; if it is 24-48 hours late but after the first time, whether it is 1 day or 1 week, they are paying a late fee, which is non-negotiable.
    • I am completely upfront with them. “Remember when you called me 2 weeks back about the dripping faucet, and we came over the next day to fix it? That is me upholding my end of the lease.” When you pay your rent late, I pay my mortgage late, and my lender charges me a late fee.
    • I have had some tenants who consistently pay their rent late, and they pay the late fee. If it is a consistent thing, they pay the total rent and the late fee within a week of the due date; I might let it slide. But, when I make this decision, I change my hat from a landlord to a payday lender.
  • Property damage: Tenants who don’t respect your property can become expensive problems. This includes tenants making unauthorized improvements or tenants who cannot seem to get their trash into the dumpster. This must be immediately brought to the tenant’s attention when it is noticed. When handymen or contractors go into units, ask them what the condition of the unit is. Some people will suggest doing regular inspections, but if you are changing HVAC filters or making minor repairs here and there, you will most likely be in most units every few months.
  • Criminal activity: When screening a tenant, you will have access to the tenant’s criminal background check, and you can make your own decisions depending on your tenant screening guidelines. Minor infractions from years back don’t bother me, but with recent, more serious offenses, I might pass. I am all about second and third chances, but not on my dime.
• A few different tactics have worked for me over the years when dealing with difficult tenants.
  • Always be professional: Easier said than done. However, ensuring you handle every interaction with the tenant professionally will help you, especially if this becomes a court problem. Communicate clearly with the tenant, ensuring the tenant understands 100% what is happening, your expectations, and the consequences.
  • Know the law: This is essential for all landlords, no matter how many units you own or manage.
  • Respond to issues immediately: Even if it is not an emergency, it is crucial to respond to your tenants and address their issues promptly, especially if they are difficult tenants because they are the ones that will become a problem, and keeping lines of communication open with them as you are rectifying their problem, will avoid escalation.
  • 4. Maintain Detailed Records: This is especially important if you go to court. Keep a detailed record of when you spoke to the tenant or when you tried to contact them. This helps you stay prepared for a possible eviction, allowing you to move quickly if that is where the situation leads.
    • Send written notices. I don’t think landlords do this enough today. Not just a first-class letter, but certified mail to the tenant. When a tenant needs to sign for something, it raises the level of importance dramatically.
    • We used a process server who worked a lot in our city. He would drop off letters to tenants face-to-face for $20 or $30 since our office was very close to our properties. We called him, and he would stop by when in the neighborhood. You gave him the cash and the letter, which he would give to the tenant. It is another level above a certified letter, which signifies the seriousness of the matter.
  • Cash for keys: Some landlords get hung up on this because they think they are in the right; you need to minimize losses. Get problem tenants out of your property as fast as possible and with as little damage as possible, and cash for keys usually checks both of these boxes. Also, have the tenant name the cash price they will accept and offer to pay more if they leave sooner. Of course, it is binding on the condition of the unit. Try to walk the unit before you agree on an amount.
  • Tenant screening: I harp episode after episode about tenant screening because it is one of the easiest ways to filter out less ideal tenants from the good, long-term tenants we want to stay in our properties for years. Check out episode SS189 when I go over some important tenant screening questions.
• As we close here, know that this is the cost of doing business and being a landlord. If you have losses from one tenant, the real way of staying profitable as a landlord is similar to many other businesses: having more clients, customers, or tenants. Insurance companies hedge their risk by having millions of customers to cover losses as they occur. As a landlord, the more units you own, the more units you can spread out losses from one property or one bad tenant.

Transcript:

Charles:
Are you dealing with terrible tenants? Trust me, I’ve been there. One bad tenant can cost you thousands, but I’m here to show you how to stop that from happening. Whether it’s tenants who have guests who never leave, to ones who constantly complain about things that aren’t broken or always pay rent late. Dealing with difficult tenants is inevitable no matter how great your screening process is. Welcome to Strategy Saturday. I’m Charles Carillo, and today we will discuss the best strategies for landlords dealing with terrible tenants. So let’s dive into the exact steps you need to know. As a landlord, having a challenging tenant is inevitable. No matter how good your screening is, it will happen occasionally. It is something you could have noticed or checked for beforehand, and at other times it was unforeseen. Either way, you must manage the tenant and resolve the situation effectively.

Charles:
As a landlord for many years, I’ve encountered a number of management intensive tenants and I’ve grouped them into a few different categories. Number one is guests that don’t leave. So you’ve rented to one person and then what do you know? You start seeing another person showing up who wasn’t present when the application and the lease were signed, or when you’re showing the apartment. I’ve combated this by speaking to the tenant who signed the lease as soon as I noticed it. And I would also confirm several times during the application process how many people will be living there. You might not know what is happening daily, but if you see them or their car regularly, and I would speak to other tenants to see if they consider the guest as living there. If your other tenants consider this guest as a person that lives at a unit, while there’s something that you have to start talking to that tenant who signed a lease right away.

Charles:
And if they live there, they must complete an application, pay the application fee and sign a lease. Usually this is where the problem is that they probably aren’t able to to be approved for the lease in the application. So there might be something that comes up on their background, most likely on the criminal background which is why they’ve maneuvered around signing the lease the correctly the first time. Number two is constant complainers. So during the application and lease process, I always explain my expectations in addition to my responsibilities of the landlord. If there’s a problem, I will address it within X days and if there’s an emergency, I will address it immediately. Maybe give them an example of each, do a walkthrough with them when you hand over the keys and ensure they confirm the unit’s condition upon moving. So if you’ve got water leaking, you know, a little bit of a drip from a faucet, be there 24 hours, no later than 48 hours, right?

Charles:
I’d probably make that earlier than later if I have to pay for that water anyways, a landlord. And then I have water coming in from upstairs, okay? If that’s something we’re like immediately over there because any type of water damage is very expensive and it just it wrecks havoc on so many different things at your property and it has to be immediately addressed. So I would give these examples when you’re signing the lease with them. If they have an issue with a ceiling fan or something like this, that’s something that’s like a couple days down the road, right? You know, a couple business days down the road that we’re gonna, we’re gonna get around to that. And I think it’s important to kinda lay that groundwork. So when people start coming to you ’cause they’re gonna might, you might have people that are complainers and they’re gonna come to you and they’re gonna probably start with some smaller stuff and they’ll consistently see how far they can push it and kind of how fast you’ll jump at getting stuff fixed, right?

Charles:
And when the complaints start, I hold firm with my policies. If they want you to start fixing things that are not broken, this is not how the unit was rented. It, it was rented as is. And I will maintain the unit, but I’m not making upgrades or renovations unless something actually breaks like a stove. And I’ve had one tenant I remember in in a recent memory that he went to my property manager and wanted like new cabinets or something, and the property manager was like, fine, we’ll put in like these new cabinets, whatever it is. And they’re like, we’re gonna raise the rent this much. And the tenant agreed and then, you know, a few months later they tried to go back and be like, oh, I thought it was just until these cabinets got paid. They’re like, no, no, no, this is the new rental amount.

Charles:
And they stopped complaining. They were trying to like weasel out of what they had already agreed to. So you just have to make sure that what people, you know that everybody’s on the same page and that you know, you’ll have some people that try to bend the rules, get what they want, and then not fulfill their end of it. Number three is always pay late. So I always provide a lease cover sheet outlining the leases main points on one or two pages in big print because people don’t read the lease. And one of these is how to pay rent. And I physically write in the late fee one is charged. You usually have like a permanent marker that’s like a weird color. So I write it in there, I go Late fee is this. After, you know, how many days or after one day or whatever it might be, depending on your location, how many late days you have to give them legally.

Charles:
And you might say it’s 50 bucks and I write in $50 and I personally let my tenants slide on the first late fee. I don’t tell ’em that if it is 24, 48 hours late, but after the first time, whether it’s one day or one week, they’re paying a late fee, which is non-negotiable. And you’ll have people that try to push this, but then it’s also like, listen you know, I’m comp completely upfront with them. Remember when you called me two weeks ago about the dripping faucet and when I came over the next day to fix it, that is me upholding my end of the lease. When you pay your rent late, I pay my mortgage late and my lender charges me a late fee. You know what I mean? Like really be honest with them what’s happening when you’re getting that money. Some people have this notion that landlords take the rent and just put it all in their pocket.

Charles:
And maybe we’re putting, if we’re lucky, 10% of that in our pocket, but a lot of it’s going to pay other bills and other people, you know what I mean? And I have some tenants who consistently pay their rent late. I’ve had this in the past and you know, they pay the late fee and if it’s a consistent thing and they pay the toll rent and the late fee within like a week of the due date, I might let it slide. And I’ve done this before when I manage properties. I’m not saying it’s the best management tactic ever, but you know, you are getting, you are getting paid more money, you’re just taking on additional risk there. But when you, I make this decision, and when you make your decision, if you choose this, you’re changing your hat from landlord to payday lender because now you are agreeing to take their rent late and really pretty much make them a payday loan until they get their next paycheck a week later or whatever the timeframe is it, if you’re getting it weekly, like late and it’s more than a week, I’d probably, that’s not gonna fly.

Charles:
If you’re getting like a few days late every day, like your, you know, your rent’s due like in, in Connecticut, they got a 10 day grace period, right? And it would be like, so rent was due on really, you know, the first, but they had up the 10th to pay. So obviously everybody paid on the 10th, right? And you have somebody that’s gonna pay on the 15th or month. That’s one thing. If they start paying like on the 21st or something, that’s where something we have to change something, you know what I mean? And you gotta nip that right away because that 21st becomes, the 24th becomes now they’re two months and you’ll never, it’s like a gambler, you’ll never get caught up, you know what I mean? It’s just it’s a vicious cycle. Number four is property damage. So tenants who don’t respect your property can become expensive problems.

Charles:
And this includes tenants making unauthorized improvements or tenants who cannot seem to get their trash into the dumpster. And this must be immediately brought to the tenant’s attention when it’s noticed. When handyman or contractors go into units, ask them what the condition of the unit is. And some people will suggest doing regular inspections, but if you’re changing HVAC filters or making minor repairs here and there, you’ll most likely be in most units every few months. And one thing too about the HVAC filters, I find it funny when certain landlords will be like, oh yeah, it’s part of your lease to change the filters. I’m not gonna leave a $10,000 piece of machinery up to my tenants to change a very inexpensive filter. I will send someone in there, have ’em change the filter because so many apartments, I’ve walked thousands of rental units before.

Charles:
And when you’re walking in c class properties, a lot of ’em don’t even have the filters. And the HVAC systems are like in terrible shape because this, and they just, their lifespans are shut really short. So it’s something that also gives you the ability of going into the unit and changing out the filters and seeing what’s going on there, okay? And that allows you to really do an inspection without really doing an inspection. One thing about the trash is that when my dad had some many years back, decades and decades back had some de class properties and the tenants well, some of the tenants on the third floor wouldn’t walk their trash down. They would just drop it off the third floor balcony and try to make into the trash, right? This is something that has to be addressed immediately because it was a mess, right?

Charles:
So hopefully you’re not buying de class properties, but with any type of properties when you’re having that happen, it has to be immediately addressed because one tenant does it, someone else does it, they’re learning from it. They’ll know how far they can push you, and you just have to stop this immediately. Number five is criminal activity. When screening a tenant, you’ll have access to the tenant’s criminal background check, and you can make your own decisions depending on your tenant screening guidelines. Minor infractions from years back don’t really bother me, but with a recent more serious offenses I might pass. I’m all about second and third chances, but not on my dime, especially when I’m just starting out in my real estate investing journey. A few different tactics have worked for me over the years when dealing with difficult tenants. Number one is always be professional, easier said than done.

Charles:
However, ensuring you handle every interaction with a tenant professionally will help you, especially if this becomes a court problem. And communicate clearly with the tenant, ensuring the tenant understands 100% what is happening, your expectations and the consequences. Number two is know the law. And this is essential for all landlords. No matter how many units you own or manage, you have to understand the law. If you have any questions, this is why you have a real estate attorney in your phone, call them the one they use for all your evictions and for your closings, for anything you have, call them, ask them before anything happens, tell them how you would handle it. As you start sending them more business, they won’t bill you for these little questions. Three, respond to issues immediately. Even if it’s not an emergency, it’s crucial to respond to your tenants and address their issues promptly, especially if they’re difficult tenants because they are the ones that can become a problem.

Charles:
And keeping lines of communication open with them as you’re right to find the problem will avoid escalation. And this means like if anybody sends your, you know, for instance, if you’re getting, you’re on text minute communication with your tenants, which I highly suggest you don’t, they should have a call because it makes it so much easier for them to report issues to you and contact you. But if it’s something where they send you an email or they put an issue through like kind of your, your system, if you have a, like a an online payment system or what do they put issues into and they’re paying their rent portal respond to ’em immediately and be like, oh, you know, I’ll take care of this right away, you know, send ’em an email back. I’ll take care of this immediately. And you know, it’ll be like two business days, whatever, it’s let ’em know exactly what’s going on and that you received it.

Charles:
And this way they know that you’re on top of it. Even if you haven’t started the wheels in motion and getting it fixed, they’re aware of it. And if it’s a bigger problem like a, a hot water heater, maybe it’s a a, an odd size hot water heater and they don’t have it at the plumbing supply house and you have to wait for it to come in or so, whatever it might be, you know what I mean? And this will happen sometimes, especially with older properties that have like weird things, right? This is something you have to keep in contact with them, right? Or a specialty furnace or boiler, whatever it is. Let him know, hey, this is the day it’s gonna come in. This is what I’m expecting. And just give him like that regular update and that’s gonna keep him. He’s on top of it, everything’s fine.

Charles:
There’s no problem. You know what I mean? Especially important with difficult tenants. Number four is maintain detailed records. This is especially important if you go to court, keep a detailed record of when you spoke to the tenant or when you tried to contact them. And this helps you stay prepared for a possible eviction, allowing you to move quickly. If this is where the situation leads, you will thank yourself. Your attorney will also thank you because it makes their job easier too, right? They’re gonna be able to do their job more efficiently because of it. You don’t wanna have their hands tied anywhere, so you wanna make sure that you’re following what they’re saying in the process of being a landlord. And then also you wanna provide this documentation to them when it gets to that point. Hopefully it doesn’t, but if it does, at some point it will get to that point with some tenants send written notices.

Charles:
I don’t think landlords do this enough and not just like a first class letter. Certified mail is pretty inexpensive for what it does to the, to the tenant in the sense of knowing how important this is. But certified mail being sent to the tenant, when a tenant needs to sign for something, it raises the level of importance dramatically. It’s not just like, oh, this could be junk mail, this could be blah, blah, blah. This could be anything. When you sign it while they’re turning around and walking away from their front door after signing it, they’re gonna be opening it and they’re gonna read it and they’re gonna take it more seriously, then you just sending some mail that they just leave in their, you know, box for a week or something, right? We used to use a process server who worked a lot in our city and he would drop off letters to tenants face-to-face.

Charles:
And back in the day, like myself managed properties, it was probably like 20 or 30 bucks. And, you know, since our office was very close to our rental properties, they would just like stop. We’d call ’em, he would just like stop by. And I don’t know what he was, he was a pretty imposing size guy. I think he, you know, he’s a process server. I mean, you know, they have a special physique that makes them more efficient at their job just like a bouncer would. And it’s a difference. It’s somebody else showing up differently at their door and delivering the letter to ’em. I mean, there’s not like, it’s not like a shakedown, but it’s something that you have 20 or $30 you pay the person, I give him cash, he goes down the street, he knocks on their door and he drops off the letter.

Charles:
And when that’s happened, that’s been a very effective method for getting paid. And there’s, there’s nothing wrong with it. You can have someone that works for you to deliver a rent letter to someone. There might be rules about leaving it on doors and stuff like this so other tenants can see it, which isn’t really the classiest thing ever, but it’s best, you know, you go down there and give it to them. But I, it’s also something if you have a process server you’re using, or if your attorney has one, he’ll give you the name of the person and just give ’em cash. They’ll go down there, they’ll do it. Or have your attorney do it depending on how that property is owned. You have to speak to your attorney first about that, but that was something we used to do that was pretty effective.

Charles:
And it signifies a seriousness of the matter, which is another step over certified. Letter number five is cash for keys. Now, some landlords get hung up on this because they think they are in the right and you need to minimize your losses. Eviction is extremely expensive, so any type of vacancy is expensive. People not paying rent is expensive. Evictions are, put all this together and add more onto it of how expensive it can be. So get the pro tenants outta your property as fast as possible and with as little damage as possible, this is not about being right. This is about being successful at what you’re doing. And cash for keys usually checks. Both of these boxes also have the tenants, you know, the tenant, the name and the cash they’ll accept. So when you talk to that tenant, you know, ask them the cash price that they will accept and offer to pay them more if they leave sooner.

Charles:
So I remember doing this one time with a girl and I don’t know what the reason was she was working, she just wasn’t paying rent. And it was like a two or $300 that she off that she said, if you gimme that, I can move by this time. And I said I’d give her even more. And if she moved quicker, and she did, and I was like, it has to be like broom, you know, broom clean kind of thing. I don’t want all this stuff left there. I don’t want damage. I walked the apartment really quickly, it was a small one bedroom. I walked the apartment. I was like, okay, this is fine. Just leave it like this with your stuff outta here and I’ll give you this. And yep she hustled to get that thing done and so she could get the additional money on top of it.

Charles:
And that was the easiest way of doing it. I was able to get it clean, paint it, rent it you know, within weeks instead of waiting months for someone to drive their feet and having to go to court, having to go back to court, having to talk to attorneys, having to pay attorneys, all the stuff that goes with it. So it’s a, it’s maybe you feel wronged at first, but you just gotta get ’em out and it’s easier just to cut your losses short and just get back to tighter screening, better tenants for longer periods. And of course this is a binding condition of the unit, so try to walk the unit before you agree on the amount. As I said before, it’s super important. I don’t wanna just make the agreement over the phone. I, if I do that, I wanna make sure that I have access to walk the unit before I sign on it in the sense of sign on.

Charles:
Like go agree on it, you don’t have to sign right there. I would have something they’d sign afterwards that’s like, Hey, we’re you know, we’re canceling the lease and have something maybe your attorney can draw something up or you draw something up and, you know, send it to your attorney. Have them just say, this is fine. I would have ’em sign that and then you give ’em the cash and I would get a receipt for that too, you know what I mean? Just saying that, Hey I’m gonna give you, you know, or I’m gonna give you $400, you’re gonna leave. We’re ending the lease right now, you know what I mean, on this day. And that’s that we’re done. And you’re giving me the keys back so you don’t have access to the unit and everything’s fine. You’ve got a receipt, you’ve got the money.

Charles:
It’s pretty much straightforward and you won’t hear from that person again. Number six. And the last one is tenant screening. And I harp episode after episode about tenant screening because it is one of the easiest ways to filter out less than ideal tenants from the good long-term tenants. We want to stay in our properties for years. Okay, check out episode SS 180 9 when I go over some important tenant screening questions. And as we close here know that this is the cost to doing business and being a landlord, if you have losses from one tenant, the real way of staying profitable as a landlord is not to drag people through and try to get every penny out of ’em and take ’em to you know, evictions and then try to bring you know, get collect money from a collection agency.

Charles:
This stuff could work. But for most people it’s just gonna be easier for you to have more units and tighten up your screening. And it’s similar to any other business, having more clients, having more customers, having more tenants. Insurance companies do this by their hedging, their risk, by having millions of customers to cover their losses as they occur. And as a landlord, the more units you own the more units you can spread out your losses from one property or one bad tenant. So I hope you enjoyed, please remember to rate, review, subscribe, submit comments, substantial show topics at globalinvestorspodcast.com. If you’re interested in actively investing in real estate, please check out our courses and mentoring programs at syndicationsuperstars.com. That is syndicationsuperstars.com. Look forward to two more episodes next week. See you then.

Charles:

Have you always wanted to invest in real estate but didn’t have the time, didn’t know where to find the deals, couldn’t get the funding, and didn’t want tenants calling you? Since 2006, I’ve been buying income producing properties in great locations that provide us with consistent passive income while we wait for appreciation in the future and take advantage of tax laws while we’re waiting. And unlike your financial advisor, we invest alongside our investors in every property we purchase. Check out and invest with harborside.com if you like the idea of investing in real estate. If you like the idea of passive income, partner with us at investwithharborside.com. That’s investwithharborside.com.

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Links Mentioned In The Episode:

• SS189: Tenant Screening Questions

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