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Strategy Saturday
SS20: How Do You Deal with Non-Paying Tenants?
May 2, 2021
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SS20: How Do You Deal with Non-Paying Tenants?

Welcome to Strategy Saturday; I’m Charles Carillo and today we’re going to be discussing creative solutions to handling non-paying tenants in your rental properties.

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Transcript:

Charles:
Welcome to strategy Saturday, I’m Charles Carrillo. And today we’re going to be discussing how to deal with non-paying tenants. So, disclaimer, I am not a real estate attorney and you’re not either. So speak to one. If you have a non-paying tenant, also, if your property is not owned in your personal name, you will most likely be required to hire an attorney. If it leads to an eviction. Also, if there are any eviction moratoriums in place, this will affect timeframes and portions of the eviction process. So first off, understanding your lease and inherited leases before using a lease, have your attorney review it when inheriting leases buying a property. In other words, understand the leases you are inheriting, make sure on renewal, they are signing your lease. Don’t just keep them months a month after the inherited lease runs out. Second, keep detailed records know when rent is due.

Charles:
No, who owes what, what the grace period is, what the late fees are. And when do they kick in? When did you send new notices of non-payment? When did you call it’s important to know all this and making sure that you record all of it. Third, know your state and local laws. Every state is different. You can find these online, make sure it’s on a.gov website. For example, you can not lock a tenant out, turn off utilities, harass, or make threats. What do you do when someone does not pay? So here’s the first five days after someone doesn’t pay, send a notice of late rent, the rent due rent, for which months applicable late fees. You could mention that you will start legal proceedings, but I would just be in the mindset that they forgot have us set for me, email or letter that you quickly print off and post on their Dale door and or email them and text them next.

Charles:
I would speak to the tenant in person or over the phone, be clear and firm. So maybe this is a couple of days afterwards. Remember the first goal is to be paid. And the second goal is to avoid eviction. They may have a cashflow issue and you can get partial payment, say Friday. And the balance in one to two weeks do not accept any late rent. If you want to get rid of the tenant or you feel an eviction is inevitable. So in my years of self managing properties, you would have people that always paid late and that was not a problem. And I just made sure that they knew I would give them one late free for free one late fee waived. And then after that, what would happen would be that I would then tack the late fee onto the rent. And you had to appeal that habitual late payers of rent.

Charles:
And that wasn’t a problem just that they paid the late fee. It was fine. But if you’re dealing in this the first time that you’ve had this, this a tenant and you don’t know if they’re going to pay or not, I would give them the benefit of doubt maybe for a week or so, but make sure that you have to get a sizable amount of that rent in. If they owe you a thousand dollars and they can get you by to the next week for a hundred. I don’t know. That’s when it comes to your personal decision, it’s usually best to move forward with the process. And then wait, I think if most landlords move forward with the eviction process sooner, they’d have more money in their pocket. So lastly, have your attorney send a payor, quit notice. I would send this about five days after the rent is due.

Charles:
If no other arrangements are made the time period for a pair, quit notices short three to five days. If tenant refused to move out or pay time to file an eviction. Once the eviction is filed, the court hearing could be three to six weeks away. Everyone name is on the eviction, including all co-signers. So if there’s anybody in there on the lease, they’re all added it to the legal documents and the eviction unlawful detainers. So there’s two parts of it really there’s the unlawful detainer, which is the eviction. And there’s the judgment portion for rent owed, which is pretty worthless because your, I mean, you’re not going to get money out of anybody. And so we have judgments on people. They’ll be sent to collections and you’ll never hear from them again. So, but in regards to the two parts of the eviction, really what you want is you want to get the possession of the property, possession of a unit back so you can clean it and rent it.

Charles:
Don’t use a litigation attorney. That’s going to charge you 300 to $600 an hour, or use a real estate attorney that focuses on evictions. When you talk to an attorney or an eviction attorney, you want them, you know, when you call them in the morning, you want their secretary to tell him, oh, he’s in court today. He’s in court today. He’s in court today. That’s all he’s doing is just following filing evictions. He knows evictions better than anyone. He knows what they’re going to do. And he knows how to deal with them. And that’s what you want. When you’re dealing with evictions. They’re also going to be a lot less expensive for what you pay. One hour of a litigation attorney. You probably can get a whole eviction done with a real estate attorney that focuses on evictions, eviction, alternatives, cash for keys. So this is one of my favorites.

Charles:
And this is something that you should definitely definitely look into if you’re having a non-paying tenant. So this avoids legal fees, avoids months of rent loss, and possibly avoids damage to your unit if all done correctly. So when I have successfully used this, I did not offer them out. I asked them what they need to move. If they are halfway decent people, it will be less than what you think slowly agree, but only if they move out in seven days and at the apartment is clean with no damage and no furniture left, maybe do a walkthrough the same day to view the condition. So let me just give you an example here. Your someone’s not paying you go to them through. I lost my job. There was an issue, whatever it is that I’m not paying rent, be like, listen, this is I can’t take a hundred dollars here for $1,200 with a rent and the a hundred dollars here.

Charles:
You’re going to get too behind, too soon, too fast. Right? So what we’re going to do is this. We are going to, if I gave you a set amount of money for you to leave, would you be able to leave? How fast and what amount would it be? Maybe they’ll take 500. Maybe it’ll be a thousand who knows. And then also try to get them out as soon as possible. I like to walk the unit to see the condition of the unit right then, and you’ll see that issues that might have to be done. If they’re minor, not even a problem, you’re not even gonna touch their security deposit. You can just take their secure pilot, whatever it might be that they’re doing. And so if cash for keys is a great way of doing this, where you can get the person out and once you get the person out, then you can rerun that pretty quickly.

Charles:
And you’re avoiding all the hassles and costs of going to court. So after the cash for keys is agreed upon text them three to four days later to make sure you’re still on for Friday, for example. So if you spoke to someone and said, Hey, next Friday, I’m going to be out. It’s going to be, I can do it for $600. Okay. Follow up with them. These people haven’t paid rent. They’re used to making commitments and not following through. So all you have to stay on top of them and make sure that they’re still going to be moving out on Friday. For instance, no response means you’re back to eviction route. Okay? You’re not gonna wait to try to hear from them in a Friday. You want to hear from them. If you don’t hear from them before the time and your check-in, you’re going forward with eviction and move out day, you may want them to sign the lease termination form, speak to your attorney, walk the unit, have them sign, get the keys, give them cash, and immediately change the locks, like bring the locks with you, paint clean rent and repeat.

Charles:
So I hope you enjoy. Please remember to rate, review, subscribe, submit comments, and potential show topics at global investors, podcast.com. Look forward to two more episodes next week. See you then.

Announcer:
Nothing in this episode should be considered specific, personal or professional advice. Any investment opportunities mentioned on this podcast are limited to accredited investors. Any investments will only be made with proper disclosure, subscription documentation, and are subject to all applicable laws. Please consult an appropriate tax legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Syndication Superstar incorporated exclusively.

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