What if all of my tenants are bad tenants?

Question

All of my tenants are bad tenants – slow pay, severe damage, and always bringing issues. What can I do to get my rental business on track?

Asked by: MO – Ohio
Answer

This question is a big red flag because the rental business is a customer service business.  So when the business owner says that "all" of their customers are a problem… that's a problem.  

If all tenants are bad tenants, this points to a total breakdown in functional property management; it speaks to letting the customers run the store, and that never works.  Property management brings order to the business of operating rental property assets.  Many of these assets are multi-million dollar businesses; they do not run themselves with hope and a prayer. The rental property business requires structure to be successful. 

Have Strong Lease Agreements

A lease outlines the relationship between tenant and landlord.  It is the controlling document for how the relationship is supposed to work. Assuming you (the landlord) are fulfilling all the requisites of the lease, and the tenant is not, then there is no reason to wait to present a notice to evict.  The reasoning doesn't have to be about non-payment.  If the tenant is breaking any clause in the lease, then the landlord can and should post a notice to vacate and explain why. This reason should point to the clause in the least.

Most rental property owners can't afford to kick everyone out and start over all at once.  The easy out is not to renew leases when they expire. Non-renewal of leases will create a rolling vacancy that is more manageable.  As units become vacate, complete the turnover bringing some incremental upgrades to the interiors, and lease the newly-turned unit to "credit-worthy" tenants.  

Concurrently, take a fresh look at your property's presentation and known reputation; how is it viewed in the public eye, the neighborhood, and the community?  Is it an eye-sore and a place to avoid or a place people know and like?  

If all findings point to negatives, consider how this can be changed, first, with the smallest investment of dollars.  For example, it's incredible how much better a property looks when management dedicates just 30-minutes a day to ensure the property is tidy and neat. 

Consider adding exterior lighting to areas that will benefit.  This small feature brings a feeling of safety to those who walk those areas.  Another quick but impactful item is to apply a fresh coat of paint to common areas. I'm not saying paint "everything." But look for selective areas that bring a new look visible to residents and anyone passing by the property.  

You didn't mention your rental business's size, so I will assume you have more than five rentals.  If even 5% of your customers are problematic in the property management business, that makes for some challenging days as a property manager.  

On the surface, the problem would seem to stem from poor or dysfunctional systems in place, from leasing standards to the enforcement of the lease once occupants move in.  The lease outlines the rules that the lessor and lessee will abide by.  If the lessee is not abiding by the rules, they should be asked to leave, in writing, and with the lease's full force to administer their removal.  

The high road in my commentary above presumes the property is in reasonable condition. There are in-place leases to enforce engagement rules between the owner (or property manager) and residents.  

If the property is wasting away and rental payments are all-cash, there's no changing the current circumstances without installing an entirely new paradigm.  There is no way out without bringing the property up to operational standards.  Said another way – the property needs new management or ownership.  

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