We got scammed….by ourselves. In keeping with extreme ownership principles, I am looking at our first ever eviction as a case of us getting scammed by ourselves. And now I’ll tell you why I’m glad it happened.

When we were getting started in real estate investing people would tell us about evictions and “professional” tenants (people who know the system and have a strategy to live for free and drag out their eviction). It was almost enough to keep us from turning that first house into a rental at all.

We’ve tweaked our systems over time and now have vetted and screened over forty households successfully without a single eviction….until this guy. Despite being angry at him, we know that we are responsible for this outcome and we know where we broke our own rules and we know what to do differently next time.

The system we have in place already works, we just have to stick with it. We violated a couple of our own processes on this applicant and we got burned. Here is a list of what we did wrong:

*We didn’t get a call back from his “employer” to verify his good standing. We called and left a voicemail.

*We didn’t talk to his past landlord because he said everything was in his ex-wife’s name. We should have contacted her to verify this.

*We let his urgency to move in quickly become our urgency to rush our processes. We know not to do this as urgent applicants probably haven’t planned their transition well and may be leaving somewhere else under distress.

*We bought into his story of raising his granddaughter and being happy to move back to town. All of which was untrue as far as we can tell now.

*We screened him while driving up a beautiful snow-covered mountain to go skiing. The world seems almost perfect when you are on an adventure and it’s easy to think the very best of people and overlook the red flags. We won’t screen any more applicants from paradise!

*We accepted his deposit and first month’s rent by Quickbooks payment because we were out of town and he was in a rush. He moved in and then contested the charges to get his credit card to pull the funds back from our account! Only CERTIFIED FUNDS for all future transactions of deposit and first month’s rent! We already knew this but we made an exception.

Now here’s why I’m glad it happened. We need to check ourselves and not grow overly confident in our abilities. This forced us to re-evaluate our systems and we have changed to a different background screening company since this happened. We also won’t be skipping steps in our process anymore – even for a good story! We now know how to file an eviction from start to finish so we’ll file away this expense in the “tuition” category for all the lessons it taught us.

We also got our first eviction over with and we’re still here. We’re certainly not going to let it define us or deter us. I always say that if you had a trucking company you would budget for tires and repairs so why do we act like investing should be without any hiccups? Things are going to happen and that’s why we keep reserves on hand. 

I hope that some of our lessons learned will help you avoid an eviction. If you have one however, it’s not the end of the world. It’s going to cost some money to resolve. It’s going to cost you some rental income but it’s going to be okay. 

So don’t be deterred by the chance of an eviction if rental property interests you. Do the screening and create systems to avoid bad tenants – all of the rest of our tenants are great people that passed our thorough screening process. Most are just like all of us, hard-working people that want a home to raise a family in. I hope you’ll be able to follow what has worked for us and avoid some of our mis-steps to screen for excellent tenants along your rental property journey. Let us know how we can help you get started or move further along with your investing.

And as always, keep the main thing the main thing!