Why We Chose to Do An Eviction AGAIN?!?!
So for those who have been following along here, you may recall that we have had one eviction in our entire real estate journey. This was the result of skipping steps in our tenant screening process. You can read about that HERE.
We now have two under out belts. This second one was by choice. Why would we choose to do an eviction, you ask? Well, I’ll tell you. We bought a house with a non-paying tenant in place knowing that the tenant wasn’t paying rent to the seller. We know that finding problems that we can solve can equate to opportunity. And we are willing to take on headaches other people aren’t willing to take on. Although we often think of opportunity coming in the form of houses that need a ton of work, opportunity can also come in the form of a headache like a non-paying tenant that someone doesn’t want to deal with evicting. Luckily this house had both: it needed a ton of work AND it had a bad tenant. The only thing harder to sell than a house with a tenant in it is a house with a terrible odor and a tenant that doesn’t pay.
The reason I joke about wanting smelly houses is that I don’t want to compete with as many other buyers and most homebuyers who intend to live in the house want the perfect house that smells like magnolia rose petal rainbows and freshly baked bread. If we focus on the houses that stink (or have other issues), we’ve eliminated a lot of our competition. We are not afraid to figure out how to fix cosmetic or structural issues, take on problem tenants and make houses smell like vanilla sunbeams and Fabuloso again.
This particular house was contracted by wholesaler friends of ours and presented to us. They reported that the existing tenant hadn’t paid rent in seven months. We knew that evictions could be done relatively easily if we followed the prescribed steps but that they scared away many other buyers. In fact, stories of evictions and squatters were some of the things that deterred me from trying this business for years. This article is partly to share that these are not very difficult if you find yourself in this position and they are often times avoidable with your own tenants if you set up expectations and stick to the lease agreement. If you do find yourself doing an eviction you’ll spend a little money and spend a little time but it’s not the end of the world. It took us almost ten years to have our first eviction and after doing the first one now they aren’t so scary. This gave us the confidence to move forward with this purchase.
How We Bought It:
we walked the property with the wholesalers while the tenant held a healthy pit bull by the chain collar and a little chihuahua ran around our feet. This was a tense situation. It smelled like dog pee and beer so I knew this might be the one! When I saw the dust caked on everything and the carpet that had never once seen a vacuum but had seen chewing gum and kool aid plenty, I got really excited. It turns out that carpet at that stage of filth is almost a hard surface flooring. Gross.
The wholesalers knew we could close quickly and that we wouldn’t make the transaction more difficult by requesting multiple inspections etc. given the tense situation. We contacted a private lender who was happy to get a good interest rate again and they wired the funds to the title company. When you pay off private lenders they often want to do business with you again and the transactions become easier and easier for both parties.
What We Did Wrong
We wanted to give the tenants the opportunity to find a new place to live so we gave them 30 days to find a place. They didn’t. Now we had to start the eviction process by posting the 3 day notice to pay or quit and mailing it by certified mail. Posting the notice was possibly the most tense part. I like dogs but I knew there was a strong pit bull in this house that could inflict some serious damage on me and a little Chihuahua who would bark encouragement to his brother while I bled. The posting is supposed to go on the INSIDE of the door unless you have a reason why it is unsafe. I considered Cujo and a large frustrated tenant enough justification to post it on the exterior of the door. And this just starts the process. It was then almost a month until our court date. The judge ruled in our favor and then there was a five business day minimum wait until we could file for the writ of possession. By the fifth day, the tenant had moved out. This tenant had now lived for two more months for free without paying any rent.
The tenant was polite in every correspondence and I started to feel bad about the eviction at one point but remembered that he had not paid a penny to us or the previous landlord for months. But why was he in this situation? I’ll never know his story but I will say that the house was in terrible shape. It’s hard to understand paying rent to live in those conditions or collecting money for a house in that shape.
Don’t Become a Burned-out Landlord
Buying from burned out landlords can be opportunities to find good deals but how do we make sure we don’t become the burned out landlord? First we have to provide a good clean house at a fair price that will attract multiple applicants. Then we screen our applicants well. We teach our processes for this in classes but it’s essentially using online tools that are readily available today and by calling the applicant’s current landlord references and employers. Then we have to hold the tenants accountable for their end of the agreement by making sure they pay on time and keep the home clean. We also have a responsibility to hold up our end of the agreement by making repairs in a timely manner and keeping up the property. We are partners in this endeavor. Interviewing applicants for homes has reminded me that tenants have horror stories about landlords just like landlords have horror stories about tenants. We’ve heard some appalling stories of landlords taking advantage of tenants and refusing to fix safety issues in the homes.
With this house, it’s easy to see the tenants as the problem but it’s both parties that created this situation. Kind of a “chicken or the egg” scenario. The landlord let the house fall into complete disrepair and filth which the tenants contributed to. The landlord also allowed late payments to become seven months of unpaid rent. This should have been addressed after the rent was late by three days with late fees and a notice to vacate. The house had linoleum floors with most of the pattern worn off of them. It had six different flooring types throughout and was missing flooring in several areas. There were broken windows in the house, large holes in the sheetrock and beer cans scattered across the yard amongst other junk. Both parties had lost respect for this home and the agreement they had. Firmness in enforcing the lease can be uncomfortable but it can also help you avoid these very difficult situations of someone ending up having to move out with an eviction on their record and a house that needs a complete overhaul.
What I would do next time I inherited a deadbeat tenant: Set the new rent immediately and post the notice to vacate as soon as it wasn’t paid so that the clock started ticking. If they paid I would stop the eviction then they would know the new landlord had different rules and that they enforced them; unlike the past landlord. I know we tried to work with this tenant which puts my conscience at ease but we lost out on more time getting him out and starting to renovate the home by being overly accommodating or trusting that they would move out on their own. We also went two months with zero income and now have to go six weeks or so without income as we renovate the house. This house was in unlivable condition by our standards so they would have needed to move out while we renovated it. Had they paid rent they would have been given an opportunity to apply to rent the house again but that didn’t happen and they won’t be on the short list to move back in when it is available to rent again soon.
While I hope we don’t have any more evictions, they won’t scare me away in the future. They are just a process. Holding tenants accountable is good for them and for you to avoid these situations. Evictions aren’t a fun thing to do and they feel ugly even when the tenant is in the wrong. If this tenant had cooperated we would have helped them transition in any way possible and could have avoided this on their record. They had a classic car in the driveway and other items of value that could have helped them pay rent but they chose not to sell these items and this was the result.
Solve Problems – Always!
If you are willing to take on these situations and other pain points, you may be able to find some properties that others don’t want to take on, thus eliminating much of your competition.Be the person that eliminates someone’s hassle and you may be rewarded with a discount and a stinky house, angry tenant, mean dog, little dog, gum carpet, beer cans, dilapidated shed, and headaches all your own. But seriously, almost all problems are solvable.
Good luck finding some problems of your own. Let people know you are looking for houses that need work and you just may find a taker. If you need help evaluating a deal or just need some advice, we’re always a phone call away so don’t hesitate to reach out to us. In the mean time, Keep the Main Thing the Main Thing!