If you’re just launching your foray into real estate investing, you might have been attracted by the allure of a steady guaranteed rental income that, once established, requires less effort than a regular full-time job. While this is possible to some extent, real estate investors should remember that tenants are not merely cash-generating robots, but rather humans who can cause problems, disregard rules and policies, and fail to make payments.
Because of this, aspiring landlords should take proper precautions by familiarizing themselves with the eviction process in case the need arises as well as possible ways to avoid this cost and time-intensive procedure altogether. Here are five life hacks to make the eviction process as painless (or preventable) as possible:
1. Screen out the stress.
As the old sports adage says, “The best defense is a good offense,” and the same is true for avoiding the tedious eviction process. Landlords should proactively seek to screen tenants enough to filter out those who will be extremely likely to damage property, break rules, and make late payments.
That being said, in a bad market, landlords are sometimes forced into trusting questionable tenants. Moreover, sometimes even normally good tenants can have life circumstances that create unfortunate situations where an eviction process eventually needs to be enacted.
But how do you know when to pull the trigger on an eviction, and what steps you should take if you do?
2. Be considerate but clear.
As a landlord, you should always strive to maintain civility and kindness with your tenants. This is not only a higher moral road to take, but it’s also a better business path to follow since those you maintain a good relationship with will be more likely to treat your property and policies with respect. However, kindness should not be confused with carelessness, and tenants should be given clear payment guidelines that are consistently enforced. In a professional arrangement, tenants can be assessed a base late fee for any delayed payment plus a daily late fee for every additional day that the payment is delayed. These should generally be non-negotiable because setting a precedent to allow late payments to go unpenalized can easily lead to future neglect as well. And if you are renting to multiple tenants, it will be viewed as unfair if one tenant gets let off the hook while another one gets penalized.
Thus, tenants should know exactly what will happen if they make late payments, and they should also know exactly when the eviction process will be enacted. When tenants miss a payment deadline, you should send a friendly reminder to them and then subsequent reminders as they accumulate more fees and eventually progress further toward eviction. More often than not, a late payment will be due to simple forgetfulness or a temporary shortage of cash, and the problem will quickly be solved.
Of course, tenants can find themselves in desperate life circumstances such as the loss of a job or a loved one, and you might be tempted to give them a free pass here or there. This is obviously ultimately up to your own discretion, but you should view whatever ‘free pass’ you give as a direct payment from your bank account and evaluate your willingness to do so in those terms, as that’s ultimately what it is.
3. Don’t shoot yourself in the foot.
If a certain tenant is particularly annoying or troublesome, it might be a temptation to lose your cool and to use aggressive, hardball tactics. While you can be very straight to the point with a bad tenant, you should avoid getting emotionally involved or straying outside of the legal framework, as that can ultimately hurt your case in court and end up creating more problems than it solves.
You should never use a ‘self-help’ eviction tactic where you start taking matters into your own hands before letting the eviction process run its course in court. Similar tactics such as changing the locks or otherwise barring access to the property are never a good idea, as they can easily impede your legal eviction process and will make you look like the bad guy.
4. Leave it to the professionals.
It is highly advisable to get a real estate lawyer and/or professional property manager to assist you with the eviction process, as though you will incur fees, they can save you a lot of time and prevent you from slipping up on your own in what is a fairly complicated process. If you’re not sure where to find a good lawyer, you might try checking with your local authorities who are responsible for evictions to see which lawyers have a lot of experience with filing evictions in the area.
5. Look into possible alternatives.
One popular method for avoiding the eviction process as a landlord is what’s commonly known as a ‘cash for keys’ procedure. With this, you can inform the tenant that they will be evicted but that they can alternatively accept cash in exchange for quickly evacuating your income property while leaving it in a move-in condition. While this may seem counter-intuitive (paying people that aren’t complying with rental agreements to leave?!), it can actually save you a lot of time and money – and of course stress – due to the duration and legal fees involved with an eviction process. For example, a typical eviction might see you paying around $1,500-3,000 to your lawyer, cause you to miss at least one month’s rental income, and see you paying more to clean up the place and address needed repairs, as evicted tenants aren’t exactly known for leaving places in a spotless condition. With ‘cash for keys’ on the other hand, you could be simply out $500 with no need to miss further rent since they’re leaving the place in a move-in condition for the next tenant.
Through screening tenants well, hopefully you will avoid having to go through an eviction process or ‘cash for keys’ processes in your career as a real estate investor. However, while you should always hope for the best, you have to be prepared for the worst by having a researched system in place to deal with such matters.