rentals and tenants

Over the last couple of posts, I have painted a pretty bleak picture of tenants and rentals, that is quite a bit more biased than some. We have had some pretty exasperating tenants over the years. Much of that is due to the fact that we are a little bit too kind-hearted. Does this sound like some of you? The tenant runs into financial difficulty for some reason or another, and cannot (or won't) pay their obligations, and you work with them to try to help them past these "temporary" setbacks. But, are these really "temporary setbacks" or are they situations that the tenant has created for themselves? I will give you an example.
We had a tenant ( a single mother of LOTS of children) who was brought to us by a local religious organization. She was in a very bad situation at the time, and had to move out that day! Now, normally, that sends huge red flags up for us, and we usually do not subject ourselves to this potential future aggravation. However, in this situation, she was brought to us directly by the religious organization, and they vouched for her, telling us that they would provide the rent if she could not. So, we provided her with a vastly reduced monthly rent, and a 6 month lease, so that she had time to get on her feet again. Now, the house that we rented to her, had been our home that we had just moved out of and totally remodeled. Another red flag. She had lots of children. She also did not work outside of the home, waiting for her ex-husband to pay her child support for her huge brood. She also home schooled all of her school age children, which means that ALL of the family was there at all times. This should be a couple of red flags.
See what I mean about being soft-hearted? Or is it soft-headed? On this one, I am not so certain! None of you would do anything like this, or would you? We went against all of our better judgement to help out this poor single mother, with lots of kids and did it help her? Not a bit! She was in the same position at the end of our lease, as she was at the end of the previous lease. By the way, the previous landlord for her was a church.
Well, to make a long story short, she had a flood in the basement of our house, spilled wine on our newly polished hardwood floors, put holes in every single wall in the house, somehow she flung jelly on our 11 foot ceiling in the dining room, had leaky plumbing in every bathroom and the kitchen, put holes in the ceramic tiles in the bathroom shower, and tore out some beautiful rhododendrons that had been there for probably 40 years or more! She did not pay the rent for the last month that she was there, nor the fuel oil, nor the water bill (which was $950.00) for one quarter, and we had to send her an eviction notice to get her out of our house.
Where was the church in this whole fiasco? Hiding! They originally told us that she would receive budget counseling to help her get past these situations, and we were told that she participated in these. These were a requirement of the church for them to help her with her bills. But when we called the church to let them know what was occurring, the representative that we talked with, told us that they are not going to pay any more for her, and the representative started talking about how much of a tax break this would be for us! Great! From now on, we will put all sorts of unverified people in our properties, so that we can incur huge expenses to evict them, pay their bills for them, and fix up all of the wonderful repairs that they created at the property, so that we can get more tax deductions! Anyway, we fixed that house back up, put it on the market and sold it. But more on that later.
This is just the larger of the reasons that we are a little biased on tenants. We let our hearts get in the way, not allowing our reason to make decent, financially viable decisions based on credit, job stability, etc. Keep in mind, that if you are buying properties for investment, the choice of tenants can never be according to your heart. You bought these properties for business purposes, and that is exactly the kind of mindset that you need to have when you install tenants in your residential properties.
If you owned a commercial property, you would rent out that property based on the stability of the prospective business tenant. These are almost always long-term tenants who are building a business in your particular property. Almost 100% of the time, both you and the prospective tenant will be making the decision to rent or not to rent based on past numbers, a financial plan, and back-up capital. Not whether they are going through health problems, job layoffs, divorce, or any other life situation that can cause a residential tenant to fall short of their obligations. Since this is a business for you, then you must make your decisions based on the tenants' credit, income stability, amount of income, past landlord verifications, criminal history report, etc. Don't let your heart think for you. There are lots of very wonderful people in this world that have good credit, good job stability, and want to have a lovely house, but do not want to buy at this time. These are the people that you are looking for to install as tenants in your properties. Don't settle for less than this. Even if you have to pay a month or two of payments! You deserve good tenants in this beautiful property that you purchased.