Purchasing a rental property is one of the most stable and profitable sources of income in real estate. The concept of a consistent source of income coming to real estate investors is one of the reasons that make this type of investment appealing even if the potential owner needs to take a loan to purchase an investment property. However, some investors face various difficulties and obstacles along the way. The most annoying problem facing rental property owners is a tenant not paying rent. This is a very delicate complication because it has to be dealt with carefully and in accordance with the existing federal and state laws as well as the rental agreement between the two parties.
The main issue that faces real estate investors when it comes to a tenant not paying rent is that as owners of an income property they have obligations and expenses to pay. They rely on the rental income coming in from the tenant in order to pay for their mortgage, property taxes, and/or their next real estate investment cost. This makes a tenant not paying rent a huge problem that needs to be dealt with swiftly to restore the source of rental income for the investor. The problem is that many rental property owners start to act impulsively which could be more damaging to them than the actual tenant not paying rent. The law or rental agreement aims to protect both the tenant and the owner while avoiding a chaotic and messy process which would inevitably hurt both parties.
An investment property owner shouldn’t just change the locks of the property and throw everything the tenant owns onto the street as a resort to solve this issue. Following a set of steps that might help appeal to the tenant not paying rent in terms of reason and compassion before taking any drastic action is advised.
Related: Your Tenant Not Paying Rent? What Can You Do?
Dealing with a Tenant Not Paying Rent
1. Check the Lease
The first go to step should always be trying to understand what you both signed up for in the lease agreement. A tenant has contractual obligations in the form of the lease agreement that he/she has signed, which makes him/her liable under the law to comply with the agreement in full. Printing out the document and showing the tenant not paying rent the point of dispute in the agreement might force the tenant to respect the agreement in order to avoid legal consequences.
Some tenants will point out that the landlord has not met part of the lease agreement as well if there is any lack of attention on part of the owner. However, unless the lease agreement specifically states that the tenant has the right to stop paying rent if the front door handle wasn’t fixed, for example, then the landlord still has the upper hand per the lease agreement.
Related: 5 Risks That Come With a Rental Property and How to Mitigate Them
2. Understand the Law
Each state, city, or town has different local real estate laws when it comes to the rights of rental property landlords and tenants. It would be wise to understand your local laws carefully to know what is within your rights on how to manage a tenant not paying rent. The laws will include the right steps to approach the tenant while not committing an offense, reimbursement for rent not paid, eviction notices, and the eviction process. Being careful when going through these steps will ensure that the tenant not paying rent has no claim legally over the way the eviction was conducted. The law aims to protect any party to a rental agreement if it has been violated, but understanding the law is what makes it all happen. Some local laws grant tenants a grace period, which gives them time to pay the unpaid rent, so pursuing legal action before that period is over could backfire.
3. Contact the Tenant
The tenant not paying rent will obviously have reasons for the delayed or missing payment. Rental property investments require some good social skills on behalf of the owner. Contacting the tenant with the intention of solving the problem and discussing the reasons of why the rent was not paid in a polite and civilized manner is advised. There is no need to lose your temper and call too many times with anger to force the tenant to pay the rent. This type of behavior leaves a bad reputation for future tenants. The truth is that some tenants will go through financial hardships when renting income properties, so being patient to a certain limit as a landlord could be an asset and not a liability.
4. Submit a Notice to Quit
A notice to quit is considered the final attempt by real estate owners to channel a tenant not paying rent into grasping the gravity of the situation and making the payment. The notice can be delivered by registered mail. A notice to quit gives the tenant a fixed number of days to pay the full rental amount or face the eviction process if he/she doesn’t comply. This is a step that scares many tenants who are not paying rent because they will be facing forced eviction by the landlord, so it psychologically pushes them to start complying and finding a way to get the money.
An eviction process is not allowed to go to court without the notice being sent out to the tenant first. It is a prerequisite of any eviction process.
5. Start an Eviction Process
An eviction process can be costly when it comes to hiring a good real estate lawyer, but it is the only way for the landlord to win the case to get his/her rent money back. Inspecting the income property for damages to be included in the payments that tenants need to make is considered appropriate as well. Evictions are a messy option for everyone, but it is the last resort for owners to get what they’re owed.
Related: 5 Real Estate Investing Life Hacks to Make the Eviction Process as Painless as Possible
Conclusion
A tenant not paying rent is a nightmare for any rental property owner to deal with. But in the real estate market, a landlord will have to deal with different people who face different circumstances. A tenant not paying rent is not necessarily the bad guy who is withholding money for the fun of it. Some people just face difficult situations, but in the end real estate is a business, and a real estate investor must protect his/her interest first before considering those of the tenant. Dealing with these tenants must be done with delicacy because real estate business requires lots of patience when dealing with people.
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