How to Manage Tenants When Real Estate Investing

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Imagine you are a landlord, managing your own rental homes, and some issues arise with your tenants. Tenant #1 suffers an unexpected financial setback and asks for an extra week to pay her rent. Tenant #2 has a cousin whose dog needs a temporary home, but your standard lease prohibits pets. Tenant #3 agrees to provide his own lawn care, but he allows the yard to grow out of control.

Now imagine that you like these tenants. You interact with them occasionally and they are nice people. You’ve enjoyed friendly conversations and there are no other complaints or problems with their tenancy. So, do you let these “little issues” slide?

The Slippery Slope

I first encountered the principle of the Slippery Slope in law school. The concept is based on the inevitable downhill slide that occurs when people first begin to bend, and then break, the rules. If one infraction, even of the slightest sort, is allowed to pass without consequence, the next infraction will soon follow. The rule-breaking continues, growing larger and more frequent, sliding further down the slippery slope.

Preventing the Slippery Slope is the cornerstone of successful tenant management.  When a tenant violates the terms of your lease, you must quickly address the violation in a friendly yet firm manner. Set the tone – this is business. Even your nicest tenants are not your friends, they are your clients who are providing you cash flow and protecting your asset. If you look the other way or bury your head in the sand to avoid the hassle or conflict, it’s likely that your tenant will take advantage of the slack enforcement.

Moms and women managing rental properties can handle tenant issues
Don’t Bury Your Head in the Sand

So when a tenant issue arises, address it. Decide where your bottom line lies, and what concessions you are willing to make to keep your tenant happy.

In your initial contact with the tenant, point out the lease provisions that are being violated and lay out your expectations to address the violation. I recommend e-mail for the initial contact. It provides a written record of the violation and gives the tenant some time to absorb the information prior to reacting. As for your approach to addressing any given violation… well, that depends on your comfort level and your needs as a landlord.

In my case, I tend to look for reasonable concessions that I can live with. What can I live with?

Tenant #1 – Late Rent Payment

With all tenants, I make it clear that I will waive the rent payment late fee one time only. If the rent payment falls late again, the late fee will be enforced; and if the rent falls to 10 days overdue, a Notice of Default will be delivered (this is the first step in most states to legal eviction). I can handle an occasional slip-up, but I can’t handle wondering where my rent payment is every month.

Tenant #2 – Dog Needs Home

I own and manage single family homes. These homes tend to attract…guess who…FAMILIES. And they have pets. Now I don’t love pets in my rental homes, but I generally end up accepting them. Since that is my stance, I would find out from Tenant #2 what age, type and size of dog he would be housing. I have never accepted canine breeds known for aggression (often not covered by rental property insurance). I really don’t want puppies either (chewing and peeing), but I have allowed a few over the years. Regardless, assuming the dog is acceptable to me, I would ask the tenant for a non-refundable pet fee. Then I would amend the lease to reflect the changed circumstances.

Tenant #3 – Lawn Care Lacking

I have seen the good, the bad and the ugly of tenant’s caring for their own lawn. Because of this, I typically provide professional lawn service and account for the added expense in my rental rates. But, I do still have a few leases require tenants to do their own lawn maintenance. If a tenant fails to provide appropriate maintenance (and continues failing after receiving notice of violation), I would hire a professional lawn service and pass the cost along to the tenant as additional rent.

Can You Avoid the Slippery Slope?

Effective tenant management is about addressing problems head-on as they arise. If you avoid conflict at all costs or you know that you simply don’t want to be bothered, then you should consider hiring a professional to manage your rental property. And I don’t say that lightly. I’m a big believer in managing your own rental homes, especially in the beginning. You learn so much about your properties and their systems, tenant communication and retention, and even about tax planning. These management basics will enhance your skills as a real estate investor as you grow your portfolio and increase your cash flow.

How Do You Avoid the Slippery Slope? Would you Handle the Tenant Issues Differently? Do You Have Management Tips to Share?

 

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2 thoughts on “How to Manage Tenants When Real Estate Investing

  1. “Slippery sloop” are good words to explain how people often take advantage of kind gestures. I had to learn the hard way, some never learn.
    Parents giving children too much money, governments giving away too much and the things mentioned in this article are all directly related. Thanks for a great article.

    1. So true Mike. As I was writing this post, I couldn’t help but think of its application in other facets of life, especially child rearing! Glad you enjoyed it.

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