Tenants behind on rent and damage

I'm just researching property investment now and find this my biggest fear - bad tenants who don't pay rent and cause damage. My thinking includes avoiding low socioeconomic areas as best I can (and yes I know not everyone in a low socio area is bad - it's about reducing the odds I guess), hiring a quality / experienced PM who has dealt with this sort of thing a lot in the past, landlord insurance. What else can you do? Are you able to vet applicants to choose the apparently 'most stable looking folks'? I know there's risk with every investment, but this one has been my main fear...

 

You are EBM manager? That is good, I have question about the claim.

If landlord does not have landlord insurance, when there is excessive damage cost higher than bond, landlord can apply for VCAT for compensation from tenants.

When landlord has insurance, which means we are covered, we will give all condition report including intial and exit report to insurance company to claim,then insurance company can ask debt colletor to get money from tenant, they have all documents in their hand, so legally they can get money from tenant. Since landlord buys insurance, insurance company is our firewall, we do not need to apply for compensation by ourself because they compensate landlord first can collect debt from teanant. This is what I understand, thus I had question about why Mat do VCAT 2 application for compensation

 

I keep having a question in my head, when tenant's situation changes, why don't they tell agent they could not pay rent and they want to move out, then this can be negotiated, landlord don't need to use VCAT to evict them.

 

I think a good PM is very important, they can be firewall.

 

Property Manager is a big part of that equation.

Also at home open, we get a vibe from potential tenants - ie something you cant see on an application. We also know the right questions to ask of references. A good PM is one that thinks ahead - choosing a tenant who is lots of work means doing lots of work for the whole duration of lease which impacts the service level to everyone else which isnt fair on them.

Ask PM for advice on areas. If they don't want to manage a certain area perhaps you should question whether you want to be in that area as well.

 

Thanks for the reply. Adelaide is one of the areas I'm looking at and know the area really well. I know northern suburbs are experiencing good growth but there's no way I'd buy in that area....

 

its not an unreasonable question. perhaps some believe living rent free will be ok, plus some are educated about their rights, responsibilities not so much?
meanwhile they can remain housed until forced out and that takes several weeks, longer in some cases. nothing to lose by their decisions?

 

Depends which part you mean. Theres bits of the north i wouldnt buy in or manage in either.

But theres other parts i definitely would and they have done great, or soon will.

 

Absolutely correct, good communication is key. I have managed several where the tenant has advised of issues, we've then been on the front foot, arranged payment plans, new leases with the remaining tenant etc.

From a tenant's perspective, why tell your agent/landlord:
a) they only want the rent;
b) provides an excuse to look for a new tenant; &
c) I can live here, rent free, until I get kicked out.

 

Lack of integrity, fear, mental illness, poor support structures, not being raised properly, poor decision making processes, not comprehending cause and effect due to lack of experience or self awareness and the list could go on.

 

Well one of my cars that was stolen was found burnt out at Elizabeth train station - so probably not there lol.. It's probably changed / changing a bit but it would take some convincing to purchase a long term rental north. What suburbs do you like?

 

In Playford council, I'd avoid Elizabeth and Davoren Park. Craigmore and blakeview are ok for the most part. Newer builds in Smithfield can be ok, but the old stock there tends to attract bad kinds.

Salisbury council is much preferred, Paralowie and Ingle Farm would be my picks there, but most of the council area depending on your criteria.

Anything nearer to city than those is likely good.

Maybe review
SA - Salisbury LGA Summary
SA - Inner North/North East Adelaide Suburbs Review

 

You forgot that the dog ate their homework.

 

So many Property Managers out there have a "zero tolerance" policy, where they jump down the tenants throat and threaten them with all sorts of awful things from the moment they're behind. If I had a PM like that, I know I wouldn't bother getting in touch...!

I always tell my tenants that if/when disaster hits, we can't force them to make payment (wouldn't it be nice though!), but we can expect and demand an open line of communication. I have countless cases of tenants who have kept in close contact and held onto their property, and thankfully to a lesser degree, tenants who have shoved their head in the sand and ended up evicted.

 

Agree with @Tom Rivera most agents don't give the tenant a chance.

I don't get paid unless the rent is, and when I've taken over managements and seen that the tenants are always 3-5 days in arrears it's as simple as talking to them. I cannot count the amount of times I've adjusted the tenants due date to line up with their monthly pay cycle, or changed their rent to fortnightly to make it easier to manage with their pay cycle. Sometimes you just need to work with someone, it doesn't necessarily mean they're bad tenants - they're maybe just not very good at budgeting.

I have one that I've managed for 4 years, they were always in arrears for the 3 years before I took over as well. I changed their rent to fortnightly and for the last 4 years they've paid on time every fortnight, if they're ever going to be late he always tells me with a couple of days notice and always pays when he says he's going to. Another got paid monthly on the 15th, but rent was due on the 12th - so they paid a small pro-rata amount and their rent is now due on the 16th - no issues. I had another that we worked with who still couldn't come to the party, so we issued them a notice to vacate for the end of their lease and they left without any trouble.

Obviously these changes aren't made without the owners consent, but I find most don't really mind changing the dates or cycle so long as they know when they will have their money and can budget accordingly.

Sometimes a PM can make these situations worse. The amount of bad tenants is actually very small, but some do require a little more hand holding.

 

This is what I think, when tenants could not pay rent anymore, if landlord/agent still ask them to stay and pay rent, they will do something out of landlord/agent's control, for example, subleasing to other people, moreover, most tenants who is in finance crisis will not keep property in a good living condition. As landlord point of view, I would like this kind of tenant out as quick as possible, if they can negotiate to out early, i think that would be best outcome

 

can understand open communication and assisting with minimising rent arrears, but if the rent remains unpaid for weeks not days we would prefer the tenant pay up or leave. but of course that does not happen. charities and government orgs can manage these people better than private landlords.

 

If tenants leave early, means they break lease, are we entitled to ask for two weeks rent and advertisement fee as signed in contract?

 

you can try, but if they are already in arrears, what do you think the likelyhood is? If there is negotiation going on to have the tenants leave early to minimize loss, then I would suggest offering to waive the lease break fee would be a good incentive for them to get out.

Cheers,
Inertia.

 

If you are issuing a tenant a notice to vacate they do not have to pay lease break fees, as you are the one terminating the lease - not the tenant.

Also lease break charges are calculated on a case by case basis (in Victoria), other states have fixed charges - but that's not the case here.