What If You Know You Have A Bad Tenant?

I recently sold a building that had a tenant who had not paid rent in 3 years. Through assistance programs, the owner was able to recoup some losses, but the rent was one week short of being nine months behind on the day escrow closed.

Additionally, the tenant had done a number of unapproved modifications to the interior of the unit. The new owner was an experienced apartment owner who owned a large number of buildings, so they began proceedings to remove the tenant immediately.

WHAT IF YOU KNOW YOU HAVE A BAD TENANT? 
If the seller informs you of late or missing payments, damage to the unit, frequent parties, etc. do you know how to proceed? During the sale, you should obtain as much information about the tenant as possible. It could be that some of the information on the original application may have changed (or may have been incorrect from the start) Verify whatever you can by making calls to employers, family members, and former landlords.

ASK FOR ESTOPPELS. 
An estoppel is a form signed by each tenant verifying their name unit number current rent and actual security deposit. These will sometimes differ from the marketing materials you may have received, so they are a good source of information.

ASK FOR ORIGINAL APPLICATIONS 
Many apartment building purchasers don’t ask for applications, only rental agreements.  Applications have a lot of potentially useful information such as persons to contact in case of emergency, old addresses, and account numbers. It may also contain intentionally false statements. If this turns out to be the case, check with your attorney to see if this will give you grounds to serve notice.

TALK TO YOUR NEW TENANT. 
Sometimes there is a tenant who clashed with the previous owner. Maybe you and that tenant will get along well. You never know, but before you start an eviction, it may be worth meeting with the tenant to get their side of the story. It costs you nothing and maybe a quick solution to your problem.

CONSULT THE EXPERTS 
Before you proceed with any action against any tenant, it is always a good idea to speak with your eviction attorney to explore your options. Your apartment association can also recommend an expert.

What we at PRS PROPERTIES CAN DO. We can discuss with you the current rents in your area and supply you with comparable rental prices for similar properties. Before you hire a manager, make sure the compensation is fair to you! We can also look at your building for changes that might allow you to get a higher value in order to create value without huge expenses for your building. We can help you to get the maximum value for your property, should you decide to sell, or the maximum return if you are planning to keep your building.

We always have many investors who are looking for “as-is” properties and are willing to purchase with low rents, a moratorium, or even with a problem tenant in place. We have put together numerous transactions over the years which involve properties that are not listed for sale. Many investors are in 1031 exchanges and need to identify a replacement property before their 45-day identification period runs out.

Should you decide to put your property on the market, we will put together an aggressive, targeted, and professional campaign to get your property sold fast. We have been doing this for over 40 years, and we will use all the tools available to bring you the most dollars at closing. If you are thinking of selling or are just curious about the value of your property, don’t hesitate to give us a call.

Remember – KNOWLEDGE IS POWER!