Andreas Anusavice, CEO at Fast Cash Offer.
getty
Owning and managing a real estate property brings with it a series of overhead costs and responsibilities that are challenging enough during normal times. Throw in a once-in-a-century pandemic and the ensuing, inevitable moratorium eviction policies and you’ve undoubtedly got yourself a recipe for a lengthy, disastrous situation. As a landlord, you can always take precautionary measures to protect your real estate business, such as a strong tenant screening solution and very clear clauses in a lease agreement in the chance you need to convince a judge that a tenant has, in fact, violated their lease terms. However, even with these forward-thinking tactics in place, you might still find yourself with a tenant who falls behind on their payments. What should you do in this situation? You can always go through the process of eviction, but there are also alternative strategies.
1. Cash For Keys
This solution is simple but effective. Provide your tenant with an incentive to leave on their own by offering them a “cash for keys” solution. This method provides tenants who can no longer afford to pay rent a chance to receive some cash if they agree to move out by a date you can both agree on. This strategy allows tenants and landlords to avoid the entire eviction process, which can take over a month, while also limiting the filing and attorney fees that often come with the territory. Remember to do a formal and documented move-out inspection to deduct your tenant’s deposit and get proof of the transaction through a check, receipt and signed agreement.
The amount of cash offered for this incentive could include:
⦁ Moving expenses
⦁ A portable storage unit
⦁ A down payment on a new place
⦁ A month’s worth of an affordable motel’s cost
2. Payment Arrangements
Good tenants usually pay rent on time, don’t cause any problems and take pride in maintaining your rental property. If a typically good tenant is experiencing a financial hardship and is late on rent for the first time, it may be worth it to hold off on serving them a three-day notice and work out a weekly payment arrangement or a rent reduction while they get their financials in order.
3. Mediation
Mediators are trained to collect information from both parties to evaluate the dispute in the event you and the tenant cannot agree on an alternative to eviction. Although the mediator’s decision is not legally binding, this process can help both parties in coming to an agreement to avoid an eviction. Mediators will need you to provide as much documentation as possible so be sure to keep track of late payments and communications with all tenants as you never know who will find themselves in this situation.
Although these are great alternatives to know about and keep in your back pocket to avoid the potentially costly and lengthy eviction process, the best way to protect your real estate income from a negative tenant situation is to be as proactive as possible before the lease even begins.
Forbes Real Estate Council is an invitation-only community for executives in the real estate industry. Do I qualify?
