Aside from midnight maintenance calls, evicting bad tenants is also a popular complaint that landlords/landladies dread about. You may have heard of war stories about “tenants from hell”. Yet just like most of the fears, the fear of eviction is often overstated.
No doubt, evictions DO put a dent to your wallet. You will lose rental income during the eviction case, and may also incur damages and cost money to fix up the property. That being said, when handled properly, eviction is a very solvable matter.
At the end of the day, the benefits of owning real estate far outweigh the effort in dealing with a couple of bad apples.
In this article, I will share some tips which I find particularly useful when handling eviction.
1. Be Informed of the Process
Most fears in life come from the fear of uncertainty, and eviction is no exception. People fear eviction because they don’t know how much time and money an eviction may cost them. People often feel the eviction process a mystery. To dispel this fear, the best way is to face it with your eyes open.
Contrary to most people’s belief, the eviction process is a standard legal matter. The legal cost (assumed you hire an attorney) and timeline are quite predictable.
As a real estate investor, you are mainly concerned of two things: the amount of money and time it takes to resolve the matter.
For estimates, you can simply ask a real estate lawyer specialized in eviction. You can find a list of eviction lawyers in your area with a quick Yellowpage or Google search.
Don’t let a lawyer fool you or overcomplicate things. A respectable eviction lawyer should be able to tell you the ballpark fee and timeline for a standard eviction case right away. If they can’t tell you cost and time upfront, either a) they are inexperienced, or b) they purposely want to obscure the real picture. In both cases, you are much better off getting a new member on your real estate team.
If for some reasons you decide to do it yourself, as the landlord, you can also file for an eviction. The eviction process can be found online in the respective government website.
I will use New Jersey as an example. For non-payment of rent (almost 90% of the eviction cases), it takes around 5 weeks after filing in New Jersey for the entire eviction process: 3 weeks to schedule a court hearing, 1 week to issue warrant, and 1 week for police escort. My attorney charges around $700 for a standard case. To partially compensate the damages, you usually use the safety deposit to offset any cost incurred.
So if you put it in a formula, the cost of eviction will be as follows:
Cost of Eviction = Lost rent + attorney fee + damage of property - safety deposit
Per above, it takes 5 weeks and $700 attorney fee to complete eviction. Let’s say it takes 2 weeks of renovation and $1,500 to fix up the damage done. The weekly rent is $250 and you collected 1,000 in safety deposit. Put everything into the formula:
(Eviction time in weeks + renovation time in weeks) × weekly rent + attorney fee + damage of property – safety deposit
= (5 + 2) × 250 + 700 + 1500 – 1000
So the cost of eviction is slightly under 3,000 dollars. Not great to lose 3,000 dollars, but not a career-threatening blunder by any means.
By knowing what I am getting into, I find going through this exercise makes me calmer and allows me to make better decisions about the upcoming eviction case.
2. Damage Control, Literally
In the previous section, we factor in the renovation cost as part of the eviction expenses. The fewer things to fix, the cheaper the cost of eviction process will be. How do we ensure there are as few things to fix as possible? How do we manage our damage control?
During the eviction period, there will be a lot of emotion charging up. Yelling, shoving, you name it. That is when things get broken. The last thing you want is a tenant takes anger on your toilet, windows, kitchen appliances… (although it’s still better than taking a punch in your face).
How do we prevent these mishaps? How can we ensure both sides cool down? We cool them down through our conversation.
During a conversation, people have tendencies to imitate the other side. Do a quick experiment. Start a conversation with your friend, without telling him/her that you are about to do an experiment. Start off by speaking in your natural tone. Then vary the pace of your conversation by speaking faster in certain sections and slower in others. Did you notice that as you speak faster, your friend will start to speak faster as well? When you speak slower, will he/she do the same? Chances are your friend will. The point of the experiment is: if you want your tenant to be calm and passive, you have to be calm and passive first.
You may wonder whether or not speaking in a calm manner implies being weak. Let me hit it home. Calm does NOT imply weak, if you stick to your principles. You can be both CALM and STRICT. For example, you can calmly tell your tenant that you will file an eviction if he/she does not pay the rent in 3 days, and then you file an eviction 3 days after finding out the rent is still due. Even better, you don’t even have to wait for 3 days to convince your tenant. You can talk about your past experiences of you sticking to your words (e.g. past evictions will be your best example, but it can be anything). Guess what, as long as your actions stick to your words, it will resonate with your tenant.
You are going to stick to your words right?
Overall, I like to think what kind of “me” I would like to present myself as in front of my tenant.
Tone: Slow, Calm Tone
Characteristics: Professional / Go by the rules
Open to communicate: Offer them a chance to talk to either: you / property manager / attorney. Leave the phone numbers as appropriate.
I know some people like to play hardball, using threats and other scare tactics. My theory is that “Aggression invites Aggression. Calmness invites Calmness”. If you like fixing toilets, repaint all walls, by all means play hardball and take your chances. Otherwise, I strongly suggest that you keep it strictly business and professional-like.
A lot of times you can save yourself a lot of headache and money if you can work out an agreement before the case goes to the judge.
The single most important thing to remember in the back of your mind is that eviction hurts both sides. Not only does eviction hurt you, it will hurt your tenant as well. On a good side, use this fact as an incentive for both sides to work towards an amicable solution.
Once a tenant has been evicted, an eviction record will attach to him/her. The eviction record will make the tenant much harder to find future housing because:
Many landlords do not rent out to tenants with previous eviction records.
If the tenant’s rent is subsidized by the government (e.g. Section 8 program), he/she may no longer be eligible of the program. That means the tenant will no longer be able to afford similar apartments.
These are some major consequences that give strong incentives for a tenant to work out an agreement with you before the eviction date.
The goal of the negotiation, as a landlord, is to minimize the time and money spent. You can ask for partial payment of rent due. Based on my experience, this is highly unlikely. After all, if the tenant was about to be evicted due to non-payment of rent, why would he/she pay now, right before they move?
So you next best bet, which I find this more actionable, is to reduce the amount of time the move-out takes. Encourage the tenant to move ASAP, well before the court date. If necessary, even offer the tenant some money (“Cash for Keys”) and a free truck rental to incentivize the tenant to move quickly. Remember, the quicker you get your house back, the quicker you can clean/fix up the house, and the quicker you can get it rented out again.
Don’t always take eviction as its face value. Always negotiate and try to work out a plan before the eviction judgment. More often than not, the commonly agreed solution with the tenant is better than a (somewhat arbitrary) verdict made by a judge.
I see a tenant/landlord relation as a two-way street. We rely on each other. We rely on rents from tenants to support our business, and tenants rely on us to provide safe and suitable housing for them.
If one side does not fulfill its promises, it is the other side’s right to protect themselves. It is important, as landlords, we have to uphold our side of promises to provide good houses to the community. At the same time, we should be confident to protect and exercise our rights should the situation warrant. An eviction is one such process.
Do your best to prevent eviction from happening in the first place. Screen your tenants. An ounce of prevention is a pound of cure. In the few occasions where you need a cure (eviction), handle it with the suggestions highlighted above.
Remember, these blips are nothing more than some glitches along your successful and rewarding real estate adventure.