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Last Monday, we talked about “renovictions” and how a tenant took her landlord to small claims court and won.
But just as there are bad landlords, there are also bad tenants. Today, we’re going to hear the opposite side of the story—a landlord who had to evict a tenant who hadn’t paid rent for over 6 months!
As you know, it’s already a pain the ass to evict a bad tenant, but during a pandemic? That sound you just heard is the sound of landlords collectively screaming and pulling their hair out.
Let’s find out from “Big City Landlord” what it’s like to evict a horrible tenant during covid-19:
1) How many properties do you own?
3
2) What are 3 things you enjoy about being a landlord?
- Stable cashflow – people will always need a place to live
- Potential Good investment – I put the word potential in front because you need to run your numbers
- Semi-passive income
3) What are 3 things you don’t like about being a landlord?
- Finding new tenants
- Tenant headaches
- Property Maintenance (new properties aren’t so bad but if it’s old you may need major repairs)
4) Tell us about the eviction process. How difficult was it to evict a tenant during a pandemic? Was it more difficult than during normal circumstances?
Under normal circumstances the process to evict a tenant is already pretty long once you start the paperwork. I was told it can take around 4 months however I’ve heard of cases from other landlords that it can take a year if the tenant knows their way around the legal system.
During the pandemic this process became longer because court dates were paused. There was an eviction ban so even for non-payment of rent, you cannot evict your tenant. After this ban was lifted, there was a backlog of cases which further prolonged the process.
In Ontario, to evict a tenant for not paying rent – the process looks something like this:
- Give the tenant the “N4 – Notice”. This tells the tenant how much they owe and the termination date (ie. the due date for their payment). You also must give them at least 2 weeks notice.
- At this point if the tenant pays the full rent owing, then you can’t evict them. BUT, if they still don’t pay the rent or move out by the termination date, you give them a “L1” (Application to Evict a Tenant for Non-payment of Rent and to Collect Rent the Tenant Owes). Since hearings are all held online during covid, I got an email with my hearing date. I had to make sure to submit all evidence to my tenant and the board at least 5 days before my hearing date. Then the board had me fill out a “L1/L8 application”. This was a form to update the board on the current situation (ie since the L1 above was filled, did the tenant move out? Did the rent owing change?)
- During my hearing, for non-payment of rent, all of the board’s orders were payment plans with a future hearing date. If the tenant fails to comply to the board’s order, the Landlord and Tenant Board can refuse future evidence and not consider any new issues.
5) Why did you have to evict the tenant?
The tenant had not paid rent for over 6 months when I filed the N4.
6) Have you ever had to evict a tenant before?
No – in over 15 years of being a landlord I never had to evict a tenant.
I did have other tenants before who was late on their rent due to personal reasons but once they got those sorted, they paid the amount of rent owed in full.
7) Do you have any regrets after this process?
My main regret is not serving the N4 sooner and starting the process earlier.
8) Did you learn anything from this process?
Yes, the entire process was new to me (what forms to fill, attending the hearing). In my situation, the tenant didn’t make the payment ordered by the board. I’m guessing she knew the eviction order would be coming on the next hearing and moved out before it occurred, so we never had to get an official eviction order.
9) Is there any advice you would give to readers who are landlords or thinking of becoming a landlord?
Run the Math:
You should run and know your numbers well. This includes having a good understanding of the opportunity cost of money i.e. is there anything better I can do with my money? There are a lot of people purchasing cashflow negative properties without truly knowing the impact this has on their life and taking a chance on what happens if things don’t turn out as expected.
Commercial or Residential?
If you do want to be a landlord, consider whether you prefer a residential property or a commercial property and why. In general, you should vet a tenant for a commercial property more thoroughly. Their cashflow should sufficiently cover rent and they should also have some sort of insurance.
For residential, sometimes if a tenant does not pay rent, it is because they simply are unable to (this isn’t always true but most of the time from my own observation).
Be Realistic
There is no point in trying to get blood from a stone. You either cut your loss and begin the process of eviction as soon as possible or try to recoup it. I do this by trying to understand their situation and working out a repayment plan if they are in between jobs.
The repayment plan must give them enough room to live normally. Try to be understanding. If they are unable to follow a generous repayment plan, proceed with eviction because they are hopeless.
It helps to understand the nearby job opportunities, even if they are just minimum wage ones as these are opportunities that you can point out for people to take to tide them over until they get their next job. If their situation seems hopeless, proceed with the process of an eviction. It is unfortunate, but you are running a business and not a charity.
Consider the location of your property, as that will determine your demographic of tenants. It will also determine whether there is future potential of further development of the area. Guesstimate a rough timeline because that might also be when you’d look to cash out and move on.
Keep a list of trustworthy contractors/services handy because having an answer ready for a stressful situation is important. That way it’s just a situation instead of a stressful situation.
For residential properties, some questions I would also ask myself:
- Does owning this property tie me down to a specific location for the foreseeable future and am I OK with this?
- Is this property cash flow positive if someone else managed it? This is not necessary but adding a stream of income via real estate and increasing your cashflow should give you more freedom and I feel that it’s counterintuitive to restrict yourself when increasing your cashflow.
- Am I able to meet mortgage payments if for some reason I can’t collect rent for a whole year? Give yourself some breathing room in case things go south. You never want to be in a situation where it is outside your control and financial means.
- Would I ever live in this residential property?
- Am I only renting out a portion of this space/rooms within my house?
- Am I sharing any space with a tenant? How does this affect my quality of life and how long will I be in this situation?
Know Your Tenant
When you do share a space with a tenant, make sure you spend the time to build the rapport and get to know them, even before the lease is signed because you will be living with them. Make sure you have systems and items in places where it is easy for them to maintain cleanliness of the spaces.
Some examples would be
- providing a good cordless vacuum in an easy to access space
- keeping plentiful kitchen towels abound and within an arm’s reach
- replacing them with fresh ones when washing the dirty ones
- providing a place to easily throw the dirty ones into
The fewer barriers there are between a habit you want your tenant to have, the easier it is for them to consistently do it.
I run on the belief that people are generally good, but they are also lazy. If the task doesn’t feel like an inconvenience, they will generally do it.
If you were to choose between a tenant who pays slightly less vs a tenant who is willing to pay slightly more but your gut prefers communicating with the former, go with the former. I have never regretted a tenant for whom I had a good gut feeling about but many regrets for the latter.
10) Would you change any of the laws regarding tenants and/or landlords?
I would expedite the eviction process. Luckily, I have been a landlord for many years before this eviction and my cashflow is good. During covid, I’ve heard horror stories of single property landlords having their only tenant stop paying rent with no ways to evict them then waiting for the eviction backlog to come to their turn. Luckily most tenants I dealt with are really nice people though I think the laws adequately protect tenants against bad landlords but not landlords against bad tenants.
What do you think? Have you ever had to evict a bad tenant? Would you do anything differently? Do you think the rental laws need to change?
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Being a landlord is a horrible business. The rate of return is not that great and the stress level is high. I used to be a landlord of several properties and I am so happy I got out of it.
Yup, sounds stressful all right. Did you have evict anyone?
“People are generally good, but they are also lazy. If the task doesn’t feel like an inconvenience, they will generally do it.”
Oh man, that resonates like a gong. My wife and I have learned a lot from each other about how to be better humans and this is way up the list: when she shared her methods, and helped me find my own ways to streamline and gamify civilized living, stress plummeted as health and satisfaction jumped.
Lazy huh? I have no idea what that’s like ;). On an unrelated note, I think I pulled a muscle from sleeping too hard the other day. #SleepRelatedInjury #I’mNotLazyYou’reLazy
“… I think the laws adequately protect tenants against bad landlords but not landlords against bad tenants… ”
Well said.
Personally, I have NEVER had a “bad” tenant during my landlord-ship years seeing we do make it a priority to exercise solid on-boarding practices above all else financial. You are really only asking for trouble if you do not follow through with fundamentals of vetting prospective tenants properly. This is also a “people’s management” business meaning the partnership between the THREE PILLARS (as in the property, landlord and tenant) must always be balanced. You simply cannot expect that one portion of this equations is more important than the rest and thus I do adamantly believe the system itself requires some “revamping” to make it equally equitable for all parties involved. Just like the comments from the other commenter, I am glad to be out of the game as well!
ImmigrantOnFIRE
“the THREE PILLARS (as in the property, landlord and tenant) must always be balanced”
I love this. Gotta have give and take. One side doing dickish things to the other will always result in it falling over. Keeping all 3 balanced seems like a lot of hard work.
That was a good run without eviction. Sorry to read that you had to evict a tenant.
I’ve been a landlord since 2009 and I haven’t had to evict a tenant yet. The key is to screen really well and a lot of luck. Also, it helps a lot if the property is in a good area.
I’m pretty much done, though. We’ll sell our last rental next year so we can travel more.
Ooh fun! Where are you travelling to?
I SO want to go back to Chiang Mai. Maybe next year.
Thanks for a balanced perspective by doing separate pieces on both bad tenants and bad landlords. I am so sick blogs / articles that only tell half a story.
“even though they had not paid their rent”
A lot of people lost jobs in the pandemic and it was even harder than usual to find a new one. I wouldn’t say “even if” in this circumstance, I’d have been trying to work with them.
I see where you’re coming from, Dana. However, in this case the tenant has a job and still didn’t pay rent.
This is a special circumstance. As he said, 1st time in 15 yrs.
I’d never be a landlord, being a tenant sucks enough.
I’ve heard some landlords even offer something called “cash for keys” and actually pay the tenant to move out of the apartment or house. It’s that much of a headache to actually evict the tenant because you don’t just lose the lost rent payment, you’re losing on the court fees and costs.
You are supposed to win those versus the defendant, sure. However, the chances of you collecting on that is slim to none.
That’s interesting. But then doesn’t it encourage bad behaviour? What if a bad tenant just moves around, refusing to pay rent, and then demands the landlord pay them to move out?
I had horrible luck with my very first tenant, in my first and only investment property. Took more than 7 months to get them out, and the lost rent was just that; you will never get your rent owing; renting now to a friend who actually pays rent, but cleanliness and basic upkeep are seriously lacking. The mortgage is coming due in 1.5 years and I can’t WAIT to sell
Yikes! 7 months of lost rent. That sucks. Even worse than this landlord’s situation. Glad you found a friend to rent to though.
Greetings from Taipei, Taiwan! I’m a tenant, not a landlord. This article gave a popular music flashback:
https://www.youtube.com/watch?v=K4xoHjNjxus
Dan V
Taipei
I am in Australia so things may be a bit different here, but do you have ‘Landlord Insurance’ in the USA? In Autralis this covers you for loss of rent should a tenant decide not to pay rent regardless for the reason. I have 5 investment properties and for the first time I am currently having issues with a tenant, (something that in my experience having been a real estate agent is very rare). Currently I am about 3.5 mths behind on rent which I expect to drag out for another couple of months. Having good insurance policies in place make life stress free (almost) for me.
I think your mindset/expectations are important with property investment which is not for every one. If you expect someone to treat your property any way close to how you would, then you will be disappointed. I factor into my expenses the need to repaint properties every 10 yrs and make repairs along the way.
Landlord insurance–interesting concept. I like that idea. Hope they adopt it in Canada and the US!
We recently had a squatter move in and claim residency. She was invited to stay by a lawful tenant who then moved out and left her there. NIGHTMARE to get her out. In Fl we had to file “unlawful detainer” rather then typical tenant eviction. Because we had no rental agreement/ lease we did not know her name. She had no obligation to pay us rent as she had never agreed to do so.
Eviction court cost were double not counting attorney fees and private investigator (to get her name).
She destroyed the door/window and caused plumbing leak which costs over $3000 in water!
This isn’t all but I’m done venting. Thanks for letting me go on and on.
YIKES! That’s terrible. So sorry to hear that you had to go through that, Jeanette. Yeesh. I didn’t even know that could happen.
I do believe that in general real estate investing can be more lucrative than stocks/etf’s… but, within my circle of friends that own rentals, every single one of them has a tenant horror story that makes me NEVER want to get involved in land-lording !
That’s my fear. At least stocks and REITs don’t squat and/or destroy your home.
We had a tenant that stopped paying rent in August 2019. After 2 months of no rent paid and numerous promises to pay by specified dates that came and went we filed an N4 the beginning of October. We had to wait 3 months to get a hearing for early January 2020. By then the tenant was 5 months behind. They gave her another month to pay what she owed but as expected she paid nothing . The Landlord Tenant Board then issued the eviction notice for her to vacate by the end of February 2020. She failed to leave that day so we nearly had to call the sheriff. Thankfully she left the next day. Note that this was two weeks before the eviction ban was imposed. It could have been much worse though. Had we not got the eviction order when we did she would probaly still be there 22 months behind on rent. I will spare you the details but our grief did not end the day we got our house back. They had caused extensive damage in addition to smoking cigarettes and marijuana inside the house. In the end it probably cost upwards of 30k plus 12 months of lost rental revenue. After the house was back to rentable condition we decided to sell it as the eviction ban was still in effect and we did not want to risk that the new tenant would move in and stop paying. Unfortunately Ontario landlord tenant laws do not protect landlords against bad tenants. Sadly there are many tenants that are very well versed in landlord tenant laws and will happily exploit them. I too agree with the other readers comment about expediting the eviction process. For us the experience left a very sour taste in our mouths so we are happy that we are no longer landlords.
“stopped paying rent in August 2019”
WHAT?! Seriously? Wow. That’s nuts. So sorry you had to go through all that.
I was a landlord for a number of years, and I’m so glad I got out of it. Being a landlord is a full time job – there’s nothing passive about it. At best, you can offload some of the work to a management company, but then you also offload much of your cash flow. I’ve never had to go through the eviction process, but I’ve had to ask several deadbeat tenants to leave – it wasn’t even worth the effort to sue them for back rent, since they had nothing… I was just happy to have them gone. And this, in a nice home in an affluent area. I wish I’d had resources like this blog twenty years ago to warn me against homeownership!
I’ve had to evict a couple of tenants in the Memphis area. Surprisingly, these were B+/A- areas and their income checked out.
They were able to pay for a couple years before they started missing part of the rent. Maybe $30 here, or $50 there. But eventually it added up and they just stopped paying in general.
They might have run into hard times, or might have just managed money poorly.
But the eviction process there, while very painful and somewhat expensive, was fairly quick in Memphis, pre-COVID times.
After the evictions, I stopped playing around with residential properties and instead invest in syndications where literally yesterday I was emailed to have my first exit at a 20%+ IRR which is pretty cool, and a WHOLE. LOT. LESS. STRESSFUL.