Real Estate Investing #18: Maintenance and late payments
September 23, 2019
Last year, we had to replace all the appliances in the unit ($2000). This year, we had to replace the hot water heater ($1000). A huge moneymaker this place is not, especially since the monthly profit margins are very thin. The PM makes about as much as I do in a month.
Then, after 4 years of on time payments, the tenant was late paying the rent. There were extenuating circumstances, I’m told. One person was ill and the other person had an issue at work, so they were several days late. While they’ve not been perfect tenants, we have several issues with HOA violations a year, they are minor issues and don’t speak to the quality of the tenant as a payer of rent.
I’m concerned with whether they pay in full, on time, and whether they are treating the property with respect. They are doing both, so while I didn’t love the late payment situation, as long as they ended up paying in full before too long, I was willing to be understanding.
My property manager had what I thought was an outsized reaction. They filed a “7 day pay or quit” notice and asked me to agree to issuing a 30 day vacate the premises notice after they paid for this month. I was taken aback. Why on earth would I throw out tenants for being late once? I’m not trying to let them take advantage of me but after one late payment? That was unreasonable.
I discussed the situation with a landlord friend who agreed that being understanding of tenant life situations includes letting them pay late one time without kicking them out immediately after they make that payment. If it happens more often, that’s a concern but at the moment, after 4 years? A single late payment does not warrant a vacate the premises notice, thank you very much.
After asking for more context, I found that the PM was (overly) worried about the potential for a non-payment situation in which case it would take time and cost money to evict, and cost us both in lost revenue. That would suck, yes, but again, a few days late one time just didn’t warrant that panic, to my mind.
We agreed that we’d wait to see what happened next month. If we had another late payment that indicates the tenant isn’t able to keep up with the below-market rent any longer, then we’d discuss what actions to take.
It is rather frustrating to keep having to deal with their HOA violations, though, because that’s precious time taken out of my schedule. I’m not sure if we can charge for repeat instances because it’s generally the same problem repeatedly and the tenants don’t have any consequences but we do. Repeat transgressions suck up a lot of my time but they also end up costing a lot of money as well in HOA fines.
If it is something like grass not being mowed, can you add landscape services to the rent?
Your property manager is probably interested in getting people paying at-market rent(!)
nicoleandmaggie recently posted…Already planning next summer’s DH-Family Vacation
I hope that’s all that is! We can’t add a fee for this particular thing, unfortunately, it’s a weird specific thing they have to do, but I did consider it.
Is there a way to pass through the HOA fines in an updated lease agreement? I agree with nicoleandmaggie, it’s pretty easy for a PM to want to toss aside a tenant if they are below market.
Yet Another PF Blog recently posted…Financial Update – August 2019
We do pass through the HOA fines, though they are sometimes a little slow to pay, it’s just a pain to deal with every violation.
Interesting comments on the property manager. Are they paid some sort of percentage of rent or something?
We technically have an HOA, but it is cheap and really hands-off. I don’t think they are in the business of fining people, and there really aren’t “rules” that you can violate. They host an annual picnic and maintain a park for us, and there is a decent sense of community that they help foster. So, the best kind of HOA, in my opinion.
Yes, it’s a percentage, so they are incentivized to raise the rent (with my agreement) if they want a raise.
That’s the only good HOA I’ve heard of!
One of my tenants didn’t pay on time and I let it slide. Ended up having to evict them as they did not pay that rent at all. Think he had been there just under a decade (they divorced and he couldnt afford it on his own).
There is an HOA but I haven’t had notice of violations (my PM would handle that). But last I heard a treasurer had stolen the funds.
Ah, that’s an unfortunate outcome. Thankfully this tenant did come back and pay late as promised but we’re going to be alert to any repeat issues.
After my bad experience with the earlier terrible PM, I get the HOA notices directly which creates more work for me but I’d rather be aware than find out too late that they hid or ignored the problems. TRUST ISSUES.
I specifically chose a place without an HOA for this very reason. Unfortunately, people can still call the city if my front yard’s weeds get out of control and someone has twice. So I have to be very careful to keep up on this, which is annoying because frankly I don’t care what my front yard looks like. But oh well. At some point I’ll break down and put rocks in, thereby avoiding the problem.
At any rate, if they renew their lease or with the next tenants, I say you make it a condition of the lease that they pay HOA fines after the first violation. It seems only fair and it’ll keep them on the straight and narrow. Or at least recompense you a bit for the time/hassle/cost of the violations.