Q & A With America’s Real Estate Professor: Evicting a Tenant

Q & A With America’s Real Estate Professor
Zillow
Dec 28, 2013

Evicting a Tenant

Q. I’m a rental property owner and have a tenant that keeps paying late and I’m getting a little frustrated and tired of it. I can terminate their lease, but I’m guessing if I do that I may have to evict them. What’s the typical process and cost? Leo T., San Bernardino, Calif.

A. Sorry to hear about this. I’ll throw some thoughts your way first.

One thing I’d like to know is other than paying late, are they good tenants, do they take care of your property, not annoy the neighbors? If yes, I’d give it another shot at trying to get them to pay on time. Have you talked to them about why they are late? Maybe they don’t get paid until the 8th of the month and you could adjust their rent due date if you felt that is appropriate.

If they are not good tenants for many reasons, maybe it’s time to part ways. Review the lease and make sure you stay within the terms of the lease and local laws on terminating the lease. Also, it’s always best to try to get them out on a good relationship basis rather than letting things deteriorate. Maybe you can work out some deal that works for everyone.

If you think you’re going to have to evict, and you believe they’ll fight it, it’s going to take 3-4 months and undoubtedly cost you $1,000-$2,000 in legal fees, plus lost rent which you’ll never get back from them, plus any property damage they could do. But talk to an attorney in your area about the costs. That’s a lot of money in addition to the stress and uncertainty you’ll experience with the eviction process and timeframe.

So, if you give them notice of ending the lease, and you think it’s going to be a brawl, you could always offer them some money to leave the house in a certain period of time and in good condition (cash for keys). Don’t give them the money until they are out of the property and make sure they agree to give you easy access to show the house to other prospective tenants during the period when they are still there.

Doing “cash for keys” may make you mad, since it’s your property and they should follow the lease, but it’s still probably the best way to get them out with the least hassle and the least cost to you. Good luck!

Mortgage Financing Getting More Expensive

Q. I hear that in 2014 it is going to be tougher to get mortgage financing, which will definitely drive interest rates up. What is your forecast? Mel R., Rye, N.Y.

A. Predicting the future is tough, especially in an economy that is still not operating on all four engines with a changing regulatory and political environment.

There are new rules on mortgage financing coming due with the Dodd-Frank Consumer Protection Act. This will reduce the number of people able to qualify for mortgages and reduce demand. Also, the Federal Reserve will most likely ease up on purchasing bonds which has artificially kept mortgage interest rates low for a few years. To add to that, mortgage loan guarantee fees have been going up at the Federal Housing Administration and are proposed to go up on Fannie and Freddie loans, although the new director of the group that regulates those loans may delay the higher fees.

Some of these issues will drop demand for financing, which should lower interest rates. Some of these will increase costs and fees on financing, which will effectively increase your borrowing costs.

In addition, if the economy starts to improve, investors in mortgage and other bonds will probably rotate their invested capital out of bonds and back into stock to earn higher yields. This will drive down prices of bonds, as demand for that secure asset lessens and drive up mortgage interest rates. We also have world instability, issues in China, Iran and Russia, the U.S. debt issue, and of course the demand and cost of oil. The United States could also fall back towards a recession, although that looks unlikely at this point, and let’s hope for all of us it keeps improving!

All of these above items may impact mortgage interest rates one way or another in 2014. But, no one knows for sure which way the interest rate ball will roll.

Right now mortgage rates are still at historic lows. That’s the best information we have. Good luck!.

Leonard Baron, MBA, is America’s Real Estate Professor®. His unbiased, neutral and inexpensive “Real Estate Ownership, Investment and Due Diligence 101” textbook teaches real estate owners how to make smart and safe purchase decisions. He is a San Diego State University lecturer, blogs at Zillow, and loves kicking the tires of a good piece of dirt! More at ProfessorBaron.com. Email your questions to: Leonard@ProfessorBaron.com

Comments

pptrsha

ha! landlord, I too am a landlord and this year has seen me breaking tenant law more than once. I am sooo ready to go to jail for all of the crap we had to deal with this year.the apts. that move 5 or 6 people in. the people that let their friends and family come over and do laundry on my dime. the ones that trash the units, leaving lit ciggs on the sinks and vanities burning them beyond repair. the ones that let their dogs rip up screen doors and want me to replace them or ruin stoves because they are filthy, or don't change the furnace filters that are provided to them. I had a tenant break the tub faucet handle off while the water was running. I found out when I got the first bill of 300.00. after I served her an eviction notice had to wait 30 days per the court, by then the bill was $800.00. I was so furious I turned off the water. the police, the city inspector,everyone that she could call told me if her water wasn't back on I would be sued! it doesn't matter if the are metro or ford workers I have had both and they are equally disgusting. I have all my places up for sale so call me and you can have them for what I owe!!!

Kingsin

pptrsha, welcome to the real world. I've never owned rentals myself but had a friend who did for a very short period of time. His final straw came when the last tenants ditched just before rent was due- they had bent over all the sinks, tore out and broke every bit of wood baseboard (who does that?), and then left him with all their trashed out mattresses and such to dispose of. All told there was nearly $2,500 worth of damage- he sold the house immediately.