My wife and I have been landlords for about six years. The biggest and costliest mistake we made during that time is renting to a subpar tenant. What do I mean by subpar tenant? Story time!
We were fortunate to have a great renter during the first three years of renting out our home. Our tenant got orders and moved to a new base in January, which is a bad time to rent out a home. We listed the home for rent, and our property manager helped advertise the house.
After almost two months of waiting for a renter, my wife and I got nervous. This vacancy had cost us almost $3,000 and we couldn’t take it. Our property manager called one day and said she had potential renters. It was a married, Army E-4 with bad credit. She were offering $150 less than our normal rental rate. Our property manager said it was risky but she would leave the decision up to us.
We decided to cut our losses and accepted the new tenant.
Fast forward one year. Our property manager tells us the tenants are unable to pay their rent on time, but promised to catch up in three weeks. I didn’t worry about it. But in three weeks she pays $300 instead of $1250! Now I’m getting nervous. She says she needs just two more weeks to come up with the money. We wait a bit longer. The two weeks comes and she pays $200!
She is getting further behind so we tell the property manager to start the eviction process. I also call her squadron first sergeant on base to notify him of the situation. He was concerned and talked to her, but said her husband was leaving her and there was nothing they could do. When she finally moved out, she left damages on the house of over $2,000!
We were able to get some of our money back, but in the end we took a $3,000 loss on missed rent and damages due to the the bad tenant.
The lessons learned for us were:
- Being in the military does not make someone a good tenant, and military leadership cannot FORCE someone to pay their bills
- We needed a vacancy reserve to calmly ride out the time between tenants. Now I try to save up three months of expenses to get through those times
- Trust your property manager and your gut when accepting a tenant.
Overall, it was an expensive lesson learned for us, that luckily has not been repeated.