Having tangible assets in my portfolio that are both practically useful (IE housing) and profitable investments (IE monthly cashflow) is what intrigues me about rental real estate.

Through my post-college years, I lived in situations where my fellow roommates and I paid our landlord rent every month.  I found this monthly arrangement smooth and simple, and I wanted in on the action. 

Buying My First Rental

In 2016, I purchased a property with the intent of renting it out.  I looked for what I thought prospective renters would want – a modern home in a quiet neighborhood, close to public transportation, an attached garage, and walking distance to dining, entertainment, and shopping, to name a few.

Initially, renting-out this property was not an issue. For the first year, things went smoothly.  My tenants paid me monthly and all I did was contact a handyman to fix the occasional issue.  Life was good.

Vacancy Angst

Toward the end of the one-year lease, the time of smoothness had changed.  One of the three tenants informed me that he would not renew the lease due to moving for a job.  In my zeal to assist the remaining two tenants find a replacement, I prioritized not having a vacancy over ensuring the best tenant moved in.

After posting on multiple websites and social media outlets for two weeks, I only received one contact from someone I’ll refer to as Don in this blog post.  I couldn’t put my finger on it, but my “Spidey Sense” was telling me to continue searching for another tenant. Looking back, I definitely wish I did more research on tenant screening.

However, Don did pass the background check and income verification, so I arranged a meet-and-greet with the two tenants who wanted to continue living at the rental property.  They weren’t thrilled with Don either, but ultimately agreed that he could join them on the lease for the next 12 months.

Omens of Tenant Headaches to Come

Shortly after moving-in, I was contacted by the other roommates that Don was behaving very strangely.  For example:

• When the other tenants had friends over, Don would make them uncomfortable with awkward conversation.
• Don would blast the heater and make the house unpleasant for the others, and refuse to discuss a mutually-beneficial solution with his fellow roommates.

If this was the extent of the issue, I would not be writing this blog post.  Unfortunately, things got much worse.

Given that Don was a nuisance, I notified him in writing both 60 days before and 30 days before the expiration of the lease that I would not renew him as a tenant.  He did not respond to either of these communications.

Regrettably, one of my two good tenants informed me that due to his negative experience with Don, he would leave at the end of the lease term too.  That meant that I would only have one good tenant who wanted to continue living in the rental property.

Bad Tenant Costs

• HVAC Sabotage – $400.  Near the end of Don’s lease term, the other tenants notified me that the air conditioning was not working properly.  I had an HVAC company fix the AC unit and they informed me that the unit was clearly disassembled, rewired incorrectly, and reassembled. This was clearly Don’s doing, though he denied it.
• Lost Rent – $1,700. The day after his tenancy contractually ended, Don had still not left the property.  He was now a “holdover” tenant.  When he finally returned my numerous phone calls and emails, he said he felt that it was unfair for him to leave while the other tenant remained at the property.  (Clearly, this guy was off his rocker!).  The people who were scheduled to move in were not able to take possession of the property because Don was still there.  He had also changed some locks on doors inside the house.  Due to this, I refunded Don’s replacements their security deposit and they found housing elsewhere.  In other words, I lost-out on rent.
• Attorney’s Fees – $750.  Due to Don being a holdover and refusing to leave after repeated pleas and threats of legal action, I was forced to contact an eviction attorney to have Don removed.  Fortunately, my attorney was able to pressure Don into leaving, but he was still in my property for 17 days after his lease expired.
• Property Management – $200.  Don left behind a messy room once he did finally leave.  I paid to have it cleaned.  I also paid to have the locks that he replaced within the house restored to their original condition.
• Theft Replacement – $80.  Don stole one of the garage door openers and a clothing iron.
• Unreimbursed Utilities – $270.  Since Don prevented others from taking possession of the premises, to keep the good tenant happy, I did not charge him utilities for the month of Don’s holdover tenancy.
• Rent Discount – $400.  Because Don was a holdover tenant, that made things difficult for the good tenant that renewed his lease for another 12 months.  In order to keep the good roommate happy during this ordeal, I discounted his rent by $400.
• Security Deposit – (-$800).  Because I kept Don’s $800 security deposit, instead of this ordeal costing me $3,800, it cost me $3,000.

Lessons Learned

Despite all of the angst and frustration that Don caused me, the entire experience taught me some valuable lessons.

1. It’s better to have a vacancy than to have a bad tenant.  It’s not worth the risk or potential headaches.
2. Do not offer a furnished property.  Over time, any landlord furnishings (IE furniture, clothing irons, cable modems, etc.) will most likely get damaged or potentially stolen.
3. Include a lease clause making the tenant liable for legal fees incurred by the landlord in the event of an eviction.  I didn’t have this clause in Don’s lease, and in the state where this rental property is, I am not legally entitled to attorneys fees for eviction-related purposes unless it is explicitly in the lease.  I weighed pursuing legal action, but ultimately decided against it.
4. Mandate a security deposit.  I’m glad I did this – it defrayed my eviction expenses a little bit!

In hindsight, this ordeal could have been a lot worse, and I am thankful for this experience.  It made me a better landlord, and I have not had a bad tenant since.

It’s always great to learn from your mistakes…but it’s better to learn from other peoples’ mistakes!

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