Your Tenant is Costing You Money

As the real estate market continues to strengthen, many home owners who were forced in to becoming landlords during the Great Recession of 2008 – 2011 are now in a position to sell, profitably. That’s truly great news!

Now, the reality check before the disbursement check …

Experienced Realtors® know that a tenant costs their client far more than the rent check will cover as soon as the owner decides to sell their investment property. And the nicer the client is as a landlord, the greater the financial impact.

1. The tenant will be very cooperative initially, before the property goes on the market. They will do everything in their power to convince the owner that they will work with the Realtor® for showing access. The tenant will promise just about anything at this point to not be made to move out. Once the tenant realizes, however, that the owner isn’t making them move because the owner doesn’t want to have to make the mortgage payment without the rent, then the balance of power shifts from owner to tenant.

2. The tenant will promise to cooperate with showings. And then the owner will discover that the tenant has (unauthorized) pets. These pets aren’t just pets. They’re “emotional support animals”. And these ESAs aren’t just animals, they’re family members. The tenant will now require 24 hours notice to show the home because the pets will need to be taken to day care if the tenant is at work, or for a walk once the tenant gets home from work. But not if it’s raining or snowing or too hot or too cold. Then the showing simply won’t work.

Cost* = $1 per finished square foot

3. The tenant will promise to cooperate with showings (part deux). And then the tenant will get very, very sick. Almost immediately. It’s the craziest thing. I’ve inquired of the CDC of this phenomenon. They attribute it to psychosomatic causes. Ergo, the conversion of the unauthorized pet to an emotional support animal. Or the tenant gets injured. Or has to have emergency surgery. Or any and all of the preceding circumstances. And if the tenant isn’t affected, then their spouse and/or all of their children are. Poor tenant!

Cost* = $ .50 per finished square foot

4. The tenant doesn’t leave for showings. This gives them the opportunity to help sell the property by touring the Buyer’s agent and the Buyer through, making sure to point out every single deficiency, real or imagined, that they’ve had to “deal” with because the landlord doesn’t or won’t maintain the property. And “no, flushing my baby’s diapers down the toilet isn’t the reason it overflowed, damaging the ceiling in the basement. The owner just won’t take care of the property, no matter how many times we’ve asked!”

Cost* = $1.50 per finished square foot

5. The tenant stops making rent payments. They feel that this is 1) their compensation for helping sell the property and 2) because they need to save up for the deposit and first month’s rent on their new place. The tenant also knows that they probably won’t get their deposit back from the landlord anyway since their emotional support animal has now been traumatized by having strangers in its home, resulting in a severe case of doggie-diahrrhea and/or cat-choaking-hairball-itis, while the tenant is at work.

Cost* = $2.75 per finished square foot (75¢ for rent and $2 for carpet replacement)

6. The tenant agrees to maintain the yard as part of the lease agreement. Not … going … to happen. Curb appeal is one of the most important selling factors during the Spring through Fall peak real estate sales period. Brown yards, flower beds overgrown with weeds and toys (kid’s and adult’s) strewn all over the lawn do not add to value.

Cost* = $2,500

*cost estimates based on 19 years of residential real estate sales experience, actual and devaluation dollars.

This $6 per finished square foot translates to $9,000 in expense for the owner of a 1,500 finished square foot property. Paying two to three months of a mortgage payment is going to be equal to about ⅓ that. The recession took market value. The current market has given a lot of it back. Don’t let a tenant take away your equity again.

Honor the lease. Give the tenant the notice you promised. Get your rental on the market and sold in 45-90 days. Unless you are a profitable, full time, investment property owner and manager, it’s time to sell. [contact-form][contact-field label=’Name’ type=’name’ required=’1’/][contact-field label=’Email’ type=’email’ required=’1’/][contact-field label=’Website’ type=’url’/][contact-field label=’Comment’ type=’textarea’ required=’1’/][/contact-form]

Kim Novak, Principal Broker & Owner
Novak Advantage Real Estate
ABR, AHWD, CRS, ePRO, GREEN, GRI, MRP, SFR, SRES – BSBA, CDPE, CSP, SSS
Certified Military Relocation Professional
Certified Buffini Peak Producers® Mentor
2012 Salt Lake Board of Realtors Hall of Fame
RE/MAX Hall of Fame & Lifetime Achievement Award

3636 N 2900 E, Layton, UT 84040
(801) 726-1443 l novakadvantage@icloud.com

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