How To Handle Bad Tenants? (HMO)
What is your worst tenant experience?
Listen to this week's podcast episode to hear some of my worst experiences, how to handle bad tenants and how to spot red flags during the application process….
This is an interesting question that I get asked all the time. The assumption is that managing tenants is handwork, it's a headache, and a lot of people want to take a completely hands-off approach.
In Rent-to-Rent, most companies keep the management in house because it allows for extra cash flow. When you are at the beginning of your property journey, the additional 10% commission that you would pay to outsource can make a huge difference. I still manage all of my properties; however, I have systemised my business and built a team so that I don't physically have to do it.
I have been fortunate in that most of my tenants have been amazing, and I'm cautious about looking for red flags when accepting an application process. However, I have not been able to avoid bad tenants entirely, and in this episode, I run through my top three worst experiences.
I would love to hear your stories and tenant experiences, as always if you have any questions, please don't hesitate to contact me directly. You can direct message me on Facebook or join and ask me your questions within the Creative Cashflow Community.
In this episode, you will discover
My top three worst tenant experiences
Why it's essential to have systems
How to look out for red flags during the application process
Why prevention is better than cure
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Podcast Transcript↓
0:54 - Simon here. Welcome to another episode of the podcast where every single Monday leetle, all things property, creative cash flow. And of course, how to be financially independent day. If you want to know how to become financially independent to create more security for you and your family through property, you are in the right place. And if you're brand new to me. Three years ago, guys, I knew nothing about property. So you don't need to be a seasoned veteran here you don't need to have hundreds of 1000s of pounds. You know this is common misconception that you need loads of money and experience to do property. Well, you don't. And on this podcast. I share it all. I spread as much of my experience as possible. And we also have a designated Facebook group, the creative cash flow Facebook group where over 1000. Other members share their experiences too, so if you'd be interested in joining I'll post a link in the description of this podcast episode. So, guys, today we're going to be looking at how to handle bad tenants. It's an interesting one, I always get asked you know, what about the tenants. Isn't it hard work. Isn't it a headache. I know some people want to be completely hands off. And in rent to rent, generally speaking we hold the management in house because it allows us to get extra cash flow. So, as you can imagine, whilst you're scaling got that extra 10% commission that you would give out is handy for us to keep in, because that could be the difference between you, being able to leave your job and not that could be the difference between you being able to get another deal and not. So, particularly in the beginning we like to hold on to the management and I still manage all my properties. Now, I've just incorporated systems and the team to help us so that I don't physically have to do it.
3:06 - Or, I don't have to do as much as I used to at least, so bad tenants and look disclaimer before I even go into this. Most of my tenants have been amazing.
3:21 - And some of them have been a little bit bad, but that might not be their fault that just might be circumstantial, and I think a lot of it is prevention is better than cure. So I do you think as landlords, we have the responsibility of putting our best foot forward and giving good value building trust and building rapport with all tenants. So I thought an interesting way to start would be for me to give you my top three worst tenant scenarios, number one, we had a group of international students last academic year. And they paid a whole year in advance so that was not an issue. But what happened was when COVID stroke. They must have found a window to get home, and they must have had like their own freshers week before in their house because it was ransacked, and I literally got a message saying hey, Simon we've gone back home. Thanks.
4:28 - Basically, can you empty the property we don't want anything left in the property, any It was a state that was takeaways everywhere old food mouldy food stains on carpets, tonnes of their belongings that we had to dispose of. And in the end they ended up paying a certain amount, and we dealt with it, absolute nightmare. On the plus side, we'd received the whole years when, and we managed to turn it around and relay it, so we ended up getting additional income. So, you know, silver lining and then Burning Man.
5:03 - Second, bad tenant experience, and we've had this a few times. It's been people that have just want to call over any single tiny issue, like, you know, the amount of phone calls, we've had you know that the lights not working the lamps not working. Okay, cool.
5:26 - Bump in case a fuse I'm thinking is a power cord. And then, you know, turns out someone's gone out there the bolt gone. I've had tenant issues where they've not known how to power, And they've liked the flag, each individual issue so instead of them just clocking in the power has gone, they've liked time and the show is not working. So, internet stopped working Simon the TV's not working. And then, like, a penny dropped to jump to the corn, and delvin.
5:57 - But guys, and I talk about this. You've got to get systemize because what I've done now is I've created a system, got an app for tenants, so that there's a system to deal with all these issues. Okay, and manage this type of stuff because you will get it. And third thing that's been really tricky at times, his tenants, not getting along with each other. Okay, or tenants, causing issues between each other and you've kind of got to act as a mediator. So, one of the points, I'm going to share with you later is how to combat that. So, had my fair share of bad tenants, but today I'm going to share with you five tips on how to deal with it, and how to remember and sort of accept what it is, and not let it affect you too badly. First things first, guys, you need to be picky and selective in the first place. You know, that means you need to vet, the tenants, you need to look for proof of earnings. References credit checks, and those type of things before you even commit to a tenant, as I said prevention is definitely better than cure. And at the moment guys with COVID, it is extremely hard to evict tenants. I've never had to evict a tenant. Thankfully, touchwood, but at the moment. You don't want to be treated somebody joining COVID, so you need to make sure that you don't take on any tenants that aren't gonna pay or are going to treat other housemates with respect.
7:38 - Number two, and this is specifically to HMOs, you need to make sure that you match tenants carefully. So if you've got a 19 year old student partygoer, the lifestyle there makes run every night and run around three 4am, you don't want to be coddling them with a, you know, 50 something year old professional who wants to take it easy. So I'm very very strict on how I combine my different housemates, and I never just fill a house for the sake of filling in the person's got to be a good fit for the house a case in point number two is make sure you're not only thinking about is this tenant good but is this tenant going to get on with other tenants in the house, because that might that my friends heard that my friend is key in terms of tenant retention. If you move somebody into a property that disrupts the flow of the house, you will see more and more tenant turnover, which is not good. Number three, Look for red flags before and during the tenancy.
8:46 - So you know if somebody is a bit younger and can't provide a guarantor. There might be a reason for that. Um, you know, I've had situations where family members have come to view the property with a younger tenant but not been willing to be guarantors bit of a red flag. You know, if you speak to an existing employer or an existing landlord and they're not overly forced or sometimes when they're even in terms of landlord sometimes they see that existing landlord will actually give bad tenants good references to get rid of them.
9:24 - So you really got to use your gut, try and meet them in person, or have a good phone conversation with them and try and figure out, is there any red flags, quick word of advice on this, some of the tenants that I may have wrongly judge have turned out to be the best tenants. I've ever had. So, try not to judge too much, but just look out for things that seem a little bit off bustle. Number four, over communicate.
9:59 - You know, if somebody is going to be a bad tenant.
10:02 - But they liked you and you've built up good rapport, then they can change I believe people can change. Okay, so make sure you over communicate.
10:13 - You know, in terms of rental figures sometimes when I make this up is 550. And I know that on their application their budget was 500. I will really go in, I'll be like, Look, are you sure 550 is affordable. Is there any circumstance in which it wouldn't be affordable, you know, get some bank accounts bank statements and make sure that they've got a bit of a buffer, because sometimes people will say yes and then they'll get themselves into trouble, especially at the moment. Okay, so please please please over communicate, check in, see if they're all right, see if they're getting on with other house means, if not, and you pick up early, you can get on top of it before it escalates and Thing number five. Be kind. Like I pride myself on just being a cool landlord. Somebody calls me as assignment I'm struggling, a friend as long as they communicate in it. I'm just like, yeah, take it easy. It's all good.
11:14 - Just keep me in the loop. And, you know, if somebody asked for a blind or a curtain, or flags or mayonnaise issue. I'll try and sort it in good faith because I know I'm building on good will and the more goodwill you've got the less chance you are of somebody that may have historically, or may have the potential to be a bad tenant actually being bad for you two different things. And finally guys this is not part of the five but this is something that is very important for you to do to protect yourself. You need to get educated in terms of tenants rights updated in terms of COVID as well, and make sure that you're doing everything correctly, safely and you're issuing tenants with the correct documents. Okay. Nobody wants to do a section 21, which is an eviction, especially now, but you do have to serve certain documents at the beginning of the tenancy and have the tenant sign before. Okay.
12:21 - And that's the time when they should be signing for their inventory and doing the deposits, putting them in the safety deposit scheme and all that good stuff. Okay. So that's it for me guys look tenants aren't intrinsically bad, so he kind, you know, try and vet them. And, you know, help them make the right decision that your property may be a good or a bad property for them. You know, there's two edges to the sword. And, of course, guys. Be nice because these tenants are the ones that are funding your lifestyle and giving you the cash flow. So just remember remember that give love, and hopefully you'll get love back. Anyway guys that's it for me, hope you find this episode useful. I'll speak to you next Monday. don't wait 25 years, get creative.