Is My Renter About to Leave?
Watching trends among renters could give real estate investors a clue to what they may expect.
I am big on looking over reports to find an analysis that will give me insights into my business. This year has found me redoing my reports to better find the trends that I need to watch. Delving into numbers has me thinking about how those around me can find indicators of trends. Some recent experiences highlighted a way that real estate investors may wish to use to see signs that a client may be leaving.
I come into contact with many renters through my home inspection business. I also meet them on the streets of my neighborhood on my walks. I could always tell that something was going on by observable signs, but how would an investor know when they may not go to the homes that they own? In three instances, I watched carefully as the renters were preparing to leave, and I noticed this trend. Your repair costs will go up, coupled with non-payment of rent. In a fourth instance, the investor’s repair cost went up, but the renter did not default on his rent payments when he was laid off from his job. He is still in the house.
One reason that was given for non-payment was because of the needed repairs. However, reasons can be mis-leading, so an investor needs more discernable facts. Keep track of repair expenses for each month. If you have a home warranty insurance, ensure that they will give you a report or notification if the renter is calling them directly. If you have a property manager, then ask them to include this data in a monthly report. You should be tracking if they are paying rent. When you notice non-payment, begin checking the repairs column. If this is going up, you can take action.
Suggested strategies when you suspect the renter could be leaving
In most instances which I observe, the renters depart quickly, leaving a confused investor in their wake. With an environment where workers are being laid off, you may wish to contact the renter to create a new more affordable contract for a short time. You may want to put out feelers for possibly new tenants, and see if they will pay your price. The underlying theme here is to know what the going rate for a rental property in your area is. You might be too high.
Another action would be to inspect the house. Find out what you need to really repair. Do not let the renter make all of the demands; there might be repairs being done that do not need to be done. If your contract requires them to pay the rent, and there is an agreement as to how repair situations will be handled, then you should enforce it. You are running a business, so you should find the balance between being nice and loosing your shirt.
You may wish to look into selling the house. Depending upon your location, you might find that it is quite desirable. I noticed that a few rental properties in my neighborhood have been purchased (sometimes by the renters themselves). If the repair costs are too much, and you are worried about the renters leaving, then unloading the property might be a solution. You can move onto the next property.
What strategies might you take? Is there another way for you to know this data? A good way to develop more metrics is to speak to other investors. Maybe by leaving a comment here, you can help someone else.
