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Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: Chip Stacker on June 27, 2018, 11:39:27 AM

Title: Bad Renters: Small Claims Court or Cut My Losses?
Post by: Chip Stacker on June 27, 2018, 11:39:27 AM
It's my first time dealing with an eviction, and I'm looking for some advice on a way forward. My tenants stopped paying rent last October. They strung the property manager along with a serious of empty promises and letters from 401Ks about hardship loans. They've been hit on their credit report for around $12K in back rent and repairs. I'm being told that I can have the property managers take them to small claims court, but it will cost me an additional $1K.

The property is mostly a break even situation; the rent gives me an extra $200/mo, but I figure that covers repairs, etc. If I sold the house, I would probably break even after fees and such.

Should I bother going after the tenants for money owed, or cut my losses? I figure they're probably getting ready for bankruptcy (just an assumption). Any thoughts or advice will be appreciated, especially from experienced landlords. Thanks in advance.
Title: Re: Bad Renters: Small Claims Court or Cut My Losses?
Post by: Stimpy on June 27, 2018, 11:48:56 AM
Honestly, you'll probably spend more then what you'll get in return after any fees etc.   Besides, if they really are having money issues, do you really think they'd pay if you won?   Answer:  Nope.

So long as you have your rental back, and in one piece, you'll be fine.  Rent it out, do a better background check and call it loss for the tax man.
Title: Re: Bad Renters: Small Claims Court or Cut My Losses?
Post by: Sibley on June 27, 2018, 12:52:01 PM
Next question is why are you going through the hassle of renting if you're just breaking even?
Title: Re: Bad Renters: Small Claims Court or Cut My Losses?
Post by: Tester on June 27, 2018, 02:38:47 PM
It's my first time dealing with an eviction, and I'm looking for some advice on a way forward. My tenants stopped paying rent last October. They strung the property manager along with a serious of empty promises and letters from 401Ks about hardship loans. They've been hit on their credit report for around $12K in back rent and repairs. I'm being told that I can have the property managers take them to small claims court, but it will cost me an additional $1K.

The property is mostly a break even situation; the rent gives me an extra $200/mo, but I figure that covers repairs, etc. If I sold the house, I would probably break even after fees and such.

Should I bother going after the tenants for money owed, or cut my losses? I figure they're probably getting ready for bankruptcy (just an assumption). Any thoughts or advice will be appreciated, especially from experienced landlords. Thanks in advance.

I am thinking of getting a rental property sometimes.
I am afraid of not doing the right thing because I am trusting people "too much".
Below is what I think I should do in such a situation.
I don't know if I could do it so this is why I did not get a rental property for now.

What I would do (hopefully) in your situation:
1. Let it go - get them out of the property TODAY.
2. Find another property manager/modify the contract with the manager in such a way as if he does not enforce the rental contract he is paying you the lost money.
Title: Re: Bad Renters: Small Claims Court or Cut My Losses?
Post by: tralfamadorian on June 27, 2018, 03:06:41 PM
A couple things- fire your property manager. They should be following the agreed upon instructions in your contract between you and them on how to deal with late rent. Pay or quit notices usually on a specific days between 5-15 days after rent is due depending on state and personal leniency. Unless the property is in a horrifically tenant friendly state, 8 months to evict is unforgivably terrible.

By $200/mo, do you mean Rent - PITI- management = ~200. With no vacancy, maintenance reserves or capex reserves? If so, then it's time to sell. The property is an anchor.
Title: Re: Bad Renters: Small Claims Court or Cut My Losses?
Post by: Frankies Girl on June 27, 2018, 03:10:46 PM
You don't have to sue them for the backpay/damages if it would be so much of a hassle you'd rather forgo the process (I would, but 12K is a large amount to me), but you could forgive the debt, file it as such with the IRS so they go after them at tax time for the additional income they owe on (and won't have figured into their taxes). They might be stupid enough to not deal with IRS stuff, but they'll get caught up to eventually and might owe so, so much more and have the added bonus of dealing with trying to cheat the IRS. Fun!

http://blog.credit.com/2011/04/1099-c-in-the-mail-how-to-avoid-taxes-on-cancelled-debt-14927/

Ask about this process over on Biggerpockets if no one here chimes in about how this works, but I'm pretty sure I read about it here.