The park that I just took over has very poor collections, around half of the tenants have been allowed to accumulate delinquent balances, sometimes in the thousands of dollars. Most of the tenants have income from government programs, so I think they have the money, they are just choosing not to pay.
My initial plan was to begin eviction proceedings as quickly as possible on every tenant within the first month to show that we are serious and are not lax about rent collections like the previous owner. One thing I am worried about with this strategy though is that I will have convinced the tenants that I am serious too late for their own good, and I will end up purging a quarter of my tenants base that was capable of paying, but couldn’t scramble in time to get their payments together.
I’m considering distributing an outline of a more relaxed evictions schedule that will be enacted in January, and also an accelerated evictions schedule for February and beyond. This way we can show the tenants that we are serious, while still giving them time to correct their ways. Does anyone have thoughts or suggestions for retraining tenant to pay their rent?
You should go hardcore on no pay/no stay from day one. There’s no reason to go soft on them for the first month. However, your pitch needs to be that they have to pay the current month without fail, but you will work with them on the past-due balances. Under your sale agreement, do you even get the old balances? In some deals, the seller gets them, which gives you zero incentive to collect them and – by telling the tenants that you don’t have any interest in the old balance – allows them to start the clock all over again and hopefully not get behind again. Your budget when you bought the park was to collect in X amount of rent. That should be the goal – not to collect in Y amount of old balances.
Thanks Frank, that will be my plan. I did negotiate receipt of the old balances, in exchange for giving the previous seller half of whatever is collected from the past balances(in hindsight probaby too generous of an offer for the seller). So I have the old balances, but collecting on it definitely isn’t a priority. Any tenants who’s been willing to sit down with me has gotten around half of their debt forgiven and setup on a payment plan of an extra $50 or $100 a month until they get caught up.