Optimizing Rental Revenue: Strategies to Prevent Eviction

Eviction is among the most disruptive events you will face in property management. For any property manager, it signals lost income, legal headaches, and long periods of vacancy. On the other hand, it means financial hardship and housing instability for the tenants. Read on, and let’s explore how evictions are preventable.

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The Financial Impact of Evictions

The eviction process can result in both direct and indirect costs. As many landlords find out, the price is typically higher than expected.

Direct Costs of Eviction

These are costs incurred directly from going through the eviction process.

Filing fees – These vary by state but can be anywhere from $50 to $500+
Attorney fees – Depending on your situation, legal fees can range from $500-$5,000.
Lost rent – Throughout the eviction process (typically 30-90 days), you will probably not receive any rent from the tenant.
Property damage – Outgoing tenants who know they are being evicted may move out without care, costing you thousands of dollars in repairs.
Cleaning/Turnover – Whether there’s damage to the unit or not, there are always costs associated with cleaning, repainting, and getting the unit ready for the next tenant.

On average, landlords can expect to pay between $3,500 and $10,000+ per eviction. For smaller landlords who only own one or two properties, that amount can devastate their income for the rest of the year.

Indirect Costs of Eviction

Your expenses will not stop there. While no one likes to see money disappear to obvious expenses, hidden costs can be just as detrimental to your bottom line.

Loss of Vacancy

Your rental unit will most likely sit vacant while you find a new qualified tenant to rent your property. Your monthly rent may be $1,500. Let’s say your property remains vacant for 2 months. That’s $3,000 in lost income, not even factoring in marketing expenses.

Time and Stress

The time spent filling out paperwork, going to court, and working with contractors is time not spent on other parts of your business. That’s a real and costly consequence of eviction.

Damaged Reputation

It wasn’t always this way, but today’s tenants can and do look up landlords online before they rent. If your property gains a reputation for being an eviction-prone property, you may struggle to attract future renters.

Tenant Turnover

Finally, there are costs associated with turnover. Putting a unit back on the market costs time and money. You will need to advertise it, show it, screen applicants, and sign a new lease. Tenant turnover typically costs landlords one to two months of rent.

When you really sit down and crunch the numbers, eviction prevention is almost always the least expensive option.

Addressing Financial Challenges Before They Escalate

Evictions almost always begin the same way: A tenant falls behind on rent. That first missed payment is your canary in the coal mine. Your response at that point can mean the difference between quickly resolving the issue and spending weeks or months going through the eviction process.

Recognizing Early Warning Signs

Good landlords try not to be reactive. If you pay attention to certain patterns, you can spot trouble before it’s too late. Is a tenant who has always paid on time suddenly giving you the runaround? What about a tenant who begins paying partial rent late or who doesn’t return your calls?

Here are some other signs that a tenant may be falling behind:

Ask to pay a few days late
Mentions losing their job or having their hours cut back
Unexpected medical bills
Neighbors are complaining about activity at the property
Utilities being turned off at the property

The sooner you notice these signs, the better. If your tenant is already two or three months behind, you don’t have many options. But if you catch things early, you can often work out a compromise that works for both you and your tenant. Communication plays a major role here. Failing to establish clear communication is one of the most common mistakes that cost landlords.

Offering Flexible Solutions

Upon learning that your tenant has fallen behind on rent, your natural instinct might be to issue a pay-or-quit notice, and that is perfectly okay to do. But in some cases, working with your tenant can get you paid quicker and help you keep a good tenant.

Some ideas you can try include:

Payment plans

Break up the missed rent over two or three months by having your tenant pay an additional amount on top of their regular rent payment. Get the agreement in writing with specific terms outlined.

Work out a temporary reduction in rent

If your tenant is struggling but will likely recover from a short-term hardship, working out a one-time rent reduction or postponement can help them get back on track without losing the rental unit.

Waive late fees

Sometimes simply waiving a late fee as a one-time gesture can go a long way toward gaining your tenant’s trust and encouraging them to be open and honest with you if they encounter financial issues in the future.

Whatever you do, keep communication open and get any agreements in writing. If things eventually escalate to a courtroom, a written agreement shows your willingness to work with your tenant in good faith.

Connecting Tenants with Local Resources

Let’s face it. As a landlord, you can’t (and shouldn’t) solve all of your tenants’ financial issues. But there are resources out there to help renters in need. Taking the time to guide your tenant through these resources can make all the difference.

Did you know that most cities and counties have emergency rental assistance programs? These programs help pay for overdue rent using short-term funds. In many cases, the program sends the payment directly to you as the landlord. You can easily find local rental assistance programs by visiting 211.org or your city’s housing authority website.

Other resources worth passing along include non-profit credit counseling services, local food banks, which will free up cash for your tenants to pay rent, and local utilities assistance. A well-connected Austin Texas property management company will have direct relationships with local non-profits to help speed up tenant aid applications. Being able to point your tenant to one or more of these resources can help them get back on their feet sooner.

Final Words

Eviction is always the last resort, but never the first option. Prevention is less expensive anyway, which makes sense for most landlords. Take note of warning signs early, work with your tenants to find payment solutions, and direct them to available resources to help you keep your rental dollars and maintain a desirable reputation.