In a perfect world, a resident is timely with their rent payment, gives proper notice to quit and leaves the rental property on time and in good repair. However, the reality of operating a rental community includes residents who, for economic or other reasons, are sometimes delinquent with their rental payments.
Last year, approximately 20 million renters in the United States paid more than thirty percent of their income on rent. Additionally, of that group, an estimated 2.7 million renters faced eviction. This number is likely to increase as the stock of affordable housing throughout the nation dwindles. Such an increase will create a greater financial burden on property managers since the fees, costs and other financial losses associated with tenant delinquencies can result in thousands of dollars incurred by the property manager.
The True Cost of an Eviction
A common mistake made by owners and managers of multifamily communities is to estimate removal costs based solely on expenses incurred. However, the real cost to evict a resident for non-payment of rent is more than just court and legal fees.
Below is a chart of the fees that a property manager will incur when filing a formal eviction in court.
Although this chart exhibits eviction costs totaling hundreds of dollars, it does not provide the full picture. For instance, owners incur the following costs, as well:
Strategies for Managing the Delinquency Management Process
Since eviction is an inevitable part of property management, there is no avoiding it. However, there are two major strategies owners can utilize to manage the process: (a) the “last resort” approach; or, (b) the “preemptive” approach.
As a last resort, the objective for a property manager is to reduce all legal and processing costs associated with an eviction. In this strategy, the property manager will try to work with the delinquent resident to recover the late rent owed to it without going to court. The last resort method is particularly popular in states where the court process is long and legal fees are costly. When this approach works, it reduces the eviction costs for the property manager. However, if the resident employs delay tactics, the resulting costs to remove the delinquent resident could become very high.
Conversely, when filing an eviction in court is pursued as the first option by the property manager, a resident is more inclined to get their finances in order to prevent homelessness. For the owner, this is a way to take control of the problem before it gets worse. Generally, in this approach, proceedings begin shortly after the first month of late rent and the cost to commence an eviction is typically low.
Good delinquency management is a critical factor in maintaining a good real estate investment. To this end, at ClickNotices, we encourage our clients to pursue the delinquency management process which best fits their needs. We tailor our approach to that of our clients to ensure each client’s process is disciplined and supported by the best software to help offset as much of the late rent costs as possible.