How You Handle Them Is What Matters
We know the up’s and down’s of multifamily ownership. We know how successful multifamily owners handle them. You need to know best practices to get the most out of your investment.
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Today, we’re talking René Nelson, CCIM, a well-known, multifamily expert and commercial real estate broker about commercial real estate in Eugene. This special series focuses on issues related to multifamily property that many investors aren’t as familiar with as they should be.
René, how are tenant, toilets, and trash taking a toll on your property?
René: Well, Patrick, let’s start with security deposits. A security deposit is normally collected by a landlord, and it’s above and beyond say the first and last month’s rent, and the security deposit is returned to the tenant when he or she moves out at the end of the lease. However, if the tenant is really rough on a property and creates damage, the landlord has every right to use that money to fix the repairs. Many tenants are surprised when they move out and they don’t get their full refund back.
Landlords and property managers will typically hold out a fee for shampooing carpets, do some minor repairs, but if you punch a hole in a wall or something like that, they’re absolutely going to charge you for that.
Interestingly enough, potentially next year, when the legislation come back, and they look at the new landlord-tenant laws that we know are going to come back in round two, they may set a new depreciation schedule of what can and cannot be considered for wear and tear, so they may say, okay carpets have a lifetime shelf life of five years, and after that, a landlord would not be able to charge a tenant for any damages, but to answer your specific question, by far, when you’re dealing with tenants, move out and move in are the hardest things on a property.
René, what are the most significant effects of bad tenants?
René: Well I tell you what, a bad tenant can cost you your entire good tenant base in your complex. Last year, the landlords fought really hard against the proposed changes for the new tenant laws, because part of those changes were that you could only give a tenant a with-cause notice. Otherwise, if you gave them a no-cause notice and said, I’m not telling you why, but I just want you out, you would have to pay them the relocation money to get them out, and the rule that they were trying to implement was you have to tell them why you’re asking them to move.
Well, the problem with that is the landlord now has to give them cause, which means two things. One, the neighboring tenant who would normally be coming to you to complain about their neighbor, is now in an extremely tough situation because they might potentially put that tenant in jeopardy by ratting them out to the landlord. I’ve seen neighbors who are angry and retaliate. It can get ugly. [inaudible 00:02:57] if you give a tenant a reason why you’re evicting them, they have the right to cure that.
So, if the new relocation and landlord laws change next year in favor of the tenant, I think what we’re going to see is professional tenants who move in, start playing a trumpet or loud music at 2 a.m., and you’re going to want to kick them out, and then you’re going to have to dig in your wallet to pay them to get rid of them.
Otherwise, your good tenants are going to move out. So it’s super important for landlords to pay attention this next year and make sure that we defeat this initiative because if we get stuck with bad tenants, it’s really going to wreak havoc on our tenant pool and who’s going to want to live in our properties.
Thank you René. Now our listeners know what’s new with commercial real estate in Eugene right now. If you need more information, go to Eugene-commercial.com or call René at 541-912-6583.