Q–I own a small apartment building in which one of my units has been vacant for several months. I’m getting desperate because the loss of rent from one unit represents a large part of the income from the building, and the expenses remain the same even if an apartment is open.
The problem is that I have been getting only underqualified applicants to rent my apartment. Because of the loss of cash flow, I’m being forced into a position of taking one of these underqualified applicants, just to start the income flowing again. Is there another alternative?
A–Assuming you have evaluated your situation properly, if you think you’re desperate now, wait until the underqualified tenant defaults in the lease obligations. The lack of cash flow you are facing now will pale compared to the lack of cash flow from the lease default, coupled with your costs of reacquiring possession of your apartment.
Actually, one of the biggest mistakes many landlords make is accepting the marginal tenant to avoid keeping an apartment vacant for an extra month or two.
If the marginal tenant defaults, and you have to proceed to an eviction to have that defaulting tenant removed, those efforts will take approximately two months to complete. Therefore, the landlord has the choice of keeping the apartment vacant for an extra month or two, and losing the rent for those two months up front, or renting the apartment to a substandard tenant, and losing the two months of rent during the default period, in addition to spending hundreds of dollars to have the tenant evicted.
Realizing that it imposes a financial hardship either way, the fact is that taking the loss upfront while trying to find a qualified tenant costs less than the loss of rent, costs of eviction and possible damage to the apartment which a landlord faces at the time of default.
It is important, however, to look deeper at your problem, since it seems a bit odd that only underqualified tenants are seeking to rent your apartment. You should first look at your qualification standards.
It could be that you previously had exceptionally qualified tenants, and that your current applicants, while not as financially stable as your past occupants, are really qualified for the apartment.
You have to investigate the qualification standards in your area. You might want to talk to other building owners, and possibly property management companies in the area to see what the evaluation standards are which they apply to tenant applicants. Compare those standards to the ones you are using to see if you have unrealistic expectations of your applicants.
If it appears that your standards are consistent with those generally used in the local marketplace, then you have to look at your building, and try to determine how it competes with other buildings in the area.
Often, if a building is not as well maintained as are others in the area, or if other buildings offer facilities which your building does not have, then your building becomes less desirable in the marketplace.
If you allow pets into your building, that can often deter some prospective tenants from wanting to rent in your building. The noise, and sometimes extra debris, which can be caused by those pets steer people without pets toward a building that does not allow pets.
Another possible factor is the conduct of previous tenants in the building. If you have had problem tenants in the building before, and those tenants’ reputations have spread around the neighborhood, it is common for their negative reputations to reflect negatively on the building as a whole.
These are just some of the factors that can lead to qualified tenants not wanting to rent in your building. There are many others, some of which are real, and others of which are perceived but not justified. To determine the real causes of your problem you might have to do some informal market research in the area, either personally or through a real estate broker in the area.
It is unlikely that every building in your area has only substandard tenants applying for rental in those buildings. There may well be a reason why your building has been singled out for this problem. The challenge is to determine the cause of your problem, and to try to rectify that situation before the expenses of the building become too much for you to bear.
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Robert A. Boron, a Chicago attorney specializing in leasing matters, writes about landlord and tenant questions for the Tribune. Questions to him may be sent to Rental Q & A, Your Place Section, Chicago Tribune, 435 N. Michigan Avenue, Chicago, Illinois, 60611; e-mail, rabltd@aol.com.
