Time for another learning opportunity for my real estate investing journey. This was the first time I had ever had someone sign a lease and proceed to back out prior to moving in. I am continuing to learn more and more about real estate investing as new situations continue coming up. I enjoy some of the ambiguity in how things are happening and always learning new things. So here is what happened.
Finally Closed On Trifecta!
I finally closed on Trifecta and it was time to begin executing on my game plan. If you have not seen Trifecta before, you can see the initial post I had of the before and after pictures here.
Trifecta will be my second go at house hacking, but this time, the strategy is a little different than house hack #1. This is the first multi-family property I have ever purchased. It is a small multi-family triplex with a 2/1 unit in the front and two 1/1 units stacked on top of each other in the back.
The Plan For Trifecta
The plan for Trifecta is to long term rent the 2/1 unit long term. I have never gone about finding a tenant for an entire unit. Most of my past experience has been with finding tenants to rent out a bedroom in a home or my Airbnb’s.
I believed renting out the 2/1 long term was going to be much easier to find potential tenants than renting out by the bedroom. I posted the home with pictures in the normal locations I post things for rent. I usually stick with Facebook Marketplace, Zillow, and Apartments.com. Those are the sites I have personally found the most luck with.
Finding A Tenant
I was getting interested tenants immediately after posting. This was a good sign. Not only was my listing standing out online, I also had it competitively priced for the market. I screened and showed the place to four different tenants and found someone who would fit well.
A Dream Tenant To Find
This tenant was going to be moving down from South Carolina in a month. She was a registered nurse and works remote so had a solid source of income. Perfect credit score and no debt. Essentially the dream tenant you could ask for. There was one catch with her though.
Around the time she reached out was when everything with COVID-19 started escalating. The start to the lease was going to be a month from when we connected. I was willing to wait a month to hold out for such a good tenant, especially in these times.
We went through and signed a 12 month lease. Two days after signing the lease the tenant calls me early in the morning. Ut oh…this can’t be good.
The Florida governor just decided to put up blockades on the border to prevent some people from driving into Florida from some of the more highly impacted areas of the virus. The tenant explained this in a little more detail to me and proceeded to ask if I could push out her move in date another two weeks with everything going on.
This is an extremely tough time in our economy and in the world in general. There is nothing either myself or her could do about the situation and there is a lot of uncertainty in general. Being the empathetic person I am, I agreed to put a clause in the lease allowing for the move in date to be pushed back another two weeks.
Current State Of Signed Lease
So I now have a signed 12 month lease for this tenant who isn’t moving in for another 6 weeks potentially! What did I get myself into?! I had agreed to wait for this tenant and it was time to just wait it out.
The tenant sent over the security deposit upon signing the lease and she was officially locked in. For my rentals, I require one month’s rent as a security deposit. This is the standard I use in all my long term rentals. This is a refundable deposit depending on damage upon moving out of the home.
Three Weeks Later…Another Call From The Tenant
Three weeks go by and I receive another call from the tenant. This time, with some worse news. Things with COVID-19 were continuing to escalate in the US. New cases per day were continuing to ramp up, social distancing was starting to become a commonly used term in daily conversation, and only essential businesses were allowed to be open.
What a weird time in our world’s history to be alive, but also a really interesting time to observe all the things that are going on.
We are three weeks away from the tenants move in date and I get another call from her. This time, with not so great news. She called to let me know that there is just no way she feels comfortable putting in her 30 day notice at the current place she is living to move down to Florida. She apologized for everything and we went our separate ways.
Sounds Bad Right? Well, Kind Of
Sounds like a pretty bad deal right? Yeah, it definitely is not the best. I thought I found a high quality tenant who I wasn’t going to have any issues with. Would more than likely pay rent on time every month, not cause damage to the property, and had great job security.
Here is the bright side from my end. I was able to keep the security deposit from the tenant based off the contract we signed and agreement we had. So now I get to keep a months worth of rent for someone who won’t be moving into the home and I can put the listing back up online!
Within two weeks back on the market, I found another tenant who was ready to immediately move in. Was an interesting story how all that worked out. Will post about it in the near future with some real numbers of how the lease is setup so I can continue to reduce my expenses even more!
Key Takeaways:
- Finding a high quality tenant is extremely important. Waiting a few weeks for them to move in could be worth potentially placing a bad tenant in the property.
- Structure your lease agreements so you keep the security deposit if they for whatever reason don’t actually move in. I always recommend the security deposit to be one months rent.
- You always have a choice to view things as a positive or negative. I could have viewed her not being able to move in as a negative. Instead, I decided to view it as a positive, and it actually became a positive!
