Avoid This Tenant Debt Collection Nightmare

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Tenant debt collection expert Bill Gray is seeing a disturbing trend:

“We are getting more and more collection requests from owners who inherited the existing tenants from the seller,” Bill explains.

“Problem is, all they have is the lease. They don’t have the information we need for collection. Sometimes they don’t even have the debtor’s Social Security Number.”

The demand for tenant debt collection is growing, and you need to be one step ahead, especially if you are shopping for an investment property that is subject to a tenant lease.

Debt collection begins before your tenant moves in. That’s Bill’s mantra. He explains in his series Seven Vital Tips to Drastically Improve Your Tenant Debt Recovery, that the information you get up front will help you the most if the tenant defaults. Much of the information needed for debt collection is in the application. But that’s not always enough. “Even if you get a copy of the application from the seller,” Bill continues, “the information is all too often outdated, or incomplete.”

“Before you buy, do the due diligence. Find out who the tenant is,” Bill advises.

One way to evaluate the existing tenant is to compare the seller’s tenant file to your tenant screening checklist:

• Does their application contain the right questions? Click here to see Is Your Application Falling Short?

• Is the application complete? Unanswered questions raise red flags about the tenant.

• What screening reports and cross-checks (criminal history, credit, and previous address history) were used? Click here for information on the P.A.T.H. Report.

• Is the file updated at regular intervals? Click here to see our tips on Tenant File Maintenance.

Update Tenant Emergency Contact Information

If you have already purchased an occupied property, or you have not followed a prudent screening and file maintenance process, there are still steps you can take to improve your chances of debt recovery.

While it is unlikely that you can change the terms of the existing lease agreement or require more of your newly-acquired tenant (check with your lawyer to find out your parameters), you should at least be able to get updated emergency contact information. Also, if your tenant pays by check, be sure to save a copy of each one. That information is not only crucial in the event there is an emergency, but, as Bill explains, “It’s vitally important to collection efforts if there’s a default.”

“It’s not just newly acquired rentals that are problematic”, Bill continues. “Even if you were diligent when you first rented, if you are not updating the information, particularly emergency contact and employment information, and keeping track of any changes in payment methods, it can catch up with you in the collections process.

In need of tenant debt collection? Call 303-938-8280 or send an email to [email protected]. Write the word COLLECTION in the subject line.

Premium and Premium Plus members receive discounts on debt collection. Sign up now, or upgrade your membership to enjoy the savings.

American Apartment Owners Association offers discounts on products and services related to your commercial housing investment, including real estate forms, tenant debt collection, tenant background checks, insurance and financing. Find out more at www.aaoa.com.

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