Evicting a Tenant
Q. I’m a rental property owner and have a tenant that keeps paying late and I’m getting a little frustrated and tired of it. I can terminate their lease, but I’m guessing if I do that I may have to evict them. What’s the typical process and cost? Leo T., San Bernardino, Calif.
A. Sorry to hear about this. I’ll throw some thoughts your way first.
One thing I’d like to know is other than paying late, are they good tenants, do they take care of your property, not annoy the neighbors? If yes, I’d give it another shot at trying to get them to pay on time. Have you talked to them about why they are late? Maybe they don’t get paid until the 8th of the month and you could adjust their rent due date if you felt that is appropriate.
If they are not good tenants for many reasons, maybe it’s time to part ways. Review the lease and make sure you stay within the terms of the lease and local laws on terminating the lease. Also, it’s always best to try to get them out on a good relationship basis rather than letting things deteriorate. Maybe you can work out some deal that works for everyone.
If you think you’re going to have to evict, and you believe they’ll fight it, it’s going to take 3-4 months and undoubtedly cost you $1,000-$2,000 in legal fees, plus lost rent which you’ll never get back from them, plus any property damage they could do. But talk to an attorney in your area about the costs. That’s a lot of money in addition to the stress and uncertainty you’ll experience with the eviction process and timeframe.
So, if you give them notice of ending the lease, and you think it’s going to be a brawl, you could always offer them some money to leave the house in a certain period of time and in good condition (cash for keys). Don’t give them the money until they are out of the property and make sure they agree to give you easy access to show the house to other prospective tenants during the period when they are still there.
Doing “cash for keys” may make you mad, since it’s your property and they should follow the lease, but it’s still probably the best way to get them out with the least hassle and the least cost to you. Good luck!
Mortgage Financing Getting More Expensive
Q. I hear that in 2014 it is going to be tougher to get mortgage financing, which will definitely drive interest rates up. What is your forecast? Mel R., Rye, N.Y.
A. Predicting the future is tough, especially in an economy that is still not operating on all four engines with a changing regulatory and political environment.
There are new rules on mortgage financing coming due with the Dodd-Frank Consumer Protection Act. This will reduce the number of people able to qualify for mortgages and reduce demand. Also, the Federal Reserve will most likely ease up on purchasing bonds which has artificially kept mortgage interest rates low for a few years. To add to that, mortgage loan guarantee fees have been going up at the Federal Housing Administration and are proposed to go up on Fannie and Freddie loans, although the new director of the group that regulates those loans may delay the higher fees.
Some of these issues will drop demand for financing, which should lower interest rates. Some of these will increase costs and fees on financing, which will effectively increase your borrowing costs.
In addition, if the economy starts to improve, investors in mortgage and other bonds will probably rotate their invested capital out of bonds and back into stock to earn higher yields. This will drive down prices of bonds, as demand for that secure asset lessens and drive up mortgage interest rates. We also have world instability, issues in China, Iran and Russia, the U.S. debt issue, and of course the demand and cost of oil. The United States could also fall back towards a recession, although that looks unlikely at this point, and let’s hope for all of us it keeps improving!
All of these above items may impact mortgage interest rates one way or another in 2014. But, no one knows for sure which way the interest rate ball will roll.
Right now mortgage rates are still at historic lows. That’s the best information we have. Good luck!.
Leonard Baron, MBA, is America’s Real Estate ProfessorŽ and is a real estate investment columnist for Zillow. Find more of his answers to property questions at Mint.com. Email your questions to: Leonard@ProfessorBaron.com