Empowering Real Estate and Single Moms (2024)

How To Collect Rent Owed After Property Acquisition

Dealing with a situation where the previous owner owes you money for rent can be challenging, but here are some steps you can take:

1. Review the Lease Agreement:

Check the lease agreement or rental contract to understand the terms regarding rent payments and any clauses related to owed money. What I’ve seen in acquisitions is rent rolls being spiked to make the purchase more attractive. The investor I worked for purchased like 6-7 properties in one year. All numbers came in skewed. It’s not a deviant thing, it’s more of a lack of knowledge thing.

2. Document the Owed Amount:

I paid it to him you guys need to consult with him about this money and then I've been dealing with this lady for months finally after talking to her it hit me and I was like wow this is a problem because he owes us the money and I think that that is the most difficult part about property acquisitions specially if their tenant occupied is we really don't know how to collect and this is important because if the tenant is on section 8 who are you going after for this money who supposed to be paying the money essentially the tenant is responsible no section 8 is not responsible for paying their portion of the rent because at any given time this the tenant can lose their certification and they would be required to pay all of the rent not just a portion of the rent so I think the issue that lies here is really understanding to go to collections who can we who can help us in this situation right because one thing I love about property management is that in all of the in all of the industries in all of the industries that I've worked in in accounting property management is the only one that you can get a government bailout for property management is the only one you can get section 8 for and you can have someone else paying the bill wrap you'd be surprised right because people think that wrap is over and wrap is not over we're in 2024 right what is this February 2024 end of February 2024 and is still paying out OK and reason being is if the tenant got that application in before the deadline then they're still in they're still on a waitlist for payouts and rep is still paying out large portions of money large sums of money I mean in the $20,000 range $8000 I haven't seen a small ER payment come in, so I want to say that sure you can you can have those payments you can have those payments come in and record them collect that way but if you're not able to do that than what you definitely want to do is you want to communicate with the previous owner.

3. Communicate with the Previous Owner:

you want to continue it's a cycle OK and God is all about healthy continuous cycles he is the beginning in the end he's forever like he's a constant right and he's always going so what I want to tell you is yes we are communicating with the previous owner but we're also making sure that we keep it to a minimum too what is your deadline nothing first of all I have to say this right if you are in a situation where you know if you're in a situation where you have receivables past due longer than two months you're not going to be able to get a line of borrowing because you're receivables has to be within a two month period for the bank to consider it an asset anytime that you receivables goes over 60 days that starts to become what the bank categorizes as uncollectible money although we know we know if you've been in business for some time we know that after 60 days the money is still collectible but the bank does not the bank has guidelines so if you are gaining more moment in your past due then your current that's not good and then you're going to have issues what happens when you have $3 million in the whole and all your making and all you're bringing in is $3 million a month you don't have a leg to stand on.

4. Follow up with Phone Calls:

If you don't receive a response to your written communication, consider following up with phone calls. Keep records of your attempts to contact the previous owner. Phone calls are good, but you always want to make sure you document what’s happening. Following up with a phone call you can follow up with a phone call. I have to tell you guys want to keep phone calls at a minimum OK there could be something said in a phone call that you won't be able to record but I will say this there can be something said in a phone call that the person isn't able to say in an email OK so consider that right but a lot of your correspondence with the property the previous owner is going to need to be recorded.

5. Evaluate the Cost-Benefit – Is it worth the hassle?

Before pursuing legal action, consider the cost and effort involved compared to the amount of money owed. Sometimes, it may be more practical to write off the debt and move on. So follow up with a phone call but really keep it at a minimum also Think of how much you are going to be putting A an emphasis on the workload as opposed to on collecting the money right so is it worth it can you forgive it can you write it off to bad debt also this is if this is a tenant occupied property it's not going to be so easy to go and write something off to that right but it's a consideration you can it's something you can do you know we can't rule out everything just because you know I don't think that is the best thing to do I mean really finding out who is responsible for paying you the money is absolutely ultimately key and the tenant isn't always the one who owes the money in a property acquisition.

6. Protect Your Rights:

I emailed one of the ladies over at the previous property management group they were really polite I had one who was not polite and those you charge it to the game let it go doesn't matter who cares who cares because you know that ultimately you're getting what you want oh brush it under the rug this is not somebody that you have to deal with all the time this someone that you're dealing with on a case by case basis so if they're rude to you brush it under the rug a soft answer turns away wrath the Bible says so we want to make sure that we're always getting what we want but in the case that you have to seek legal counsel I would definitely say write a letter and then send it to your lawyers office that's it write a letter sum up the money owed send it to your lawyers office you don't have to do anything more it's very is very cut dry like it's a 12 step write the letter to your esquire send it over to them and then let them deal with it let them deal with the demand but also is documented for the escrow and we always OK if you go into a sale and you one party puts let's say 500,000 depending on the price of the property because taxes is can skyrocket for the larger the property is for the more expensive the property for wherever the property may be in whichever in whichever area then if the property is assessed at a higher value your taxes will be higher right so all of these things are taken into account when escrow is put up so when two parties come to the table and say when the seller and the buyer comes to the table and they're selling a property less say they put 1 million in escrow well all of the money that that other property management group owes you if you're paying for it and they should've been paying for it then take it out of the escrow that's what the escrow therefore is there to protect you so all is not lost if you can't communicate with them for them to send you the money if all of these things it's OK it's OK you're going to be OK escrow is there for your cushion.

In some cases, mediation may be a more cost-effective and amicable way to resolve disputes over owed rent. A neutral third party can help facilitate communication and reach a mutually acceptable agreement. This is best done through property management groups. Now it's always great to have mediation right it's always great to have a buffer right if you manage a tenant-occupied property you have to take yourself completely out of this equation and you have to act as the property management group about being deceiving it's about having discretion and guys the Bible goes on and on about discretion is key right you don't tell the right hand but the left hand is doing you don't tell the left hand with the right hand is doing you keep it to yourself keep it close to the chest protect yourself make sure that you're doing everything that legally is required but also make sure that you are doing everything to collect remember the person who doesn't collect is evil it's Bible so this is what we're going to do to make sure that we stay on top of this situation.

8. Consider Other Options – Payment Plans:

If the previous owner is unable to pay the full amount owed, you may consider negotiating a payment plan or settling for a partial payment to resolve the issue. Now consider other options a payment plan you know you can go into a payment plan with the previous owner OK you know getting those payments in which most of the time if they're managed by a property management group they're going to send you over me a payments which is considerably important and you know what I would say with collections I am a payment plan type of girl I love payment plans because you have to collections is a psychological game you have to consider the options for collecting the money that's all you really after right and if they're having a hard time making the payment out which they shouldn't be right we get it right is right wrong is wrong but collecting the money is key I like to think about it like cause we're thinking the psychology of collection you what you're trying to do essentially is convinced the person to give you the money without involving your lawyer without involving small claims court you know if you if you've already if you didn't catch the issue in time to go back and say no this is not what we're going to do and you know you need we need to have contacted your lawyer your attorney’s office and said hey you know this person owes me money let document us take it out of the escrow if you pass the time that the escrow was able to be held for I would consider a payment plan I would consider a payment plan if it drags out a little too long then small claims court is important it is important you know so but like I said the overall goal is to collect.

9. Learn from the Experience:

Use this situation to review your rental agreements, tenant screening processes, and procedures for handling overdue rent in the future to prevent similar issues from arising. Also, in your next purchase, know what to demand! Now learn from the experience you definitely want to level up from this experience go to the next experience and say you know what I want to make sure that I don't go through this again because after acquisitions guys I seen past due receivables age for a year six months if you're not going after the right entity and remember an entity is a person the government considers businesses and institutions people under the letter of the law so if you're not going after the correct entity you will continue to age in your receivables and this is not what we want to do it's not fun for business and without wanting to you can inevitably become a slump because we don't have the money coming in how are you going to fix things that are happening with the tenant occupied units it's a doozy so stay encouraged guys stay inspired and stay informed I think that what we can do from this situation is just learn and just make sure that it doesn't happen to us again or it doesn't happen to us from the beginning till next time guys. Remember to stay professional and keep records of all communications and actions taken regarding the owed rent. If you're unsure about the best course of action, consider seeking advice from a legal professional or housing authority.

Conclusion:

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