REAL TALK RENTALS

When Tenants Move Out-What You Need To Know

BEN BAILEY: Coming up on this episode of Real Talk Rentals, we're going to talk move outs. What happens when a tenant moves out and what do you have to do to get ready for that next resident? Welcome to Real Talk Rentals, a podcast brought to you by on Q Property Management. We're going to delve into all the secrets, tips and tricks that go into owning a rental property. So buckle up and stay in for the ride. My name is Ben. I'm your host, and with me, as always is my co host, Eric Dixon, the go to expert on all things property management and real estate here in Arizona. Today, we're going to be talking about what happens when the tenant moves out of a property, what processes get triggered, what goes from there. So let's jump right into it. And Eric, I'm just going to ask you that question. What happens when a tenant moves out of a property?

ERIC DIXON: Well, thanks for having me today. First of all, getting the the afternoon jitters. So, yeah, when when a tenant moves out, I was trying to think because you were questioning that or phrasing that out, it starts before they move out. So it's going to start with a notice of some kind. So either the tenant or the owner is going to issue a notice to vacate for us. You know, people hire us to do that process for them so they don't have to be the one telling the tenant, Hey, sorry you got to move. But so it's going to be the owner or the property manager giving them notice minimum in Arizona 30 days earlier than the lease expiration. Oftentimes it's 45, 60, maybe even 90 days prior, or the tenants given their notice saying, hey, I'm I'm moving, I'm buying a place, I'm moving to another place or whatever. So I would say that's where it starts. And then from there it kind of starts the whole cycle of of the steps to take. So one is turning utilities on. So when the tenant moves out, the there's not an interruption in service. Then when the tenant does move out, they'll turn in their keys. So the lease actually doesn't end until they turn in their keys and say, I'm all the way out from there. What we do and I'll kind of just walk through it on cue, does as far as as far as that goes, we'll send an inspector out and we'll do a full move out. Inspection takes several hours, document everything in the house from paint floor, opening every cabinet, turning on every appliance, landscaping, pool, checking for visual deficiencies and so forth. Now, they're not home inspectors.

ERIC DIXON: They're not jumping on the roof or getting in the attic or checking the mechanical function of the air conditioning unit and so forth. But they can notate. Is the AC working? Are the appliances working, Are the elements heating up? Is the microwave turning on that sort of stuff? Then from the move out inspection, it'll shoot over to our system and our and our property manager and then they'll send that to the owner and the owner reviews it. We review it and compare it to the move in inspection that we've talked about on previous episodes. And then we compare the two and we talk about what is the tenant responsible for? What is the owner responsible for and kind of what what happens there here in Arizona. And it's kind of probably the biggest task in a move out when a tenant moves out is doing the disposition. So it's basically detailing out, here's your refundable deposit that you paid upon, move in say it's 2000 and detailing out any charges and then sending that refund check. And in Arizona, you know, we have 14 business days to do that which sounds like a ton of time. But by the time you do the move out, you get estimates from contractors and handymen and so forth. And you talk to the owner back and forth, you're talking to the tenant and oftentimes your your back's against the wall trying to get it out before that 14 days. And as long as you get it out within those 14 days and it's clear and it is fair and you do not charge for something that that you're not actually going to do, you know, it's actually a fairly simple process.

BEN BAILEY: Do they get the check the same time as the disposition or is the disposition like, hey, this is what to expect? And they have a chance to say, no, that's not.

ERIC DIXON: Yeah. So you mail we mailed the check out with it. Yeah. Okay. The money is due when when the disposition goes out and then there's the opportunity for the tenant to review say, Oh yeah, do you know what I did? Forget to clean it Got dinged for cleaning. I didn't clean the carpets. Got dinged for that. Oh, I ripped that TV off the wall and I didn't patch the drywall holes. You know, usually it's very simple things they're charged for.

BEN BAILEY: Yeah, well, that would kind of brings us perfectly to my next question, which is what is the tenant responsible for it? Move out. And what is a landlord responsible for? Like what qualifies you here? A normal wear and tear. A lot of people say that and stuff. So what what kind of falls into a category of a landlord responsibility versus a tenant?

ERIC DIXON: Yeah. So the what I say to everybody that asks is I'll oftentimes get this asked by people interviewing us to be their property manager, it's damage and neglect and any unpaid charges on their ledger. So you think of damage as something they either did intentionally or it could have been an accident, but they didn't fix it because they went out. Neglect. You'll see a lot with some people just don't even vacuum the whole tenancy. Oh, you know, it sounds. Crazy, but they don't they may not vacuum or clean or, you know, they were just neglectful in the landscaping and it killed a bunch of bushes and and that sort of thing. It reminds me there was a and this is kind of going back to your first question again, but we had a tenant that we actually had a citrus tree die is in the front yard. And they said, oh, yeah, we just turned off the water. We wanted to save the water bill. There's a big, beautiful tree, right? So the owner was upset about it, It was neglectful and it was damaging. So yeah, it's a fair charge to charge them to replace this tree. So I want to say it was like 600 bucks for removing the old tree, buying the new tree, planting it, hooking it up to the water to do that. So the tenant actually did not fight the charge. They charged my thing was the only thing on their ledger. They got charged $600 for killing the orange tree. Yeah. And in their head they're like, well, we saved $2,000 in water or whatever, or water and upkeep and so forth, whatever.

ERIC DIXON: So they were fine with it. Well, three months down the road, we paid the owner the 600 bucks because he said, Hey, I have my own landscaper. He's going to install it next week, whatever. It's all good. New tenant moved in. I thought nothing of it. Well, the I think it was three six months later. The previous tenant calls us and says, Hey, you know that tree I was just charged for, for 600 bucks? It's not there and I want my money back. Oh, and you know, the property manager comes in my office is like, Hey, what do we do? And I'm like, well, we cannot charge a tenant for work that was not done. So we called the owner. And what happened was the. Maybe it was more expensive, or they just said, I'm just going to pocket this or whatever. And we said, Dude, that's not fair. We ended up obviously giving the money back. But it just goes to the further point of you only can charge them damage, neglect or unpaid charges, which an unpaid charge might be like an HOA fine from six months ago that they never paid or a late fee that they never paid. But we kept collecting rent. And so if we are just charging it just to charge it and not going to do the work, you can't do that. Yeah, we would never. But you hear some horror stories of owners that are like, Oh, I'm going to charge you to replace the carpet. And they just cleaned the carpet, but they charged them to replace it.

BEN BAILEY: Or yeah, I think that you often hear from tenants, people that rent, that's their biggest fear, you know, when they look at this deposit. Did you do these things? You know so and. It sounds like with the citrus tree, it was probably unintentional, right? Like it was just a misconception. But can you imagine being that person that drives by and is like, wait a minute, you take 600 bucks for me to put a tree in and.

ERIC DIXON: That's just wrong.

BEN BAILEY: Yeah, yeah, yeah.

ERIC DIXON: That's well, no. And it's a hard conversation to have with owners of cars and clients. It is a hard conversation to say, Okay, Ben, we're going to charge the tenant two or $300. But Ben, you're actually responsible for $900 of work. And they're like, What do you mean? It was perfect when the previous tenant moved in. Yeah, but some of it's just deferred maintenance. It's like, Hey, look, your house needs painted and it hasn't been painted in ten years. That's not the previous tenant's fault. Sure, it's just wear and tear or hey.

BEN BAILEY: This appliances are on their last.

ERIC DIXON: Yeah, the appliances are like hey man, these are old from the eighties. You know, you're trying to achieve top rent and so it is a hard conversation. What the owners and clients usually want is I want the house to get rent ready out of the tenants deposit. Yeah, 100%. And it's like that's not always even feasible. And again, I'll say it, I've said it on previous podcast, but we'll tell them like, Hey man, you might not not be ready to be a landlord if you aren't willing to invest in the property. Yeah. During that turn.

BEN BAILEY: Yeah. And like you've said before is that's it ultimately leads to more rent. No, no, it's thinking way too short term to be like you can't put those eighties appliances in there. It's fine. You know what? You're going to get tenants who are okay with eighties appliances. Yes. Then, yeah. So on the tenant side, what if the move out is an eviction? What if they need to be? And I know that's a whole can of worms of its own episode, but in this process what what triggers when it's an eviction is instead of a notice of vacating.

ERIC DIXON: Yeah so there's a couple a couple of ways. So one is an eviction and like you said, this could be a whole other podcast of just like what goes on during eviction. That's crazy. Yeah, but it could just be we call them skips where the tenant just literally walks in the office and says, Here are my keys. And we're like, Hey, you didn't give notice. And they're like, Oh, sorry, I moved out, you know? So on a skip or an eviction, that's more of a forcible eviction. I'm trying to think of a couple other scenarios that isn't conventional, right? And so we treat those in the same way where we're still going to treat it like a normal move out, where we're going to do a move out inspection, we're going to do document everything. But immediately, they usually owe money more than the deposit. So like so like on an eviction, we start at the five. At five days we send the five day notice. I'll just use the example because it's easier to talk to you, but say, Hey, Ben, you're five days late on rent, Here's your five day notice by certified mail. Usually the tenant is either communicating or they're not. It's usually nothing in between. It's like, No, this is what's happening.

ERIC DIXON: My job, my see is something happened or they just disappear. Ten days later, we'll send it to the attorney's office and they'll set a court date and get the ball rolling in that direction. And from there, usually by the end of the month, it takes about 25 to 30 days. By the end of the month, we'll get possession back. And there's a lot of different steps in between there. But usually we get possession back and not only have they not paid rent, we've got court and eviction fees on their ledger. Usually by that point, when we take the property back, the owner has utilities. The house is never in good shape. No, you can't imagine that you get evicted and the tenants like, Do you know what? Let me clean the carpet. Sorry. Let me let me touch up paint before I go in. Know, unfortunately, there's there's crazy stuff that happens, too. Like right now we've got a move out where they left their pets behind, you know, and we're we're dealing with the animal control and trying to find a home for these pets. We don't want to just drop them off anywhere. It's like we've actually had employees adopt several.

BEN BAILEY: I was just say outside of inspection, I think has like several dogs.

ERIC DIXON: Yeah, he has a soft heart for animals and it just begins to be too much. But during that eviction process, I guess the biggest takeaway is your property manager, whether it's us or someone else, or if you're in another state and you're doing it yourself, you just there are very strict rules that you've got to follow. But understand upon move out, it's a difficult process to get that money back paid by the tenant. I mean, they just got evicted from their home, so they obviously have no money. Yeah. And so the landlord is having to fork a bunch of money over to clean it, get it ready, new carpet, new paint, whatever. The landscaping is usually atrocious. Yeah. And so it's there are several thousand dollars out of pocket. And then once we get the new tenant in and it's it's on to the next tenant, then we kind of go back and we say, okay, let's let's button this file back up, let's send it to collections, garnish wages or settle with the previous tenant or whatever the situation is.

BEN BAILEY: Sure. Is there I mean, I guess this kind of leads to my next question is, is there a scenario where. A landlord. Let's say it's not an eviction. They're a fine tenant. But the landlord says, Hey, I want to not renew with this tenant because I want to put it on the market for more money. Yeah. They know this person is not going to be okay with whatever this new price is. Can they? Is that doable? I've seen people ask that question before and it's like.

ERIC DIXON: You've seen this kind of be a trigger on the news even to that's like my landlord raised my rent to $1,000 and the sticker shock is like, dude, that's messed up. Like, why would you raise the rent so high so quickly? You know? So I'd say first there's two sides to every story. Obviously, there are there are landlords taking severe advantage of of of different tenants. That's not okay. But there's also ways around negotiating rates and stuff like that. The so there are a number of reasons a few come to mind of reasons why you want to end the lease. That's not an eviction at the beginning. It's not a eviction. It could be a ten day notice type thing. You know, we had a client that was they rented a house from us. They passed all the checks and everything because they had good income, good background, all that. They moved in and then they turned it into an Airbnb. Oh, and we had to send them a ten day notice say, Hey, dude, you can't do that in this community without permission. That sort of thing. Can't sublease the property ended up having to start the eviction. But then they kind of just said, Hey, look, let's figure this out. And they paid out of their lease. We've had criminal evictions where we found out that the FBI called. So it was like, hey, you have a a wanted person. If you want to Google it, you can Google the wig Bandit.

BEN BAILEY: The Wig Bandit in.

ERIC DIXON: Maricopa, Arizona. It was one of our one of our tenants. And it was one of those things that's like, dude, they're current on current on rent.

BEN BAILEY: Great tenant, great tenant.

ERIC DIXON: The routine inspections are coming fine, you know, So we had to get our way out of that one. But but I guess the biggest one you're dealing with that you're asking about is we'll take over properties, maybe your self managing. We take it over and we're like, Man, Ben, you're $500 below market rent. What do you want to do? And the owner is like, Oh, just send him a notice, bump the rent up 500 bucks, and it's like, Oh, that's why you hired us. Because you wanted us to be the bad guy, you know?

BEN BAILEY: So it's us on the news.

ERIC DIXON: And it raise the rent and now on cues on the news, right? So there's a few ways we can do it. If you're going to raise rent like that, I suggest you give them a much more than 30 day notice. Give them 3 to 6 months and say, Hey, look, Ben, I understand. You know, you love this house. We love you as a tenant. But here are comps actually send them and say, hey, look, finding a house in this neighborhood is going to cost you 2000. You're paying thousand 500. I'm not saying I need the full two, but I need to get it up to 17 or 18 and kind of reason with them. And they're either going to react in one way. They may just be upset, but usually people realize when they go on Zillow or Realtor.com or Jumper or something and they look, yeah, they're going to be like, Man, I've been getting a steal. And don't think that your tenants know if they're getting a steal, they know and and they'll usually be cool and they're like, You know what? We'll negotiate this out or, Hey, thanks for giving me three months notice instead of 30 days. Right? And then you don't get that those bad reviews or those bad phone calls or calling the news, you know, if you just give them more time. Another thing you can do is just let them go month to month and negotiate a higher rent than you're at.

ERIC DIXON: But maybe not full market, but say, hey, Ben, I'm going to raise your rent. $200, not five, but only for up to six months. Please go find another place or let me know if you're willing to pay market rent. And then the only other caution I would say to landlords, whether you're self managing again or have us managing it and hopefully we're giving you this advice, our property managers is there is value in keeping the tenant above getting full market rent, right? So as an example, if you're at $5,500 rent, market rent is 2000. It's not worth losing this tenant if they're willing to pay 18 or 1900, you know? Yeah, usually if they're taking care of your place because vacancy, right, you're going to lose your your daily rental rate or your monthly. It could take 2 to 4 weeks. You're going to have utilities on in your name as you're getting the house ready, you're going to have costs to get carpet and paint and get everything prepped. You're going to have fees to your property management company, right? Marketing the property, getting pictures, leasing it out, the commissions. It's just not worth it to jump over, jump over penny or dollars to pick up pennies. Yes.

BEN BAILEY: Well, and rolling the dice to hopefully get another great tenant. If you have a great tenant, it.

ERIC DIXON: Actually that's actually the best the best reason that I didn't even mention.

BEN BAILEY: Yeah.

ERIC DIXON: Yeah. You're rolling the dice. And even though the next tenant may check all the boxes, maybe they don't take care of it as much as the previous people did. So that's where if we do routine inspections every six. Months and we show you, Hey, look, they take care of the place, but they're under market rent. Let's negotiate the rent a little bit. Yeah. Did they take care of your property? And that is invaluable.

BEN BAILEY: Yeah. Yeah. Why risk, you know, getting someone in there who doesn't care as much? Know who kills your citrus tree? Yeah, totally. Well, I think that pretty much covers it. I think. We'll definitely have to dig into evictions more in its own episode one time. Maybe you can bring someone expert on or something to walk us through it. I know there's tons to avoid there, but. Oh, yeah. So that's it for us at this time. Be sure to follow us and subscribe to wherever you get your podcasts. And we're really pushing. If you could leave us a five star review, you'd really appreciate that. And we will see you guys next time.