Today’s topic, it’s about evictions. Complicated things do happen when it comes to real estate investing, and one of them turns out to be evictions.
This can be a very difficult subject to talk about, especially given the crisis, especially given everything that’s going on with the coronavirus, but at the end of the day, this is business and everybody gets impacted.
Most people tend to think about the tenant. The family who’s been evicted, who’s been placed out on the street, but people seem to forget the other side of the equation.
For real estate investors, that also becomes something that is difficult and challenging to deal with. Why? Because real estate investors have a lot to pay. They have to pay for:
- Mortgages
- Insurances
- Property taxes
- Property manager
One of the reasons we created this article was basically the intention of giving you some level of transparency as to what goes into the equation of evictions.
Let’s pretend we have a timeline and in it we have day one, day five, and we have day seven. Depending on the state that you reside, the eviction process might be different, but this is in essence what goes down in Alabama.
Evictions: What happens when the process starts
On the first day we have when rent is due. Then on the fifth, it’s when rent becomes late. Two days after, on the seventh, the way things work in Alabama is that your property manager places what they call a notice to vacate. At this point in time, the tenant is going to choose what action they want to take, whether they want to pay the rent or just choose to do nothing.
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If they choose to do nothing, what happens after day seven is that your property manager will reach out and work with an attorney. This attorney files in court something that is called an unlawful detainer action. It’s basically action that needs to be taken to legally evict someone either from the place that they’re living in or from work. Then once this unlawful detainer action is filed in court, the tenant has an additional seven days. They have an additional seven days to either show up to court, or just simply do nothing once again.
If they show up to court, you can imagine how this is going to go. You either, as the landlord, can have the option to just show up to court and defend yourself, which is something not recommendable unless you have experience handling cases like this, or administering your property.
Cost of Evictions In USA
Attorneys, they charge somewhere between $100 to $200 to represent you. You don’t know how long you’re actually going to stay in court until that tenant shows up and fights you. In the event that the tenant chooses to do nothing, what’s going to happen is that the deputy chief, along with my property manager, in this case, they conduct the eviction process.
All their belongings are placed or taken outside of the property in itself. On average, the cost for someone to go through an eviction process, assuming the tenant doesn’t fight back, assuming the tenant doesn’t show up to court; it costs $800 to evict somebody.
Think about it this way. It’s not just about the $800. We’re talking about mental stress that is causing the tenant, and at the same time, it’s mental stress that you as a realty investor get.
Because it’s more than just:”Hey, they didn’t pay rent, and therefore, I decided to evict them. I’m willing to place a family out in the streets.” No, it’s: “Hey, if I don’t collect rent, does it mean I’m going to have to foreclose my investment?” “Does it mean I’m going to have to lose the house? What’s going to happen to my credit if I don’t pay, or if I don’t make that mortgage payment?”
It’s a lot more than the $800. It’s about all the complications that an eviction process has for both the tenant and the landlord.
This is just assuming that everything is going in an orderly fashion and that nothing gets delayed for more than a month. Imagine if things get delayed, or imagine if the tenant decides to appear in court and you have to hire an attorney, you’re going to start adding more money to this. Assuming that this is what it cost for one month.
Imagine if you have to go through this process for the entire three months. We’re talking about $2,400. Now, if you add to that $2,400 attorney’s fees, we’re talking somewhere between $500, $600, or even $700. As you can see, evictions don’t happen overnight. It’s more than just, “Hey, I just want to evict this person.”
An entire thoughtful process has to go through. You have to involve more than one party. In this case, you have to involve an attorney, your property manager, the deputy chief, so that everything is done properly, and that you’re respecting the rules of the rental contract, and at the same time, the laws.
This is how you have to be sure when you’re picking the tenant who will be living on your property. No one wants to be in the position of having to evict someone out of a house, your house, which means your real estate business. The selection process when you choose a tenant has to be a win-win situation for everybody. First, you found a responsible person who’s going to take care of your property. And second, you will be able to continue to invest in your real estate business and be able to pay your mortgage, your insurance and your taxes.
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