While the end of the year is a very busy time for most of us personally, it’s generally a slow period for homeowners. Many of us spend this time working on our taxes, cleaning out our desk drawers, and preparing for the New Year.
An often overlooked part of the cleanup that hurts your bottom line is old files from tenants who still have balances due. Too often, owners just file them away and forget about them. By storing these files without taking any action, you are literally wasting money. You may think it’s impossible, that you’ll never see a penny of the money owed, but a percentage of the debt owed to you is collectible. It may not be collectible today, but in the next seven years, some of that money will most likely pay off.
Take time to do some end of the year chores. Start by separating the files of past tenants who have no balance due from those who owe. One by one, review the files with balances to make sure each one contains a signed lease; then, break down what is owed.
There are three different options to select when collecting your lost winnings. Each has its advantages and disadvantages.
1. You went to court and sued the previous tenant for the balance owed. This option can be expensive and time consuming, but with the right outcome, it can be an effective way to collect a tenant’s debt.
2. Hire a collection agency that specializes in collecting debts from tenants. If you don’t have an agency, spend an hour online and find one. If you don’t know what to look for in an agency, read my blog article on how to hire a collection agency to collect debts from tenants. “How do I hire a collection agency to collect my tenant debt?”
3. Report the debt to the three major credit bureaus, Experian, Equifax, and TransUnion, as a collection account. The dent in your previous tenant’s credit report should stay there for seven years after you move out. There are several online resources for reporting tenant debt to the credit bureaus. It is worth your time and effort to investigate them.
Too often, I hear homeowners advise other homeowners to forget about any debt they owe and move on because it’s not collectible. From experience, I can tell you that this is not true. While you may not be able to cash out everything, a percentage is, maybe not right away, but over time, you can recoup some of your winnings.
There’s only one way to make sure you don’t collect any of the debt, and that’s to do nothing, save your files, and accept the loss. Trust me when I tell you that doing nothing will cost you profit.
Contact me with your tenant selection and debt questions.
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