How to Handle Loss of Income for Your Rental

As a property manager, one of your many roles is to monitor residents who are moving in and out of your properties.

Typically, you are aware of people moving in and out via the acceptance and the issuance of notices, either a standard renter's agreement or an eviction notice.

However, you may notice that particular tenants have overdue rent, and they have not tried to contact you.

You call, write letters, and knock on doors with no luck.

In some circumstances, people choose to abandon the property altogether rather than deal with their landlord or suffer the consequences of delinquent payments.

Prevent Abandoned Property with Tenant Screening
Abandonment of property is a reality in today's economy when many individuals are struggling to pay their bills, including their rent.

This underlines the importance of tenant screening.

When communicating with prospective renters, there are a number of tenant screening questions that should be answered.

A thorough screening of potential tenants should include a full credit report, including corresponding scores from all three credit bureaus, a nationwide criminal report and a report expanding on past bankruptcies or foreclosures.

You should make your tenants aware that you are paying attention to their behavior.

That does not mean you need to nag and constantly be around tenants, but making sure you are taking care of any problems and are readily available will deter abandonment.

Tenants are more likely to abandon property if they hardly see you.

Go Back to Your Rental Agreement
Check your rental lease for a clause on abandonment.

This should be a component of any lease.

Depending on state laws and local legislation, definitions of abandonment differ.

The situation has to meet the defined criteria before the rental property can be labeled as abandoned.

In some situations, it can be difficult to determine if the property is actually abandoned.

Some residents may leave everything behind, including the house keys, while some will leave behind personal items, but take the keys with them.

It is important that you start an investigation by asking nearby tenants if they have seen or communicated with the suspect renters.

Check to see if their vehicles are still in the garage or on property grounds.

If you tried to contact them via their supplied form of communication, then issue a three-day notice and an abandonment notice.

If you suspect that renters have abandoned the unit, then calculate rent owed plus any incurred damages. Subtract this from the security deposit you received when the tenants moved in.

If you see substantial damage that exceeds the security deposit, write a letter tallying losses and expenses.

This notice should be signed and dated by you, then mailed to the tenant.

Even if the tenant has abandoned the property, legal actions take into consideration that you tried to contact the renters, and you followed proper protocol.

What Constitutes a Loss
Normally, the IRS allows you to write off customary expenses against accrued income.

There are specific lines such as interest, insurance and advertising that can be written off on IRS Schedule E.

You can add more categories in the other expenses line.

This could be used to help alleviate the blow that you suffered due to an abandoned property.

Abandoned property is an unfortunate reality that landlords sometimes have to deal with.

Rather than simply suffering through the loss of income, though, you can recoup costs by deducting the expense and taking legal action against the tenant, if possible.

Better yet, abandonment can be avoided preemptively through quality tenant screening and a well-written rental agreement.

Posted on Feb 24, 2015


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