As a landlord, you will run into situations when your tenants for some reason or another can’t pay you the rent when it is due.

When this happens you have two choices:

1.) Give them more time or…
2.) Ask or force them legally (eviction process) to move out.

Let’s look at these two options in more detail.

If you choose to give them more time, you should be very specific on a future pay date and then, no matter what, stick to that date. Things happen in people’s lives that cause them not to have the money and sometimes you may feel sorry for that person and you want to help them out. That’s OK, but I would suggest to you that you don’t let it go very long. The more they get behind the harder it is for them to every get caught up and the probability is that they never will and you will eventually lose more by giving them more time. So what I saying is be very careful of this choice.

The second choice is for you to talk to them about the reality of there situation. They can’t afford to live in your rental property and they should most likely be living in a less expensive place. This can be hard because a lot of people don’t want to face that truth.

Here comes the hard part. You need to be ready to make these decisions in advance and have a set of rules that you follow and then follow them. Take the emotions out the equations and operate it like a business. If you sell any other product and the customer didn’t pay, what would you do? You would give them more products, would you?

Letting them continue to live there without collecting the rent is like a business give away their products without getting paid. Any business that operates like that will be out of business!

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In every class I have ever taught to new real estate investors, they always seem to stop themselves from investing because they can’t figure out how to borrow the money to buy.

They tell me that the banks, mortgage companies and loan officers told them that unless they have huge amounts down, have great credit, have experience as an investor or some other rule that most new investors don’t have, they can’t borrow any money.

Here are the facts. Quit letting people tell you NO!

And create a money-getting plan.

In order to do that it’s important to understand why lenders would say no or in other words, you have to find out what their rules are BEFORE YOU ASK FOR A LOAN!

Here’s the first step.

1.) Get on the phone and start calling multiple lenders (banks, mortgage companies, etc.) and ask exactly what CURRENT loan programs they have available for investing in Real Estate and what does it take to qualify. Make lots and lots of calls.

When you do this, you may hear somethings that you don’t like. That’s OK, just keep calling and keep asking questions and remember that there is plenty of money out there and lenders MUST lend it to make money.

Once you’re done making the calls and you have a list of the lender’s programs and their rules, you’re ready to move on to step two.

Here’s the second step.

2.) Look at your current situation and BE REAL. If you don’t meet the lenders rules, ask yourself a couple questions.

Did you contact enough lenders. Just because you didn’t meet one lender’s rules doesn’t mean you won’t be able to get a loan from another lender. You need to keep calling more lenders.

The second question to ask yourself is…

Would you lend money to you?

Again, BE REAL!

If you don’t have any money saved or you are currently having a hard time to paying your bills, why should anyone lend money to you?

Are you living beyond your means? If you do receive the loan, do you have a very specific plan on how to pay back the money?

Do you know what you would do if something happen that you didn’t expect?

If your answer to those questions are negative, then you need to get your finances in order before you can expect to get a loan.

Keep this in mind. If you’re bad with money, borrowing money and investing in real estate is not going to solve your problem. You need to learn to manage your money before you ever invest in real estate.

One more thing to consider. Do you have a financial statement and a cash flow statement. I learned a long time ago, that if you want to get a loan from anybody, your primary goal is to blow them away with the most impressive presentation that they have ever seen.

For example: In most cases, I don’t fill out any loan applications because I have a professionally prepared financial statement ( you can create this on your computer) that includes everything that I know that the lender is going to ask for and more.

Most lenders are so impressed by my advance preparation, that they have a real hard time saying no. This is the key. Find out what they want and figure out how to give them more.

If none of this works, you still have another option. It’s called a Contract for Deed (Land Contract). In this case, all you have to do is convince the seller and they are a lot easier to convince.

LandlordTools has a new site design.

Hey, thanks for visiting LandlordTools. If you ever visited this site in the past you’ll notice that it has changed. It is now in a format where it is easier for me to interact with you and help you become a better investor and landlord. You will see that you can make comments or ask questions on each of my posts, articles and videos.

Again, Thanks for visiting and let me know what you think.

Dave Schneider