Dealing with bad tenants: What a landlord did when he had a ‘junkie’ for a tenant

Desperate to get a tenant into one of his properties to avoid extended vacancy and negatively impact his cash flow, Mr Lance – a self-managing investor – decided to simply trust his guts when choosing a tenant so he could get one in as soon as possible.

The result: He unknowingly housed a couple of junkies on his Potts Point property for a little while.

“I didn’t know what a junkie really kind of looked like and I rented out my properties myself. I was kind of desperate to get someone in because I didn’t want the vacancy factor, so I just had a couple of people come through,” Mr Lance said.

“I said to them, ‘Sure you can have it’, and they said, ‘We'll give the bond to you on Monday.’ The bond never came. The rent never came in. They knew all the legal side. They were like… ‘Legally, we can stay here for this and that and we want to go to the tribunal.’

“Suddenly, before I knew it, I was speaking to solicitors and booking in tribunals and it ended with the sheriff.”

On the day of the eviction, a nervous Mr Lance watched as the police “brought in a couple of jerry cans of petrol”, ready to raid the property.

“I’m thinking ‘My God, he’s going to bomb the apartment block’… They contacted the police or the Kings Cross bomb squad. A couple of minutes later, there were at least eight coppers there, all in black with the bulletproof vests. They burst in,” he said.

The experience took an emotional toll on Mr Lance at one point, but overall, he was thankful for the lessons that the unfortunate ordeal has given him.

After the incident, Mr Lance ultimately realised that rushing to fill the vacancy and, thus, failing to do due diligence, is what lead to his misjudgment of the tenants’ applications.

“I thought of it as in if I don’t have someone in there for one week, its $400, so I just took the first person that walked in… I should not have been in a rush and find the right person,” he said.

Renovation

Apart from the lack of due diligence, Mr Lance believes that the physical state of his property attracted the wrong type of applicants.

According to him, the unit was “a dive… horrible,” which, he now realised, could just be the perfect place for junkies to settle in.

Since the eviction, Mr Lance has spent money for a simple cosmetic renovation.

From $360 a week, the place is now renting at around $450 a week.

The property investor said: “I did paint, installed a few new few tiles, ripped the kitchen out and even added a bit of fancy furniture.”

Insurance

Fortunately for Mr Lance, he had landlord insurance on the rental property, which ensured that he would not be worse off financially after having rented his place to a couple of junkies.

Apart from the cost of taking down illegal activities, the insurance also covered other common issues, such as non-payment of rent and damage inflicted to the property.

His advice to fellow property investors: “Get insurance before people move in… Get it now.”

“It’s nice peace of mind… Most insurance firms, they’re pretty good, to be honest with you… They’ll challenge it – that’s what insurance companies do – but stay firm,” he said.

At the end of the day, he believes that he came out from the experience a better man and a smarter investor.

“Time will grow your portfolio, and there will be a couple of headaches, but you will learn a lot,” Mr Lance concluded.

“I know if I can get through that, then I can get through anything.”