The Art of Eviction

Investing in real estate is a tricky business. For people who have a lot of extra income and are just looking to make sound investments, real estate is a great way to go. Real estate investment properties provide high returns, and many would argue – including Bill Montgomery of Trophy Homes - that real estate returns are even higher than returns on stocks. Whether or not this is true, one this is certain. The higher the returns are, the more risk an investor takes on. That is to say real estate investments can become very risky and cause a lot of headaches throughout the course of the investment process. High returns are accompanied by high risks. But you already know that, which is why you are interested in finding a good investment property to begin with. So let’s take a look at one of the major problems that can arise when you invest your extra income in real estate.

Real Estate Investment Partnerships

Typically, the structure of a real estate investment team will consist of two principal players or partners. First, there is the partner who brings in a lot of extra income, and thus provides the cash in the partnership. We might think of this partner as the cash partner. The other partner serves a different role. Normally this partner does not have as much extra income, and thus does not contribute substantially to the cash position of the partnership. Rather this partner provides his experience and time to the partnership. Often this partner is known as the managing partner because he takes on the role of actively managing the investment properties and ensuring the ongoing success of the partnership’s investment.

Suppose a partnership found an apartment complex with 100 spaces, a high occupancy rate, and a reasonable capitalization rate. After crunching the numbers the data supported what their intuition had already suggested – this apartment complex will be a great investment opportunity. After discussing the investment at great length, both partners agreed to move forward with the investment.

Everything was going great until about a month later, when the managing partner realized there were a few tenants that had not paid rent for the last 3 months. Suddenly the disadvantages of investing in apartment complexes and serving as the managing partner are being realized. The managing partner takes care of the day to day responsibilities, which typically include the dirty work. In this scenario, the managing partner needs to evict several tenants from the complex for not paying, but eviction is far from easy. Having to perform an eviction is one of the realities of becoming involved in real estate and managing properties. If you have ever spent any significant amount of time in this industry, you likely have been faced with an eviction situation before.

Time for Eviction

As a managing partner you hope all your tenants pay their rent in a timely manner and that there are never any problems. But this is hardly ever the case. If you are unable to obtain payment from a problem tenant, then eviction is your only answer. If you are forced to evict a tenant, before you can take action as a landlord, you will normally need to file the necessary eviction papers with the county. The tenant will be given a certain number of days to respond to the eviction notice, and should he fail to respond in the set time frame the court will likely rule in your favor and serve an eviction notice.

At this point, it will only be a matter of time before the eviction is actually completed and you are in full possession of your apartment unit once again. After that all you can do is maintain a positive outlook and try to rent out the apartment as soon as possible so you can realize high returns on your investment property and produce the extra income needed to make your next investment.