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In this episode, you’ll discover:

  • How your tenants not paying their water and sewer bill can come back and haunt you as the owner (5:02)
  • The sneaky way your tenants game the system and rack up a $1700 water and sewer bill (that you’ll have to repay) (6:36)
  • Why evicting your tenants usually backfires and costs you a boatload of money (8:42)
  • The counterintuitive reason that splitting the bills with your tenants can protect you from losing a year of cash flow (9:46)

Hey! Want to do a deal? Need my help? No cash to make an offer? Send me a quick text at 440-389-3883 and we’ll work together to get you the deal.

Read Full Transcript

Welcome to Cleveland real estate investor. On this podcast, you'll hear about every aspect of the real estate investment business. You will talk to your rockstar investors about their businesses, how they built them, where they came from, and where they're going. Who am I? I'm Joe Lieber and I've made millions of dollars from the real estate investment business over the last 20 years. If you're ready to hear the good and bad from a guy who's learned this business from the school of hard knocks and get educated by some bad ass entrepreneurs, then put your helmet on, strap on your chin strap. Let's ride.

(00:42): Going to get it straight. Hey Hey, what's up guys. Thanks for tuning in Holy frustration today. I'll tell you this, podcast equipment is give me a little bit of technical difficulties. And this is my fourth time rerecording, this particular episode, Holy cow, I actually recorded three different ones and then they didn't record right. There was like, Oh no, the audio is messed up on them. And so I have to like go back and I've done this one, literally three times. This is my fourth time. So this is going to get really good. I'm going to be really good at this one. I'm going to say everything I want to say, because this will be my fourth time going at it before we get started today, though, when I tell you a story, my little 10 year old boy comes in here to me, you know, hustling me for money for a video game today.

(01:40): And you know, I remember the days of, I hadn't Nintendo. It was the eighties, right? And your parents take you up to the well kiddie city, or I think it was toys R us then, but you get your video game, super Mario brothers, you pay 40 bucks, which was a lot of money, but you have it and you had it. You could play it any time you want to play it. And you got it. I mean, I still have my Nintendo and I still have super Mario brothers and it's been 35 years and I can still go in there and play that game today. And it's really cool, but those days are gone. They're gone. Now, what they do is they give you the game for free. So Fortnite, this is some of you have heard of, this is the big thing right now. Fortnite, you can have Fortnite for your X-Box now for free, but if you want different avatar, basically different characters, then you've got to pay.

(02:37): So he comes in here asking me for Vbox has called on the game, but you gotta use your real box to buy Vbox, to buy different avatars. And all the kids want these different avatars. And we had this free game for probably about two years now. And I'm embarrassed to say this, but I am, you know, many, many hundreds, if not thousands into this game, because you know, you'll buy them Vbox for, he was what he wants for a special occasion, or it would be a birthday. He'll get a hundred dollars gift card for the game. Or if he does something good, you reward them with some B bucks, but it adds up over time. So that $40 game is now, you know, hundreds of dollars for parents. And it's just crazy. So I told him, I said, listen, if you want to earn Vbox, you've gotta earn them, dude.

(03:24): Like, I'm not going to just keep hooking you up for really no special occasion. So just something cool that I did. And I want to share with you parents out there as like, come in here, let me go on YouTube, pick out a video for you to watch and I'll pay you 25 cents. Free minutes of videos. If you watch a 10 minute video, I'll pay you $2 and 50 cents, but then we have to talk about it. So I went on there and typed in kidpreneurs, which is like this really cool series. And it's just kids that have like real businesses that really drive revenue. And I made them watch it. And then we talked about it and it's just kids at different things going on, you know, whether they're selling on eBay or Amazon or something like that. But so just like, you know, I'm just a parenting tip.

(04:10): I thought it was slipping me at comp with that out of thin air. But let's jump into the show today. So should I evict someone one over utility bills? And the answer to this is it's situational. That's the answer. It is situational, but let's take a deep dive. All right. So I got a house West side of Cleveland, single family homes off a hundred 17th tenants paying eight 50 a month in rent. Been there two years pays on time, but they're not paying their water and sewer bill. They pay gas to pay electric water and sewer. Here's how it works. The electric and gas bill. They put it in their name and then if they get evicted or they don't pay it, they get it turned off. But if they get evicted, the bill follows them, the gas company, the electric company, they will go chase that tenant and collect payment.

(05:08): And if they can't, then they'll, you know, whatever they do though, put it on their credits or wage garnishment. If it gets to, it's not the landlord's problem, it's gone. New tenant comes in it, turn on gas, fresh account Raider role, but it does not work that way with water and sewer, bill water and sewer always follows the owner. Even if you go down there to the division of water and put the bill in their name, which we've done, it still follows the owner. So how it works is you can take your tenant, use that to take them down there. Now I think they'll let them go by themselves. And they put up a deposit for $300 and they put the water and sewer bill in their name, which is cool, but it's in their name, but it's still not. It's still tied to you.

(05:54): So if you evict them, they take the deposit credited to the accountant, sent you the balance. So I've got this tenant here with a 17, $1,800 water sewer bill waters, like a thousand dollars, the sewer 700. It blows my mind how they got this thing. So high. You're probably thinking, how did they get us? $1,700 water, sewer bill. I mean, I just know from being an adult, I missed having to all of us, you're on vacation or you forget to pay your water bill or your gas bill. And it's like one day late and the gas company is calling going, Hey, you're going to pay your payment. We're going to turn you off. You're like freaking out running to grab your checking account or your credit card bail over the phone right now. Huh? You know? So how do they get up to $1,700, late water and sewer bill.

(06:40): And I go one day late on my $30 water bill on my house and the whole water company's lurking around the corner, ready to turn me off. So I found out I've investigated. And what they're doing is they found a way to buck the system. They called down to the division of water. And if they say they have on record, that this person who lives at the house says they a have a sick kid. They have an, an elderly person in the house. They have any multitude of. So they're, they're lying. That's what they're doing. They're saying they have a person with disabilities in the house, whatever. They can not turn that water off the division of water. They legally can't turn it off. So they call down there and they say this stuff and they get their account gets flagged where they can't get turned off.

(07:30): And I get blown away by this. I'm like freaking kidding me. And I've even had over the years were the ones that didn't figure that out. They'll go out to the curb stop. And they will take a small bucket full of sand, throw it down that pipe. So when the division of water comes, turn the water off with that street key on that 10 foot long street key, they put down there by the curb stop. They hit sand and they can't turn it off. And then they have to send a whole another truck out, which takes two weeks. And they have to basically suck the sand out of that 10 foot, long pipe down there to get the sand out so they can be able to put their street key down there and turn off the curb. Stop, turn off the water crazy stuff, right.

(08:13): This really goes on by the way, you guys don't have a lot. Yeah. A lot of property. And this isn't my only person that's that far behind in water and sewer bills. Okay. There's others that are getting over on me. But the question is, this is where my team gets it, right to me. They're like, you need to evict them. You need to get them out of there. And you know what? That's all cool. That's all fun and games, but I'm the one writing the check and that's expensive. So let's do the numbers. Let's see what uncle Joe here is going to go through. So if I make a decision to evict them, as soon as I give them the eviction notice to vacate, that starts the process though. They're not going to pay me. They're mad. Right? They'll be mad at me. So, and two months rent, two months of rent minimum right there.

(08:57): Then I'm going to get that water bill for sure. So there's 1700 bucks. So I'm down two months rent, which is 1700. I got the water sewer bill, 1700. And then I've got some type of rehab to do to the property to get it rent ready again. Now I haven't been to this house in two years, so I don't know what it looks like. I'm sure it's gonna need something. I mean, if after even just the basics, just some paint, maybe carpet, some flooring, you're a few grand. So by the time you start adding all this stuff up, that's a year of cashflow. I'm going to lose one year gone. And I'd like to add that's if you don't have it, that service, if you have a mortgage, forget about it. Oh my goodness. That's it. So I think I'm going to do, and you're probably not going to like this.

(09:47): You're probably going to think I'm an idiot like my staff does, but you know what? Until you open up your damn checkbook game changes here, and this is what I'm going to do. I'm going to call them. I'm going to have a conversation with them and I'm going to split it with them. Yep. I'm going to do it. I'm gonna say, Hey, I'll tell you what I know you got in a jam. Maybe you had a water leak. Maybe things just life's getting the best of you right now. Whatever. I'll split it with you. Can you come up with 150 bucks? I'll come up with eight 50. We'll just pay it, consider it an early Christmas present by your fabulous landlord. And now I'm a hero. I'm a hero who saved a lot of money too. Right? Because I don't want to go through this again.

(10:26): I don't want to go evict them. It costs me many, many thousands. And then get someone else in there that might not pay the water bill. I can tell you what the portfolio of that I have of my size. Somebody not paying. There are a lot of people with, well, over $1,500 water bills. And I don't want you to think I'm like a complete pushover. It's like, well, if it gets to three or four grand, which I have had them there, you know, that's starting to get crazy. And yeah, you do have to take massive action. Cause that thing could never stop. You know? So this is about my threshold though, but I'm going to try and do everything I can to retain this tenant because I don't want to write all these checks to get them out. So the answer to this, should you evict over utility bills?

(11:08): It's situational. And sometimes yeah. You know, you have to, now if I pay this bill off and they go back and they get it up there again, well, we've got a major problem, right? I'm not going to split another water and sewer bill with them. I let them know that, you know, when I talked to them, Hey, listen, if they're even willing to do that, maybe they, you don't have eight 50. And then we got a problem. You know? So there's some variables here, but I'm just telling you, I'm going to do everything I can to try to, to work it out with them because I don't want to write that big check. So there it is today. That's what I'm going to do. Maybe it'll jive some things in your head. Maybe you have this situation going on, tennis, not paying utility bills. I hear this from landlords.

(11:47): I hear it all the time. I want to add this though. Remax is the property management company that does all the management for my national and international clients. And they got a dial in dude. I don't have the systems and processes. They have, they take that bill and they add it into the rent. So if the rent's eight 50 water bills, one 50, they're going to get an invoice that month for a thousand dollars. And if they don't pay the thousand, then they're going to eviction court, a nonpayment of rent. And they're going to catch it early, basically, which is slick. I like that style. I just don't have all the wicked systems and processes and staff to be able to put all that stuff together, but from my own stuff. So I kind of do it the old school way. We send them out the bill and just say, Hey, you gotta pay it. You know, I'm kinda monitor it the best we can, which, you know, whatever has this pros and cons, but Remax has their pros and cons of their system too. But they do it really good. I do like their system, but they have a personal there. It does nothing but water bowl management, but they're a large company and they can do that as well. So for what it's worth. Awesome. Thanks for tuning in. Have a great day.

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