I am the first to tell you that I am an always-learning landlord. Heck, my 14-page lease is growing faster than I wish to acknowledge. Things come up constantly. Today, I’m explaining why I added a deductible to that long lease.
As a landlord it is very important for me to take care of my property. But, on the other hand, I am a busy working professional. Time is a rare commodity. I also hate being the bad guy.
Here are some of my favorite situations. I had to laugh at these. What else was I supposed to do? It was a frustrated laughter, but I was laughing nonetheless.
- “Will you hire an exterminator? A Palmetto bug (flying cockroach) is in the house!” (Mind you the windows are wide open, and these bugs are so popular in South Carolina they have their own name!)
- The call that the dishwasher isn’t working only to find that food is down one of the pipes. How did that happen?
- The drain not draining but the tenants just washed A TON of cat hair down the drain.
- The three garbage disposals that went out.
I could keep going. These situations always seem to be the result of a tenant error but it’s almost impossible to prove.
Why I Added a Deductible
While most won’t see it, I HATE being the bad guy. I like saying yes, not no. I don’t want to be put in situations where I have be a hard tush, but I also have to protect my investment AND I have to follow my lease. If I don’t follow my lease to the letter, we could be penalized because we didn’t follow fair housing rules.
Therefore, I decided to try something new. I had seen various people mention a deductible. I do a lot of research and have seen this showing up more and more. I have also personally noticed over the past 3.5 years of home ownership/landlording that creating skin in the game for both the tenant AND the landlord makes for better relationships all around.
My experiment is adding a deductible. I now have tenants pay the first $100 of repairs. The point isn’t to have them pay to fix my roof leak but to have them watch what goes down the disposal, etc. It is still the early part of the experiment but, so far, so good. I receive fewer calls about things that are the tenant’s responsibility per our signed lease.
Stay tuned, because if it fails — I will write an article about it! We will see how things go over at these next few turnovers.
What do you do to create skin in the game? Do you have a deductible? If you are/were a tenant, would a deductible be a bad thing?
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I’m thinking about adding a deductible to my lease. (Like you, I write my own.) My only reservation is that tenants might ignore things that need repair to avoid paying the deductible. Have you had any experiences like that? Thanks!
I have not had any of those issues. Honestly most of my issues were minor and any large one (AC needed replacement) I have already replaced in full.
Is the deductible standardized across all your rentals regardless of monthly rental amount? I ask because I am considering a $50 deductible and wondering if “less skin” would still have the same effect, but ensure tenants don’t brush off repairs because they can’t spare $100 or try and quietly accomplish them on their own.
When renting an $80k home for $850/mo, I think that I will have to experiment with this to see what works best.
Great articles…thanks for sharing!
I do it across all of my rentals. On the other hand, all of my rentals are at least $1200. Hope that helps. Good Luck!
As someone else has said, this causes tenants to not report things that need to be repaired. Repairs that would be cheaper to fix if reported early turns into a very expensive repair later on.
While I know that is many people’s fear, that has not been my experience.
5 years later, how has the deductible policy been?
What if the repair being requested involves you making a capital improvement to your property? You have been putting off replacing that electrical panel and now its causing issues for your tenant regularly… So they should help pay for that? What about that 25 year old roof that has finally started leaking? So they should pony up $100 for that too, eh? What about that AC that just died? What about regular A/C service that is required to keep the system in operating order? Should they pay $100 out of their pocket for that? What happens when your tenant starts repairing small items themselves to avoid paying your fee? Then what happens when they complete those repairs improperly and you are never told? This is a slippery slope that is caused by you. Yes, you! All because you did not properly price your rental property to include all of your expenses. I cash flow enough from each of my rental properties to cover those unforeseen repairs without affecting my bottom line. I can even afford to unclog a few drains that were likely the result of the tenant’s usage without losing sleep over the $150 service call… If it is broken due to their negligence, note it and think about it when it comes time to renew. People are lazy when they price their property followed by being lazy when they screen their tenants and they look around wondering how it all went wrong.
I like this idea, wondering if there is any specifics of what the $100 would cover and what is solely the property owners responsibility. The only issue I see is they find a a small leak and don’t want to pay to have it fixed and it later turns into a major R&R (Ripout & Redo). We’ve had tenants before like that, that did not want anyone in their apartment to find after they moved out we had to gut the bathroom to make proper repairs.
As a tenant, if my landlord added a deductible for repairs, I would do the worst possible repair possible. Hide it up and leave. Your property catches fire after I am gone? Oh, that was a repair I did. Big hole in the wall? No problema, just add a patch.
Landlord is responsible for the repairs. But the tenant doesn’t have to pay any deductible if they don’t ask you to repair it. That means, your 500$ freezer broke? No problem. Put it in the storage room and buy a new one.
You people have to understand that if tenants wanted to have their “skin” in the game, they would have been owners themselves.
I hate to say that, but you are going down the black hole of bad landlord gets bad tenants.