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Winning a judgment on a tenant that has trashed your property is one thing, collecting on that judgement is entirely another story. Did you know that only about 10% of judgments are actually collected? In this episode, Steve White from RentPrep drops some serious wisdom on what you can do on the front end to increase your chances of being in that 10% of landlords that actually collect! Website: https://rentprep.com/?utm_source=roofstockautm_medium=podcastautm_campaign=steve-media-outreach-2021 The "RentPrep for Landlords" Podcast: https://podcasts.apple.com/us/podcast/rentprep-for-landlords/id851540886 The "RentPrep for Landlords" Facebook Group: https://www.facebook.com/groups/RentPrep --- Transcript   Michael: Hey everybody. Welcome to another episode of remote real estate investor. I'm Michael album, and today I'm joined by Steve White, who is the founder and CEO of rent prep. And on this weekend wisdom, Steve's going to be giving us some insider tips as to better ways to collect judgments that we have against former tenants. So let's get into it.   Hey, Steve, thanks so much for joining us on today's weekend, wisdom. Really appreciate you taking the time.   Steve Yeah, thanks for having me on.   Michael: Steve, we had you on another episode of the real estate investor, where we're talking about rent prep your company and some things that landlords can do to screen tenants. So stay tuned for that one, but wanted to give everybody a little nugget. And you've got some experience in collecting judgments, or winning judgment awards that landlords have put on tenant. So can you talk to us a little bit about some things, tips tricks landlords can do?   Steve Yeah. So winning judgments is a lot easier than executing and collecting judgments, as you know,   Michael: Yes, I know. I am all too familiar with that.   Steve: Yeah, I hear landlords get excited all the time and say like, Yeah, we got to judgment. Oh, my God.   Michael: Good luck.   Steve: Yeah, the struggle has just begun,   Michael: Right, really the best way to handle it. And  I'm gonna say that your strategy needs to start way earlier than you would imagine the strategy needs to start at the rental application process. I know, a lot of landlords are okay with applicants skipping information on their application. And there's a lot of information that you wouldn't think is super useful in the application process, like for example, their references, like who's going to call a reference and expect that they're going to give you a truthful, objective perspective of if this person's a good tenant or not, you know, their mom is gonna say they're lovely, and they're great. They want them out of the basement anyway. So they're just gonna be like, yeah, they're awesome. But, you know, that rental application has a future life well beyond that screening process.   So when you think about obtaining a judgment, or even executing judgment, some of the pieces of information that you might need are going to be hidden in that rental application. So for example, they were just evicted or abandoned, or whatever your property, where are they living now? Well, if they're short on money, they may not have a new apartment, they're probably living with whoever they listed as their next of kin or personal reference. So now, you know, now you know where to serve. And now you know where to you know where to find them at least.   So those personal references are absolutely worthless. When it comes to the application process. Don't waste your time calling them and asking if they're going to be a good renter, call the previous landlords, that's worthwhile, but not the references, the references are worthwhile after you've screened them, and you're trying to track them down.   Michael: Interesting.   Steve: Yeah, employment information, right. So you cannot garnish somebody's wages, if you don't know where they work, the court will not do that dirty work for you. So you got to know that going into it, you know, and again, that's something that you'd find on the rental application, right, daycare 30 to list where they work, who their supervisor is, how to get ahold of them. So the best piece of advice I can give you on the rental application side of things, is every single landlord needs to adopt a no Blank Space Policy.   If an applicant fills out the rental application and says, I just don't have some of this information. But here you go, it's 70% complete, you need to kindly push it back across the table and say, I'll wait, I need the rental application to be fully completed. And again, a lot of that information may be useful to you into the future.   Wage garnishments again, you need the employers information, if you're going to do any kind of garnishment you know, beyond the wages or freeze their bank accounts or anything like that, you're going to need their bank information if they're not paying you with rent checks. And they're, you know, they're paying you through some online system, you're not going to have access to their bank information as easily as you would if you had a check in front of you. So if your application or your leases including information on you know, bank information as a reference and things like that, that's going to be useful for you as well during the the judgment collection process.   Okay, so a couple of easy tips on the front end, no Blank Space Policy collected information, it could be hugely valuable to you in the future and on collecting on a judgment. Now, let's assume that you have the judgment I'm already I'm going to give you the really ugly truth, the rental industry as the lowest collection rate of any other industry below if you can imagine below dentists, these poor dentist can't seem to get paid on stuff. And the reason is because there's no blacklist for dentists. If I go to a dentist and I leave owing a balance, I can go to the dentist on the street and have him continue or fix whatever my problem is. Mm hmm. And he's going to take me as a new patient. There is no dentist blacklists that says hey, this guy owes me money, so don't do business with him. So Dentists have a notoriously low collection rate when it comes to their receivables or past due bills. And if you can imagine the rent All industry is even lower than dentists.   Michael: And we have a blacklist what a bunch of baloney.   Steve: I know. I know we Yeah. Right. So first and foremost, don't get your hopes up that because you got a judgment that it's money in the bank. And don't spend it before you have it, the chances of you getting it are slim. And when I say slim, I mean, at best 10%. So our recovery rates that we were normally seeing were about eight to 10%. In the rental industry.   And the reasons are obvious. If somebody falls behind on things, and they can't make their payments, it's really hard to catch up on big chunks, like rent payments, and still keep up with other things. Right? really tough.     So, you know, they're really, really difficult to collect on the best advice I can give in terms of what do you do after you have a judgment in your hands, don't spend another Penny trying to collect on it. A lot of landlords make that mistake, I would use a third party collection agency that operates on a contingency basis, do not pay them anything upfront to place the debt with them, if they're insisting that that's how it works, find a different agency, there are a ton of them out there, including a lot of attorneys that may not even advertise that they do debt collections, but a lot of attorneys do. So it may even be worthwhile asking your own attorney. And if they're working on contingency, they've got a little skin in the game, they're not going to get paid unless they get paid. So that's one, you know, potentially useful way to do it and take it off of your plate and not have to think about it and let a third party agency or a third party, you know, Attorney try to collect on it   Michael: Like Dog the Bounty Hunter.   Steve: Exactly right. Don't you wish like that would happen? Like dog showed up and says like, Hey,   Michael: you owe me money.   Steve: Right, right. Like every landlord wants that. So, of course, like I said, you know, you could try some of the traditional ways which are not very effective, like wage garnishments, if they're job hoppers, and they don't have a job or don't keep a job for a long stretch of time, you're not going to be able to garnish wages. And even if you do what garnish your wages, it's regulated by the state that you're in how much of a percentage of that wage you can actually take at a time. And I think the highest percentage is Ohio, which is about 10%.   So it's not much going to take you a long time. I think you mentioned you had a $10,000 judgment and take you a long time to collect a $10,000 judgment small bites at a time.   Michael: Yep.   Steve: Freezing bank accounts. That's another one varies by state. But in most states, they require a minimum balance before you can freeze it. In New York, it's 20 $500. I don't know about your confidence level that your previous tenant has just an extra 2500 cash laying in their bank account, right? They did, they probably wouldn't be in bad financial shape.   Michael: Right.   Steve: So that's not super effective. What I've seen the most effective is tax refund, garnishments Hmm. And these need to be filed every year, you can get lucky if they have a huge refund coming, you might be able to grab your past two in one clean swoop. But there's a more likely that you're going to have to do this in over a period of several years, you got to check with your county that you filed your judgment and when that deadline is for filing refund garnishments, because it's usually December, each county is a little different. So you want to be prepared, make sure you get it within the filing deadline. And there may be a filing fee. And we're talking most places, it's 10 or 15 bucks, it's like the same fee, you pay for a marriage license or you know, to get a permit to build a fence in your yard or something like that. So it shouldn't be a super expensive fee. But you file these at the courts.   And you're basically standing in line waiting for that refund that tax refund. And it's based on order filing priority meaning first come first serve. So if you're doing this and five other people are doing it, you got to get there first. And the only person that can supersede you is the government. So if the government is going to garnish their tax refund for whatever purposes, maybe they would pass due taxes. The government's first no matter what, okay, they're going to get through money before you do.   Michael: Big shock there.   Steve: Yeah, right. But anything that's left or if they don't have any other garnishments, that is a really useful way to take large chunks at a time and get your money back. So in my opinion, that's probably the most effective strategy. If you have an old judgment laying around, and you want to blow the dust off and try to go after it again, that might be your best bet.   Keep in mind that judgments are only good for seven years, they expire. They're like milk, and the differences they get chunky, but here's the difference. You can file extensions, ah landlord should do. Again, it's a filing fee. So it's well worth 10 or 15 bucks to file an extension and have that thing live on for an additional seven years then to just let it die because it will just die after seven years and then blow away like dust and it says if it never happened. So if you're getting close to that timeline, you want to refile. Also if you can get them to pay anything, it restarts the time   Michael: That's seven years of no payment,   Steve: Seven years no payment, no activity. It's it's dead after that time. So if you can grab something on a garnishment or something like that, or get them to make a payment on it, then it starts that time clock back over again.   Michael: Okay. And can landlords double dip or use multiple of these tactics? Get a wage garnishment and a tax refiling garnishment? Or is it one or the other?   Steve: It's one or the other? I've never heard of anyone double dipping, although I'm sure plenty I'm sure it's been tried. I think it's one or the other. And I think the issue that you would potentially run into, which would end up being more of a headache for you as landlord would be. Let's say you got two things operating at the same time, and you get lucky and you collect all the money on the tax refund. And now you're in some sort of situation where you're collecting,   Michael: Wage garnishments.   Steve: Yeah, so I would say I would do one at a time,   Michael: Pick one and stick to it,   Steve: Pick one stick to it. If you already have an existing judgment, check out the tax refund, if it's really early in the process, and you just got that judgment filed or you're about to I would look into, again, a collection agency or an attorney that's willing to work on contingency to try and collect that so you don't have to worry about it. Think about it. stress about it if they collect something great. If not,   Michael: Didn't cost you anything.   Steve: In it wasn't probably a good collected either way. So yeah, yeah.   Michael: Oh, man. See, these were great. These are super, super cheap. I wish we had had this conversation seven, eight years ago when I needed this more.   Steve: Yeah, I know. I know. I   Michael: That's okay.   Steve: Well, I talked to landlords all the time that are in that same situation and a lot of landlords that have that mindset of like, cool. I got the judgment and it was a couple of hoops to jump through. But it was worth it. And now when I get it collected, and that was   Michael: Easy sailing.   Steve: Yeah, that day never comes.   Michael: No, it doesn’t. It has it. But you know, I've gotten a lot of mileage out of this story. So you know, it's all good. It's all good.   Steve: Well, that's that's what it counts for, right? Like life lessons. And usually don't make those kind of mistakes twice or, you know, high aspirations that something's going to happen if you learn like, no, that'll never happen, and I'm probably not going to get that money. So, Yeah, I hate to tell you that to let it go. But that's the best. You're gonna sleep better at night.   Michael: It's the best thing you can do.   Steve: Yeah, yeah.   Michael: Yeah. Awesome. Thanks Steve. Again. really a pleasure having you on and we'll have to do this again sometime soon. Take care. Yeah. Great. Thanks. Alrighty, everybody. That was our episode. Wow. A huge thank you to Steve really, really great stuff. I wish I had known years ago when I was trying to collect a $10,000 judgment from a tenant that trashed a property on the way out of my house. So again, if you liked this episode, please feel free to leave us a rating or review. They are really helpful for us. And as always, if you have a specific episode, topic or idea or something you'd like to hear more about on episode, leave us a note in the comment section. We'll make an episode about it. Thanks again for listening. Happy investing.