CRE 101 - Tenant is a massage therapist, she is 3months behind on rent. Shes making monthly partial payments and continues to get further behind. This current rate has already been revised lower from the original rate. She now wants a smaller space at a lower rate
She's 3 months behind and now wants to reduce her office space and go with something smaller with a lower rate. She is a hustler and I feel like I should keep her around for the cash flow she adds to the cash flow, but tends to test boundaries, vs completely cutting ties.

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Thoughts on how to stretch this tenant out and keep the cash flow in tact. Its always harder to replace a tenant than to keep them there?
[{"id": "ixbpnt8", "text": "Looks like you answered your own question. Reduce space and lower rent to inline with the partial rent she paying.", "replies": [{"id": "ixbq1op", "text": "What about the unpaid balance. I knew all along her business was set to fail, but she came in at 2700 a month, I dropped it to 2000 after 6 months, now for the last three months she hasnt been paying other than 500 a month. \n\n&amp;#x200B;\n\nI agree moving her into a smaller space is the route to take, and Start off at 1500 to 1000. But how do I handle the unpaid balance, and do I still hold her to the unpaid amount?\n\nI honestly just want to lock her out, but I know that's not the most diplomatic thing to do.", "replies": [{"id": "ixbsjpn", "text": "&gt; I knew all along her business was set to fail, \n\nLots of mom &amp; pops have no idea how much space they really need, and the business revenue can support.", "replies": [], "depth": 3}, {"id": "ixc2htp", "text": "I think to the extent that you\u2019re asking for specific situational advice, the answer is always going to be \u201cit\u2019s up to you.\u201d  Generally for an unpaid sum you can write it into the contract amendment as a pay over time deal.  But where you draw the line about accepting lower amounts vs evicting is ultimately up to you.  You may want to consult with your attorney as well to determine how accepting partial rent affects your rights.", "replies": [], "depth": 3}, {"id": "ixg5449", "text": "If you knew all along, why rent to them?", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ixbqw2o", "text": "Ask her what she wants to do about the back balance and how she plans on paying it. You either accept what she says and hold her to it or evict her. \n\nWhat market are you in?", "replies": [{"id": "ixgad2b", "text": "I second this, and would also say given the history you have, if they want to move to another space in your building, carry the unpaid amount as a debt to be repaid later and require access to their books under any new lease.\n\nAnother option is to evict or enter into an agreement to mutually terminate the lease.\n\nAnother option is to change the lease and give them month to month terms while you find another tenant. This is a win-win because it gives them the ability to move to another location that they can afford and gives you the flexibility to re-lease the space to someone who can afford it.", "replies": [{"id": "ixggmkj", "text": "I agree with your options. Without knowing the demand for the space, it is difficult to gauge what to do in this situation. If he can re-lease the space easily, getting the problem tenant out is the obvious option. If the property is difficult to rent, that changes things.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ixbzn5b", "text": "OP, and future landlords, evict this tenant. You are running a business, I give people some slack with 1 week or maybe waiting for payday but 3 months is unacceptable. From dealing with hundreds of tenants once they are behind they stay behind and you won\u2019t get paid the past rent. Small claims can do so much and have caps which is totally bs. \n\nAsk her she has 30days to to pay passed rent then we can talk about making a smaller space. \n\nYou have to ask yourself why am I going to spend money to cut the space into 1000sq, put up a wall and find another tenant for the other 500sq? She is playing you and she will continue to play games. \n\nIf she is serious she can get a personal loan to pay the passed rent. Times are tough but you have a mortgage to pay.", "replies": [], "depth": 1}, {"id": "ixcbmcy", "text": "Absolutely not. Evict and go after the unpaid balance. Always be a professional landlord.", "replies": [{"id": "ixg9klh", "text": "This is a weird comment. Only siths deal in absolutes.\n\nIn truth, in many cases it isn't worth the hassle/time/expense going after tenants for unpaid rent.", "replies": [{"id": "ixm3jdf", "text": "I\u2019ve dealt with a lot of smaller tenants like this over the years so I\u2019m going based of my experience. \n\nThe headache and chasing after your money are almost not worth the little rent that this tenant will bring in.", "replies": [], "depth": 3}], "depth": 2}, {"id": "j1njtgr", "text": "Kill yourself", "replies": [], "depth": 2}], "depth": 1}, {"id": "ixch1at", "text": "Moving a tenant (particularly one destined to fail) almost never makes sense.   Moving comes with costs and if they can\u2019t pay rent they can\u2019t pay to move, so that\u2019s another cost that falls to the landlord.   \n\nIf you have other options for the space evict them now.   However, if you don\u2019t have another option for the space there\u2019s no reason to kick out a tenant who is paying more than the operating costs.    Assuming this is true, I\u2019d get them to agree to a landlord recapture right on a short notice (30-60 days) and start marketing the space.", "replies": [], "depth": 1}, {"id": "ixcpg9f", "text": "Behave rationally, not emotionally. Pretend like you have investors looking over your shoulder. That back rent is theirs too, you\u2019re just going to forgive it?\n\nOptions could include: extended payment plan where she amortizes the arrears into the rent she can pay or % rent (ie additional rent as a % of sales) on top of the rent she can pay. \n\nYou can also tell her that you won\u2019t do a long term lease 3-5 more years with her and that if she doesn\u2019t get current on the arrears you will market the space for lease. If a better offer comes through then she will have to get current or vacate. \n\nSounds brutal but this is business. The one sympathetic piece i would add is that if she wants to leave and throw in the towel then maybe give her a break on the arrears. We all know what failure feels like, it sucks.", "replies": [], "depth": 1}, {"id": "ixcpva4", "text": "Some cash is better than none. I\u2019d offer up a payment plan that\u2019s manageable while you start the search for a new tenant. If they do move to a smaller space they should be responsible for any out of pocket costs. Ask for a copy of their bank statements or financials to verify lack of funds.", "replies": [], "depth": 1}, {"id": "ixd1bt2", "text": "My take as a retail LL/asset manager... I'd first want to review her financials and make sure that she does in fact have a viable business that is able to pay rent on the smaller space and still leave room for her to make a living. If at that point you're comfortable keeping her as a tenant, I'd then present terms for the new space, combined with a payment plan to pay back a portion of the past due balance from the current space (maybe offer to reliever her of 50%). This shows some compassion on your end, right-sizes a tenant and you'll get paid back some of your lost rent while marketing her old space. Just my .2.", "replies": [], "depth": 1}, {"id": "ixes9jc", "text": "I\u2019ve dealt with this several times in my Landlord life. Even with a smaller space and reduced rent this tenant will more than likely come up short.\n\nGive her the boot. List the space. Go after the balance. Keep it moving. \n\nDon\u2019t let tenants slow your momentum.", "replies": [], "depth": 1}, {"id": "ixfahy5", "text": "Depends how tough your market is to lease the unit to a new tenant. My market is difficult, so I would work with the tenant. She needs to show you her income and expense to prove that she can pay a new lower rent in a smaller space. You can then work the unpaid balance at the back end of the lease or have her agree that once she is late again, the lease is terminated, unit is vacated and a earlier agreed to promissory note is activated for arrears.", "replies": [], "depth": 1}, {"id": "ixfb6sj", "text": "They\u2019re an adult, they made an agreement.\n\nI\u2019d hold them to their debt.\n\nThat said, if you lend or extend credit to them that you know they can\u2019t pay then you\u2019re setting yourself up for a bad financial situation. You said they\u2019ve been paying $500/month - anything above that as their rate is a recipe for non-payment.", "replies": [], "depth": 1}, {"id": "ixfe3w8", "text": "Suggest she partner up with another massage therapist or she could find someone to share the space with in a similar industry like 1 on 1 yoga or something. But don't let her slide. Tenants are like toddlers, they will push you until they find your limits.", "replies": [{"id": "ixfets0", "text": "I agree, most of my tenants are in their 50s or older, im in my 30s. Attorneys, doctors, CPA, wealth managers, real estate agents, apartment locators, and then youve got the various run of the mill people that occupy the space and feel like their business isnt doing well because the vending machine isnt fully stacked all the time, or the parking lot needs to be brand new for their small executive office.\n\nTrue business owners that focus on the larger picture dont care about the small things. The weak will almost always fold.\n\nI'm thinking about relocating her to a step down from her current space and chargin base rent on the space and adding in the back dated amounts in to the base. So instead of 1000 a month, make it 1500 a month for space that should be 800 (shes a bit of a nut job), I don't think anyone will work with her. I just see her as a source of cash flow.", "replies": [{"id": "iyctn53", "text": "How do you know she's not making decent money from her high profile clients but she intends to move soon and doesn't mind slacking on rent?", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "j1njqit", "text": "Get a job and stop being a parasite", "replies": [], "depth": 1}]