Rent is Due, but Not Collectable
Landlords have enjoyed a particularly amazing run since about year 2010 with ultra low vacancy rates, intense rental demand, low mortgage rates, and rising rent prices.
It’s been an unprecedented decade for residential rental market investors, landlords and property managers. Yet now, with the Corona Virus “great shutdown,” it’s a completely new world for landlords and rental investors, big and small.
Between collecting rent from unemployed, self-isolated tenants and fending off banks demand for their mortgage payments, Landlords suddenly need help. Let’s talk about the key issues and how you might deal with them. See our Shutdown checklist for landlords below.
Unemployment, Court Appearances, and Tax Write offs
In the second half of 2020, rental occupancy rates will be down, unemployment persistently up, and cash flows the worst they’ve ever been. You’ll want to ensure your bookkeeping and accounting is up to date and accurate as the Corona Virus hits your balance sheet. Your bank will consider your books key to any credit they provide this year.
NMHC rent tracker reports rent payments were down 12% from last month, while Avail reported in its survey that 1/3 rd of renters missed their payment in April. This is just the beginning of the economic recession. The $1200 CARES aid check to individuals may not cover rent for many in California and New York where average rents are at least double that amount.
In the shorter term, encouraging tenants to pay some rent is paramount, even as the governments have ruled they won’t have to pay for some time, and you cannot evict them.
Legal Fallout from the Renter Landlord Confrontation
Be sure to get up to date on legal requirements and reread your tenant leases. You can see know why spending more time composing and writing leases is wise.
Landlords should be cautious and ensure they’ve got agreements, concessions and amendments regarding rent payments in writing and all conversations with tenants are documented. This will be important in future amid legal proceedings coming later this year.
Now, Efficiency Matters
Aside from good cash flow management and being able to persuade tenants to pay rent, you may want to push the reset button. Going virtual with property management might seem secondary right now, but getting tenants to commit to online rent payment and online communication might result in them being more flexible. Some of them may have dug their heels in about not paying rent.
Landlords who chose to stay with traditional management systems are also facing renter payment defaults, and government mandated moratoriums on rent payments. But collecting bits and pieces of rent from hiding tenants will be exhausting and stressful.
You’ll need to quickly scramble to stay viable if the shutdown continues, or if a Corona Virus re-infection trend appears.
Short Term Rental Landlords are Adjusting Too
The short term vacation rental sector has been decimated, with little optimism without a Covid 19 vaccine. People can’t travel and won’t when the shutdown ends. As VRBO and Airbnb lose bookings, many owner’s units will be transitioned to longer lease periods. That puts more supply into the market which could lower rents going forward.
For the short term rental space, it’s been nothing but devastating. Hotels and the airline industry are teetering on the brink of insolvency. Airbnb has gone from $1 Billion gains per quarter to almost $300 million losses during the 4th quarter of 2019. We’re waiting for the 1st quarter report from Airbnb.
Optimize All Aspects of Your Business
It’s pretty clear that the easy money is not on the table anymore for landlords, and many will need to become extremely efficient in how they conduct all aspects of their business. And this means enabling easier ways for tenants to pay rent, how landlords write leases, how they manage finances and expenses, and how and when units are serviced by contractors.
For many mid-sized landlords, it might mean a complete overhaul of their business models moving from simple rent payment-based models to new expanded services and revenue sources. Landlords will have to open up to better business strategy if they want to survive.
And property management companies will need to look at new pricing models for their services and manage work virtually.
Growing Demands Necessitate Better Landlord Tools
The growing challenges of rent control, delayed rent payment, unaffordability, activism, regulation and drastic government actions could pressure landlords and rental property investors to cut back on services to tenants. And this will make tenant landlord relations tense.
Large corporate landlords will face severe criticism if they begin evicting huge numbers of tenants for rent default — a public relations nightmare fed by social media.
Small landlords are more flexible and forgiving and are more likely to work with their tenants through tough times. Yet, their resources and revenue are lesser and compassion may lose out as bankruptcy looms for some.
For this reason, small business landlords need to look at their businesses differently.
Landlords Going Digital?
A Corona Virus Shutdown Checklist for Landlords
Outlining a plan or strategy starts with building a checklist. The checklist gives you the items that need to be focused on, and then you can create a persuasive strategy to encourage tenants to communicate and to pay as much as they can.
- know your local and state laws regarding eviction and what rent demands you can make
- compose a professional and non-threatening notice that outlines your situation and tenants responsibilities for rent and communication with you
- impress upon tenants the importance on communicating their situation with you, as per government requirements for CARES ACT checks
- do research on all small business loans and grants as the Federal CARES ACT legislation as well as local government or chamber of commerce assistance
- assess your tenants on an individual basis — employment, past payment history, remaining time on the lease, as to who is first in line for your help — always protect your best tenants
- check your landlords insurance for any available coverage
- consider using the last month or security deposit if permitted by your relevant laws
- consider applying or forgiving late fees
- talk with your bank about your situation and any help they might offer
- consider refinancing your mortgages (lower rates) before you become late on your payment
- consider prohibiting “double dipping” and not providing relief to any tenant who receives government assistance, so you can help other tenants
- contact a lawyer in anticipation of eviction and collection processes
Some tenants may not have any intention of paying during the shutdown. By being involved in helping them acquire funds, you’re more assured of receiving some rent. Creating a communications channel is vital to encouraging them to do the right thing.
Good luck with collecting rent and making ends meet. Please do suggest any tips you can think of below in comments.
Check out ManageCasa’s property management platform. Learn about ManageCasa’s state of the art accounting system, superb tenant communications feature and rent automation service. Other larger platforms are likely finding themselves overloaded with tenant management issues, and their helplines may not be available.
ManageCasa welcomes customers in New York, Chicago, Boston, Philadelphia, Charlotte, Cleveland, Dallas, Houston, Phoenix, Las Vegas, Seattle, Los Angeles, Miami, Tampa, Orlando, St Louis, Indianapolis, Denver, and cities across the US, Canada, Australia, UK and Germany.
Further reading: Loans for Property Management Companies | Corona Virus Disinfecting Tips | Rent Payment Tips for Tenants | Corona Virus Property Management | Property Management Software | Landlord Software | Property Management Companies | Property Management Chicago | Property Management Los Angeles | Property Management Hawaii | Property Management Denver | Miami Property Management | Boston Property Management | Phoenix Property Management | Property Management Software Comparison | Property Maintenance | Property Management Apps | CARES Act Website