I thought I’d reach out today, partially to keep my own sanity, but also to hopefully provide a bit of insight for landlords and tenants in this new reality that we’re in while living through the coronavirus pandemic.
I hope everybody stays safe and connected. You know, we are social creatures. I don’t think that social distancing means that we can’t continue Skype calls, continue Zoom calls, and be with your friends as best as you can remotely. I would encourage everybody to do that if you aren’t already.
Prioritizing Tenants in a Time of Crisis
I also want to talk about the real estate side of this coin. I’m going to avoid speaking specifically about commercial real estate, because it’s a bit of a different animal. And it is something that I don’t think is at the top of the priority list when it comes to the government and the people right now.
I want to talk about what I think is prudent to do right now as a landlord, as well as some of the things to avoid while dealing with tenants.
1. Treat Your Tenants Well
At the end of the day, if you’re a landlord and you want to stay in this game long-term, tenants are your customers and they can’t be treated poorly. This is a perfect time to really put that to the test.
I think right now the reality has set in for a lot of landlords that they are not going to be getting 100 percent of their rent payments come April 1—and going forward indefinitely.
The government has made a few steps, at least on our Canadian side. And I know different states and the Feds south of the border have made adjustments in how easily we can obtain employment insurance or unemployment insurance, depending on which state you’re in.
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I think that’s going to be helpful. But I also think the reality is the landlords are not going to be on the top of that list for the first people that tenants are looking to write a check to. And they shouldn’t be, quite frankly—if food and other care are more essential right now, that’s more important.
Depending on the state you’re in, certain states have basically begun to ban evictions. As a landlord, I’m all for it. The idea of evicting a tenant right now is so far out of my mind. There’s a misconception that landlords are just out to get tenants—but evictions are not even on my mind right now.
We do have to think about the implications of that, as tenants know that they’re not going to be evicted. So rent payments are not going to be on the top of their list.
2. Go Through All Your Expenses
The reality is, I just started tallying up my expenses. You know, when you start looking at $15,000 or $20,000 per month for expenses for your real estate investments, nobody can pay that if you’re not getting rent from your tenants.
So you really need to start looking at strategies to deal with each individual expense and looking at what your options are. What I’ve done is run through the top line expenses, the biggest expenses.
I went through the property tax, mortgage, insurance, water, electricity, gas, and basically called all the providers to figure out what the situation is.
I know in some states there’s been some capital that’s being introduced to alleviate some of that. In Canada, I believe as part of an $82 billion dollar package from the Feds—CMHC, which is our mortgage insurance company—they have also put together a package to help lenders.
The reason that’s important is they are aware that if tenants can’t pay, that means landlords can’t pay. If landlords can’t pay, lenders are in a crunch. Right now at least, my bank has basically said that they are giving deferral options to different landlords making payments, as well as people just with their personal mortgage.
Just to keep in mind there, that’s a deferral. It’s not a freebie. You will pay that eventually, but hopefully, it gets you through in the interim.
3. Contact Your City
Once you’ve gone through your expenses, you want to contact your city and figure out if there’s anything that you can do there. I’m waiting to hear back on that end. In terms of the actual providers, one I had for gas basically said they’re not doing anything. We’ll see how long that lasts because, you know, you can’t get blood out of a stone. There are people who are not going to be able to pay.
And then I went into my utilities further—water and hydro basically gave me a July 1 abatement period so that I don’t have to pay during that timeframe.
You know, it’s helpful, and I think it’s important to go through all of the expenses you have and try to figure out which ones you may have some flexibility with. If you’re in a situation where you do see on April 1 that maybe you’re getting just 20 percent or 30 percent of your rent, for those of you who own only one or two single-family homes, that could be 100 percent of your income.
It’s prudent to go through all of those items and figure out which payments you can make different arrangements for during this time. And it’s 100 percent your responsibility to do.
4. Communicate With Your Tenants
Don’t think that not communicating with your tenants is a solution—it is the worst thing you can do right now. Communicate with your tenants. Make sure there is an open line of communication. And if you have third-party management, make sure you have weekly—at least— sessions speaking with them, talking to them about what’s been going on at your building and making sure that the message gets through to your tenants.
Any communication that you have with your managers is vital. I think that as a landlord right now, it’s important that we all work together. This is nobody’s fault—we’re unified in this, and it’s not one person against the other.
Like I said—you have the tenant level, landlord level, the lender level, and the government level. We’re all trying to do our best right now.
How are you handling the challenges you’re facing as a landlord in these uncertain times?
Join the conversation in the comments below.