Elevated unemployment rates and massive income loss across the country have left many households struggling with the cost of living expenses. One particularly vulnerable sector is the renter population.
Landlords and property managers are continuing to see a downward trend in rent payments received as many tenants face ongoing financial hardships. Even still, Rentec Direct reports that, “the majority of renters are still making full or parietal rent payments.”
This can cause a snowball effect of economic fallout as landlords are becoming more and more concerned about their financial futures. With the decline in on-time, in-full rent payments, the lost revenue, and the costs associated with tenant turnover, landlords are facing challenges of their own.
What can landlords with tenants who are struggling to pay rent do to prepare for the future and ensure their own financial security?
Open the Lines of Communication
Now is a great time to be proactive, establish a relationship with your tenants, and make sure they know how and when to contact you with questions or concerns.
The sooner you know about a problem, the sooner you can address it, so encourage your renters to be upfront if they have lost their job, suffered from income loss, or are otherwise struggling financially during the pandemic. Consider researching and sharing local, national, and federal programs currently offering assistance for renters to make sure your tenants are aware of the options available to them.
Keep detailed records so you can provide the necessary documentation to any assistance programs for which your tenant may apply. For renters who are struggling financially, explore setting up a payment plan that will work for both of you.
Related: I’ll Never Evict a Tenant—Here’s Why
Simplify the Payment Process
Data collected throughout the COVID-19 pandemic has shown that renters with online rent payment options are more likely to pay rent on time and in full. If you don’t already offer online payment options to your tenants, my recommendation is to sign up as soon as you can.
There are many options on the market that allow your tenants to make payments by ACH (electronic payments from a bank account), credit or debit card, or even at a cash payment network location.
Not only are electronic payment options increasing in popularity due to social distancing requirements, but they also give renters the option to set up reliable automatic payments.
Contact Your Mortgage Lender
Just as there is legislation in place to protect renters during times of economic turmoil, there are programs in place to protect homeowners and landlords who are facing financial hardship.
Reach out to your mortgage lender and ask about hardship plans they are offering during the pandemic. Likely they will have a couple of options to defer or pause mortgage payments.
It’s important to keep in mind that forbearance is not a forgiveness program and your mortgage will still be due in full eventually, but this option does leave you with a little more cash flow during these uncertain times. If rent payments aren’t coming in, this pause could be a lifesaver for your rental business.
Some mortgage lenders may be offering mortgage loan agreement modifications in the form of a longer-term loan period or a lower interest rate. Monthly payment amounts are typically reduced, leaving you with more room to cover income loss and other unexpected expenses.
Consider Other Options
There are a few out-of-the-box options many landlords are taking advantage of during these times:
- Equity line of credit: Some homeowners are leveraging their home equity with a line of credit, which is often faster than refinancing or forbearance, but still results in quick cash flow.
- Private mortgage insurance: Depending on your down payment, you may be paying for Private Mortgage Insurance (PMI). These payments generally follow a standard two-year requirement, so make certain that your payments have ended if you’ve passed the two-year mark. If you’re still required to pay, contact your insurance provider to discuss hardship options; it might not be much, but any amount toward your mortgage payment helps.
- Home valuation: If you feel your home has significantly decreased in value for whatever reason, you could see considerable savings on your tax payments. It may require a new appraisal, but consider contacting your county tax assessor to discuss valuation.
Research Available Resources
State and federal resources are often allocated to city and county departments, so do some research on local loans or grants available in your area. Banks and credit unions are a great place to start as they are often the distribution center for community funds.
Several agencies are offering forgivable or low-interest loans and grants including the Federal Housing Administration, Small Business Association, and the Federal Rural Development by the U.S. Department of Agriculture.
These are unprecedented times for all of us, and working with a little empathy and compassion can go a long way. While it’s clear that some renters are struggling to make rent payments, landlords and homeowners are still responsible for their mortgage payments and need to find solutions to keep their finances on track.
It’s difficult to predict what comes next, but educating yourself on current legislation concerning landlords and renters and the resources available to each party will help you tackle what comes.
Are your tenants still paying rent? If no, how are you working with them?
Tell us how you’re maintaining your tenant relationships in the comments.