Seven Proven Tactics To Maximize Rent Collections During A Crisis
1. Offer Early Bird Discounts
During early March, we already understood that April would be a tough month. We created an early bird program and discounted rents by $50 if residents paid for April by March 30 and a $100 discount for paying for May during March. In our case, about 20% of the tenants took advantage of the discount, and we later learned that some of them had lost their jobs, but it didn’t impact us since they’d already paid in advance.
2. Allow Flex Payment Plans
If one of your residents can show proof of job loss or reduced hours from their employer, allow them to pay some of their rent at the time due, and distribute the rest of the unpaid rent over the rent period. For example, if a resident pays $600 out of their $1,000 rent and has four more months on the lease, then increase their rent by $100 per month for the remaining four months. This can help residents get by during the tough months of unemployment.
3. Share Information About Charities
Yes, real estate investing is initially about making money, but it’s not everything. We also have to be humane and care for those in need. Understood that you need to help your residents as much as you can. An essential part of this involves doing market research to see which nearby charities are giving food or resources away to those in need, and ensuring your residents are made aware of nearby local resources for assistance.
4. Help Residents Learn About Federal Loans/Grants
As real estate investors, it’s our job to know what tools are out there to financially help us power through these challenging times. We've had access to tools like SBA and PPP loans, but tenants don’t necessarily have access to the information we do. Summarize the information on relief programs, and send it to your residents, in case some of them operate small businesses or work from home as sole proprietors or independent contractors. Also send information to residents about their stimulus checks or unemployment benefits to keep them informed, as well as encouraged.
5. Send Gift Cards
While I know that this might not be a popular strategy, we decided nonetheless to send Walmart gift cards to every tenant who was impacted by the coronavirus. Not only did we feel that was our way to give back, but we were also hoping that our residents would feel more inclined to pay rents when they became in a better position to do so. It worked — kindness still goes a long way.
6. Allow Residents To Use Their Security Deposits To Pay Rents
If someone can show proof that they’ve lost their job, let them use some or all of their security deposit to pay rent. The challenge is that you also can’t expose yourself to an unnecessary risk of releasing the security deposit. To mitigate that risk, allow residents to sign up for security deposit insurance, which basically replaces the one-time security deposit with monthly payments of $5–$10.
7. Be Proactive
As you can see, proactive is the name of the game here, and it’s smart to take a very active and proactive approach in protecting your investments. Once stimulus checks arrived, for example, we reached out to all the residents who opted for our flex payment plan and asked if they would make their deferred payments early now that they had received their checks from the IRS. Many opted to do so.