Investor · Hammond, LA · Member since 2016 · 3 posts · 8 votes
I'm considering lowering my rents for the next 2-3 months only because of the strain that COVID-19 is causing. I am able to drop my rents considerably and still make the PITI payments. My number one goal in doing this is to retain my current tenants after this passes. I have a great tenant base at the moment who pay on time and automatically like clock work. I was considering on waiving all late fees and reducing my rents across the board by 20%. What do you guys thinks? I'd like a different perspective.
Real Estate Agent · NJ · Member since 2019 · 237 posts · 169 votes
6y
I wouldn't offer it if there isn't a need to. This can open the door to tenants taking advantage, or worse, taking your kindness as weakness. If your tenants are as great as you mention there shouldn't be any problems. If they do come to you with issues then work with them, but don't fix what isn't broken. What is great is you're already thinking about this stuff and have a plan in place should you need it. Some landlords aren't forward thinking and that is when they run into issues, and with this current situation many are running into problems.
Real Estate Agent · NJ · Member since 2019 · 237 posts · 169 votes
6y
I wouldn't offer it if there isn't a need to. This can open the door to tenants taking advantage, or worse, taking your kindness as weakness. If your tenants are as great as you mention there shouldn't be any problems. If they do come to you with issues then work with them, but don't fix what isn't broken. What is great is you're already thinking about this stuff and have a plan in place should you need it. Some landlords aren't forward thinking and that is when they run into issues, and with this current situation many are running into problems.
I think it is something that each business has to look at individually on their units. Some landlords leverage everything to the hilt and have no cash reserves. They live like many tenants do paycheck to paycheck. Sadly in this situation they both might feel the pain when the bank doesn't get paid. Landlord loses the house and tenant gets kicked out and is stuck looking for a new place in the school district with an eviction on record.
If you can just drop rents by 20% and still make all your payments (PITI/CAPEX/Management fees). If they are late, who cares, no fees just pay what you feel it's worth, I may start investing in Louisiana :)
Seriously though in my situation I am not making any big changes during the first week of this. Tenants that are waitresses (No sit down dining in our area at all anymore) and tenants that are police officers (plenty of steady work right now) are in two completely different situations right now. Doing a blanket 20% across the board doesn't help as much as leaving the cop where they are and dropping the out of work waitress by 40%.
Just my 2 cents and good luck on whatever you decide
Property Manager · Katy, TX · Member since 2015 · 1k+ posts · 1k+ votes
6y
Anthony,
Smart man for thinking ahead! I'm with @Shain Ismailovski though - I wouldn't offer it unless asked for.
We sent out a note for tenants to contact us if there are any issues with their jobs/income then we will work with them on an individual basis to stretch payments over a few months, waive fees, etc.
Most folks seem to be okay with their jobs but a short note to your tenants would probably be appreciated.
I wouldn't offer it if there isn't a need to. This can open the door to tenants taking advantage, or worse, taking your kindness as weakness. If your tenants are as great as you mention there shouldn't be any problems. If they do come to you with issues then work with them, but don't fix what isn't broken. What is great is you're already thinking about this stuff and have a plan in place should you need it. Some landlords aren't forward thinking and that is when they run into issues, and with this current situation many are running into problems.
I agree. Don't set up a precedent like this that can be used and applied down the road to something else. Not all, if any of your tenants, will need this. If they do, then do it on an individual basis as they need it.
Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes
6y
@Anthony Pisciotta and as has been mentioned, being able to handle your PITI is one thing, but you will likely have repairs and/or capex that come up that you are putting yourself in a worse position by doing rent reductions.
Thankfully, there do seem to be various charities and government subsidies currently available or coming soon to help those that are in a pinch. And my personal take is that good tenants will not take advantage of you, even if you were to offer it.
As @Mike Cumbie mentioned, everyone is being hit in different ways by this. So blanket action is probably not the most effective for anyone. But, especially if you have tenants that you know are being hit harder than others, reaching out and just letting them know you are there to help in general, could go a long way, of course in a very sympathetic, non-belittling way.
I wouldn't offer it if there isn't a need to. This can open the door to tenants taking advantage, or worse, taking your kindness as weakness. If your tenants are as great as you mention there shouldn't be any problems. If they do come to you with issues then work with them, but don't fix what isn't broken. What is great is you're already thinking about this stuff and have a plan in place should you need it. Some landlords aren't forward thinking and that is when they run into issues, and with this current situation many are running into problems.
I agree. I'm ready to take actions to reduce rent, but I'll let the tenant ask for it before I offer it.
Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
6y
@Anthony Pisciotta
I am NOT even broaching this issue until my tenants call with a problem. And since my non real estate investments are down 30%, rent discounts are not on the horizon. However, if needed, with proof of loss of income, we will work with tenants on waiving late fees and making payments over the coming months. Paying zero in rent is not going to be allowed. Eventually, the government will allow evictions again. And there is always the end of leases for a non paying tenant. I’d rather have an empty unit than a non paying tenant.
For any landlords who do have tenants who have been laid off and their tenants have asked for reduced rent, what kind of a legal agreement are you making with your tenants? Will you be asking for them to make up some of the reduced rent once they are working again? Any other advice? We have a rental where the tenants were both laid off. Depending on unemployment and federal aid, they'll be able to pay reduced rent but they're not sure how much yet.
Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes
6y
A couple of days ago I sat down and wrote down all of my piti payments and lowered all of my rents to a little above that point. I offered all of my tenants reduced rents for April. I gave away my profit but since the total payments would cover also the mortgage on my own house, I have no car payment no expensive hobbies/habits and have 60k in cash reserves and another 90K I could access through credit cards, I'm ok with that.
A lot of my tenants are artists/creatives, who work in service industry to pay their bills. Their income stream has been cut off for now. Evictions have a moratorium in Atlanta, so, there's no penalty for tenants to just not pay.
I'd rather offer them goodwill and have them work with me and pay their rent with the upcoming stimulus, than feeling that they'll just go ahead and wait out the eviction or just move (without notifying me), because it'll be hard to fill any vacancies right now. It's much easier for a tenant to feel righteous and not give a damn about the landlord that appears to not care and only worries about their money, than it is to screw someone over that has been fair to you.
This is an emergency and I'm willing to give up something, instead of being rigid.
I"m a big picture person and rather look at the long term than just making enough money next month.
Investor · Florida Panhandle/Illinois · Member since 2016 · 4k+ posts · 3k+ votes
6y
Let’s all relax. I think it’s admirable to want to help your tenants, but let’s see if they need help. There may be a time when you need to provide help. By providing now it may limit your ability later on. I do not agree with forgiving the rent, but a deferral is appropriate. No one knows the length of this health and financial issue. Your mortgage lender will not be forgiving your mortgage, but they may defer it to the end of the mortgage where they will actually make more money.
@Jade Lindquist yes if you are going to defer rent payments it should be in writing.
Rental Property Investor · Winston Salem, NC · Member since 2018 · 102 posts · 66 votes
6y
@Robert G Turnier
You are making an innocent but tragic mistake. You are thinking, ....
I am calling to save you money because I am a loving and caring landlord.
They will hear ... this guy has been ripping me off all along.
Outside of buy and hold real estate I have been a consumer goods retailer all of my life and I can assure you your intentions will be misinterpreted. In consumer marketing ..how you do it, is just as important as what you do. As one of my retail colleague says often, ‘let’s not break into jail’!
Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
6y
People can do whatever they want, but man, some interesting answers here. I'm very comfortable with requiring my tenants to pay the rent, all the rent, that they agreed to. No strong arming here. I set the rent, they liked it, they signed the lease. I'm curious though, if you are just blindly giving your tenants a break on rent, without them asking or even knowing if they need it, then why were you charging the current rental rate this entire time? Be a full time humanitarian and give them that free or reduced rent all the time!
Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
6y
@More Repairs
Except, there’s a difference in being kind, and blindly forgiving rent. We will work with tenants that have been affected. But to compare myself to those that have not prepared? It is not my responsibility to pay my tenants rent. Is your mortgage company chopping off a few thousand or more from your mortgage? Just forgiving your balance? If so, please send us the name of said mortgage company.
“Compassion” doesn’t mean “free rent”. Again, I said people can and should do whatever they want with their business. But if you want to stay in business, giving relief where none is even asked for is a questionable decision.
Investor · Friendswood, TX · Member since 2016 · 88 posts · 51 votes
6y
Like it or not, we and our tenants are in this together. I have had both good and bad tenants. Most of my current tenants have been with me for 5+ years and they have been good. Being a hard-*** is not going to benefit anyone. Evicting good tenants is not going to benefit me or my tenants. How is having an empty property going to benefit me? Finding new tenants during this situation is not going to be easy.
I am considering a loan-type situation and would like to get some input. Currently, I can afford a 50% reduction of rent for probably 4 months. I am thinking that when and if my tenants approach me, I can offer a 50% reduction in rent for "X" months, providing that they sign a loan for the difference in rent. That loan would be payable in 1-2 years after the cessation of the discount. I would probably charge a 9% interest rate. The end result is that I have offered a reasonable solution for both of us and I should be able to recoup some of my losses.
My real fear is that the situation can get much worse and last for a long time. The government (Progressive JP) could kick in and end eviction until the end of the situation.
Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
6y
@Ryan R.
Dude, I’m with you here. And I think I’m somewhere in the middle. I expect rent to be paid, and if it cannot be paid, then we will work with tenants on a solution. That solution does not include months of free and forgiven rent. If tenants are looking for free rent, they need to move out and find that landlord that offers that. Of course, most tenants won’t be thinking this anyway.
So strange some people think we owe tenants because they are “making us rich”. No, they are not. I provide a service and an excellent place to live, for an agreed upon rent. It’s a business transaction like any other. And like you said, the grocery store isn’t given me free groceries this week just because I bought bread last week and “made them rich”.
There’s middle ground here. And that’s where my business will be during these times.
@Randall Jacobs I'm currently prepared to prorate rent that cannot be paid but it would be split up over a handful of months not to exceed their current lease. I'm working with my attorney now but I don't want those payments to exceed 1.2x rent to ensure its still affordable and would be asking tenants to sign a longer lease to accommodate the rent forbearance. I don't know about you but I only have one tenant that has ever honored a payment agreement after move out.
A plan in place is great, but I wouldn't reach out about anything proactively. Those that need the help will ask for it. I'm currently requiring proof any financial burden specifically caused by COVID-19 before any payment accommodations are made. I also have a list of local services and unemployment information that the tenant will be required to use before I make an accommodations. We need to be understanding in these situations but tenants will also almost always go the easiest route which in many of their eyes is asking for a discount when their are services already in place.
Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes
6y
@Anthony Pisciotta I would be careful about doing one big thing up front. Someone made the good point that how you do this is important.
Do one big thing and Where do you go if it gets worse?
If you are at the scale where you can/should connect individually you can offer a few options.
Did they do first last/security deposit? You could work with them to use parts or all of that in lieu of this month or next this also gives some control to them.
You can talk with them and see if they can make this month (most should since we arent so far away). Hold out the notion of no late fees or partial pay if desperately needed for next. This will reduce their sense of panic.
Between these two options you may have 2 months of cash flow which hopefully will get us to a new normal and you take stock then.
Push someone’s “fight or flight” instinct right now and the “flight” is likely to be 3-4 months of no pay.
Remind them that a lot of people will be asking for relief and you would like to do your part in this unprecedented event. if you help one person too much you won’t be able to help the others.
Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes
6y
@Ryan R. Take a hard line right now and wind up with an un-evictable and pissed off tenant which is a stupid business decision from purely a numbers perspective.
Work with them and you may be able to utilize parts of their federal support, have them treat your property well etc.
And no one is “entitled” to anything, you included.
Chandler, AZ · Member since 2017 · 174 posts · 269 votes
6y
I'm in agreement. My tenants are an important part of my overall investment. Evicting, even if possible in my localities, is not a great idea. Everyone is suffering and I'm not likely to find another tenant in trying times.
Fortunately I have a goodly buffer and can probably hold out with no rents for several months. But I don't intend to preemptively offer rent breaks. For all know my tenants are still working or have goodly buffers of their own.
I will most certainly work with my tenants if they are struggling. Maybe half rent, or deferred rent. Also possibly offering extended leases with no rent increases for tenants who work with me.
Ultimately, my tenants and I are in a partnership. If I get no rents, eventually I will lose the very homes they are living in to the mortgage company. So they will need to pay what they can lest their residence gets repossessed out from underneath them.
Hopefully everyone continues to work and pay rents. If not, my challenge will be to convince them that we're all in this together.
Investor · Friendswood, TX · Member since 2016 · 88 posts · 51 votes
6y
At the moment I have only one tenant in my SFHs with problems, but I expect more. (My MFH's are another story. I have partners and professionals with my MFHs, so that will be determined later and probably handled differently.) I am just looking for a reasonable solution that can get me by until the situation changes.
I don't know about the rest of you, but all of my insurance policies indicate that they will not pay if the property sits vacant for over 30 days. Loss of insurance could affect my loans, so I am a bit nervous about that. I am positive that whatever the Government does will be favorable to tenants and the Big Guys and leave us Little guys hanging in the breeze, just like the last crisis, so we do need to be pro-active.