Why is Rent still due during COVID-19?

328 Replies

@Rob Massopust  I kind of see your point. But Rob, someone is going to pay a grown adult's living costs whether it be the Tenant themselves (the only one responsible for their situation), the LL, or the govt. i.e. american citizens - it doesn't just disappear into thin air. There is only one person responsible for failing to financially prepare or for over extending and then not being able to make rent... there can be all kinds of arguments from social status to hierarchy etc., etc..... regardless they are all mute because at the end of the day only one person is responsible for either paying or not paying their rent. Understanding just as mentioned above that their living expenses don't just 'disappear' into thin air and that someone WILL be responsible for making them... it's only logical to go to the source - the tenant - and offer them options on making rent. Again options infer that rent is still due in some manner... what some are upset about is that these options do not include 'free'... the expectation of such is called entitlement and usually always comes back to hurt those that seek it. 

Originally posted by @Rob Massopust :
Originally posted by @Heather Frusco:
Originally posted by @Rob Massopust:
Originally posted by @Heather Frusco:

I have had the opportunity to find and work with some of the best property managers (after many years) for our current properties. Over the years we have gone from me just treating them like just a service I hired to us working together toward a common goal and reaching a place of trust. So a few of our managers have reached out to us regarding their interactions with our tenants regarding the COVID-19 situation. So here goes: 

Rent is still due. Why? 

1 - Tenants should also have saved 'reserves' in place - so if they are already missing their rent payment come April just a few weeks into this, they are selectively deciding not to pay for their shelter in hopes of rent forgiveness - which is no different than shoplifting or any other use of a service with the knowing intention not to pay - no one to blame but one person.

2 - There are options available to Tenants: They can always put it on a credit card, which really already has a payment plan set up for them with their terms... a tenant can quite literally just pay the minimum until they get back on their fee, not suggesting anyone just may the minimum on a CC but that is an option, just like it is an option to put food, utilities and anything else on a credit card, shelter is no different. 

3 - There are loans available to Tenant: Applying for temporary loans to make ends meet are available and even more so now - and before anyone says you won't qualify - there's only one person to blame for that and yes... a CC is a type of loan when used - so if you have a CC... you can access to borrowed funds with a re-payment system. 

4 - Why does a tenant have to live in the current rental? - As if there aren't options...So if a single lady is renting a 4 bedroom waterfront rental for $3,000/mo. and then says she cant afford rent but continues to remain in place i.e. selectively choosing not to move out and just stay - wouldn't her moving out to 4 bedroom non-waterfront for $1,600/mo. make more sense? or better yet... downsize,  that is... if the tenant did really want to make it right. - so again selectively choosing to pass on the debt to someone else without taking 'sacrifice' for you situation under your own wing... is a choice. 

5 - One of our managers was trying to work out a deal with a tenant for deferred rent and contacted the employer to verify the situation before approving the deferred rent plan... The employer:

 'Yes unfortunately we had to lay him off due to this pandemic, but it just important you take that into consideration because everyone needs shelter, you should certainly let him stay'

---- Couldn't agree more everyone does need shelter just like everyone does need food and water, the baffling question is... if the this employer is worried about the employees than why not just continue to pay them a salary during this entire thing?.... oh yeah... because they want to pass the buck... essentially saying 'No, I cant afford to continue paying them because we have no customers but you should offer to continue paying for the mortgage on their rental even though your customer (tenant) is not paying you' - hypocrisy at its best. 

Albeit most that request assistance as it stands RIGHT NOW... only a few weeks into this situation... are unwilling to take on the responsibility for themselves onto their shoulders and find it just easier to put it onto someone else... which is why we have instructed our PM's to 1) verify the tenant's unemployment with connection to COVID-19, 2) allow them to take advantage of the options above, deffer rent for only those that truly absolutely need it, and file for eviction for all the rest to be in place when courts start the process... because as mentioned above options remain in helping tenants make ends meet but not paying for a product you are currently consuming is never going to be an option, if it is... next time you go to the grocery store for food... a first level necessity... try to walkout with a cart full of it without paying and see if they'll absorb the cost - the audacity of the manager even trying to stop you! 

MIKE TYSON – “EVERYONE HAS A PLAN UNTIL THEY GET PUNCHED IN THE MOUTH”.

Its easy to "spreadsheet" this out from your limited perspective. Not everyone is as smart and well off as you. Give them some slack. Wait till we are in the throws of this full swing, will be worse than 2008 x 10 unless we really get a handle on things and it does not look like that.

When Mike Tyson was asked by a reporter whether he was worried about Evander Holyfield and his fight plan he answered; “Everyone has a plan until they get punched in the mouth.”

What Tyson said is similar to the old saying “no plan survives first contact with the enemy”. But does this mean that there is no need to plan? Absolutely not.

Holyfield was no doubt smarter and more strategic than Tyson (hard not to be), but was Tyson right? Tyson was a brawler, awesome at powerfully fighting his way out of a corner and landing devastating blows. Could Holyfield have planned to have half of his ear bitten off? How did he respond to Tyson’s unpredictable nature.

Holyfield won. Despite the massive 15/2 odds against him. He won. However had he blindly followed his plan when things had changed he may not have. The question is how you adapt your plan when you get punched in the mouth. There are two key things here

  1. Most of the plan should survive despite everyone being focused on the bit that is broken. So, keep the old plan in mind when working out the new plan. You may have a puffed up eye and half an ear but your arms and legs are still working so don’t stop moving, defending and throwing punches.
  2. The new plan needs to deal with right now reality. There’s no point thinking about training and strategy while you’re being punched in the face. Your ear hurts and your eyes are swelling so you need to think and make a decisive decision. In this case the fighter can either to go for a knockout now or stay away for a while, his choice will have knock on effects for the rest of the fight but the fighter needs to make a decision or get punched in the face again.

To bring this back to the workplace. If you’ve created a detailed work plan for your team that fully utilizes your people and equipment and key people call in sick or a machine breaks down. What do you do?

  1. Most of the plan should survive, priority jobs should still happen and most of the team should be able to carry on doing what they were planned to be doing. So, adapt the current plan to cope with the change, don’t throw it all out and start again.
  2. The new plan needs to deal with right now reality. In most cases planners won’t be around to help so your supervisor needs to be able to solve the problem himself, this means they must both understand the plan (the why behind the what) and believe that they have the authority to change it. Someone didn’t come in, I can borrow someone or do a different job from tomorrow’s plan. Machine is broken, can I do contingency work, fix it or borrow another machine. The last thing you want is for people to stand around doing nothing.

Both Tyson and Holyfield were right, plans shouldn’t survive the first punch in the mouth but you need one in the first place to be able to adapt it for changes in reality…

“Victorious warriors win first and then go to war, while defeated warriors go to war first then seek to win” Sun Tzu, the Art of War.

So, be like Holyfield, put a plan together in sufficient detail to “win first” but ensure you can adapt this plan so that one “punch in the mouth” does not result in defeat. Holyfield won with a TKO in the 11th round after Tyson tried to bite his other ear.

Some things you just can’t plan for!

 Rob, I've noticed you reference Mike Tyson in other post threads on BP... I'm sorry but... which part don't you agree with and what is the argument?

yeah I thought it applied to a couple of other posts, no relation.

I just find it laughable at how so many landlords that have never lived through a crisis thinks they can control and dictate from afar. It just comes off as aloof and insensitive. People are going to be devastated from all this and the last thing they care about is how it does not fit into your perfect little plan. Look at how many foreclosures ripped through in 2010 and these were homeowners. Tenants care even less. 

 

Rob,

If by "perfect little plan" you mean me getting paid for allowing someone to live in my 100k+ home, yup that would be my plan.

I'm aware some tenants care even less. They didn't sacrifice for 20 years to acquire and rehab real estate. All while getting punched in the face as you put it.

Heck under your theory maybe restaurants, drug and grocery stores should be free too. Utilities also.

Sorry, but the only one who comes off aloof and insensitive (not to mention completely off-base) is you.

Gary

 

Originally posted by @Jeff S. :

In a situation where one (of 2) on the lease has money while the other is laid off and offering half her share of the rent. We are required to defer unpaid rent and allow 6 months to repay. The paying tenant wants me to deal directly with the short paying tenant and collect when possible. One lease. This is not the agreement. One tenant pays and collects from the other. Thoughts how to handle?

 Hey Jeff I would discuss with the tenants and explain to them the situation....  if this were me, I would discuss with them and then have a written agreement with all signing laying out the terms of the agreement. 

I am not sure you have much choice.  Hopefully as soon as the non paying  tenant gets their unemployment they will pay. 

Originally posted by @Heather Frusco :

@Rob Massopust I kind of see your point. But Rob, someone is going to pay a grown adult's living costs whether it be the Tenant themselves (the only one responsible for their situation), the LL, or the govt. i.e. american citizens - it doesn't just disappear into thin air. There is only one person responsible for failing to financially prepare or for over extending and then not being able to make rent... there can be all kinds of arguments from social status to hierarchy etc., etc..... regardless they are all mute because at the end of the day only one person is responsible for either paying or not paying their rent. Understanding just as mentioned above that their living expenses don't just 'disappear' into thin air and that someone WILL be responsible for making them... it's only logical to go to the source - the tenant - and offer them options on making rent. Again options infer that rent is still due in some manner... what some are upset about is that these options do not include 'free'... the expectation of such is called entitlement and usually always comes back to hurt those that seek it. 

Yes tenants can seem like that. When I had units in south central LA  or East LA and those low income tenants drove better cars than me, had the best gadgets and what not it seems their priorities are out of whack. But I also saw alot of carnage in 1994, 2000, 2010 and now its coming in 2020. Tenants now a days have an incredible sense of entitlement, try investing and owning in Southern CA, stupid. I had many units in rent controlled LA you talk about hard thats hard. 

We buy property for a plethora of reasons and sometimes it does not work out. The higher end stuff not immune to bad tenants and problems. I know rich people that live like that so it doesnt matter where you are on the economic ladder, stuff happens and people dont handle it well. We are headed to 30%+ unemployment. We might have less evictions and foreclosures because everyone is getting bailed out. Homeowners and Landlords are going to be able to put their loans into forbearance and tenants too. No one is going to be paying anything because the banks are just going to be bought out by the FED. SO who cares at this point. Its past the point of any economic sense at this point anyways. Nothing long term investing is proving to work. We have to own property in the swing times, cycle times we have to rethink our business models. I know I am. Back to the drawing board. We all think owning property is great. Well 2008 was not that long ago. We are still dealing with it. 2020 Covid19 is going to define this next decade. 

So I do apologize if I came off as a douche but just seen this crap for the last 30 years and its really unfair how the system from soup to nuts is designed to fail long term. 

Good luck, stay safe. Buckle up

 

Originally posted by @Gary L Wallman :
Originally posted by @Rob Massopust:
Originally posted by @Heather Frusco:
Originally posted by @Rob Massopust:
Originally posted by @Heather Frusco:

I have had the opportunity to find and work with some of the best property managers (after many years) for our current properties. Over the years we have gone from me just treating them like just a service I hired to us working together toward a common goal and reaching a place of trust. So a few of our managers have reached out to us regarding their interactions with our tenants regarding the COVID-19 situation. So here goes: 

Rent is still due. Why? 

1 - Tenants should also have saved 'reserves' in place - so if they are already missing their rent payment come April just a few weeks into this, they are selectively deciding not to pay for their shelter in hopes of rent forgiveness - which is no different than shoplifting or any other use of a service with the knowing intention not to pay - no one to blame but one person.

2 - There are options available to Tenants: They can always put it on a credit card, which really already has a payment plan set up for them with their terms... a tenant can quite literally just pay the minimum until they get back on their fee, not suggesting anyone just may the minimum on a CC but that is an option, just like it is an option to put food, utilities and anything else on a credit card, shelter is no different. 

3 - There are loans available to Tenant: Applying for temporary loans to make ends meet are available and even more so now - and before anyone says you won't qualify - there's only one person to blame for that and yes... a CC is a type of loan when used - so if you have a CC... you can access to borrowed funds with a re-payment system. 

4 - Why does a tenant have to live in the current rental? - As if there aren't options...So if a single lady is renting a 4 bedroom waterfront rental for $3,000/mo. and then says she cant afford rent but continues to remain in place i.e. selectively choosing not to move out and just stay - wouldn't her moving out to 4 bedroom non-waterfront for $1,600/mo. make more sense? or better yet... downsize,  that is... if the tenant did really want to make it right. - so again selectively choosing to pass on the debt to someone else without taking 'sacrifice' for you situation under your own wing... is a choice. 

5 - One of our managers was trying to work out a deal with a tenant for deferred rent and contacted the employer to verify the situation before approving the deferred rent plan... The employer:

 'Yes unfortunately we had to lay him off due to this pandemic, but it just important you take that into consideration because everyone needs shelter, you should certainly let him stay'

---- Couldn't agree more everyone does need shelter just like everyone does need food and water, the baffling question is... if the this employer is worried about the employees than why not just continue to pay them a salary during this entire thing?.... oh yeah... because they want to pass the buck... essentially saying 'No, I cant afford to continue paying them because we have no customers but you should offer to continue paying for the mortgage on their rental even though your customer (tenant) is not paying you' - hypocrisy at its best. 

Albeit most that request assistance as it stands RIGHT NOW... only a few weeks into this situation... are unwilling to take on the responsibility for themselves onto their shoulders and find it just easier to put it onto someone else... which is why we have instructed our PM's to 1) verify the tenant's unemployment with connection to COVID-19, 2) allow them to take advantage of the options above, deffer rent for only those that truly absolutely need it, and file for eviction for all the rest to be in place when courts start the process... because as mentioned above options remain in helping tenants make ends meet but not paying for a product you are currently consuming is never going to be an option, if it is... next time you go to the grocery store for food... a first level necessity... try to walkout with a cart full of it without paying and see if they'll absorb the cost - the audacity of the manager even trying to stop you! 

MIKE TYSON – “EVERYONE HAS A PLAN UNTIL THEY GET PUNCHED IN THE MOUTH”.

Its easy to "spreadsheet" this out from your limited perspective. Not everyone is as smart and well off as you. Give them some slack. Wait till we are in the throws of this full swing, will be worse than 2008 x 10 unless we really get a handle on things and it does not look like that.

When Mike Tyson was asked by a reporter whether he was worried about Evander Holyfield and his fight plan he answered; “Everyone has a plan until they get punched in the mouth.”

What Tyson said is similar to the old saying “no plan survives first contact with the enemy”. But does this mean that there is no need to plan? Absolutely not.

Holyfield was no doubt smarter and more strategic than Tyson (hard not to be), but was Tyson right? Tyson was a brawler, awesome at powerfully fighting his way out of a corner and landing devastating blows. Could Holyfield have planned to have half of his ear bitten off? How did he respond to Tyson’s unpredictable nature.

Holyfield won. Despite the massive 15/2 odds against him. He won. However had he blindly followed his plan when things had changed he may not have. The question is how you adapt your plan when you get punched in the mouth. There are two key things here

  1. Most of the plan should survive despite everyone being focused on the bit that is broken. So, keep the old plan in mind when working out the new plan. You may have a puffed up eye and half an ear but your arms and legs are still working so don’t stop moving, defending and throwing punches.
  2. The new plan needs to deal with right now reality. There’s no point thinking about training and strategy while you’re being punched in the face. Your ear hurts and your eyes are swelling so you need to think and make a decisive decision. In this case the fighter can either to go for a knockout now or stay away for a while, his choice will have knock on effects for the rest of the fight but the fighter needs to make a decision or get punched in the face again.

To bring this back to the workplace. If you’ve created a detailed work plan for your team that fully utilizes your people and equipment and key people call in sick or a machine breaks down. What do you do?

  1. Most of the plan should survive, priority jobs should still happen and most of the team should be able to carry on doing what they were planned to be doing. So, adapt the current plan to cope with the change, don’t throw it all out and start again.
  2. The new plan needs to deal with right now reality. In most cases planners won’t be around to help so your supervisor needs to be able to solve the problem himself, this means they must both understand the plan (the why behind the what) and believe that they have the authority to change it. Someone didn’t come in, I can borrow someone or do a different job from tomorrow’s plan. Machine is broken, can I do contingency work, fix it or borrow another machine. The last thing you want is for people to stand around doing nothing.

Both Tyson and Holyfield were right, plans shouldn’t survive the first punch in the mouth but you need one in the first place to be able to adapt it for changes in reality…

“Victorious warriors win first and then go to war, while defeated warriors go to war first then seek to win” Sun Tzu, the Art of War.

So, be like Holyfield, put a plan together in sufficient detail to “win first” but ensure you can adapt this plan so that one “punch in the mouth” does not result in defeat. Holyfield won with a TKO in the 11th round after Tyson tried to bite his other ear.

Some things you just can’t plan for!

 Rob, I've noticed you reference Mike Tyson in other post threads on BP... I'm sorry but... which part don't you agree with and what is the argument?

yeah I thought it applied to a couple of other posts, no relation.

I just find it laughable at how so many landlords that have never lived through a crisis thinks they can control and dictate from afar. It just comes off as aloof and insensitive. People are going to be devastated from all this and the last thing they care about is how it does not fit into your perfect little plan. Look at how many foreclosures ripped through in 2010 and these were homeowners. Tenants care even less. 

 

Rob,

If by "perfect little plan" you mean me getting paid for allowing someone to live in my 100k+ home, yup that would be my plan.

I'm aware some tenants care even less. They didn't sacrifice for 20 years to acquire and rehab real estate. All while getting punched in the face as you put it.

Heck under your theory maybe restaurants, drug and grocery stores should be free too. Utilities also.

Sorry, but the only one who comes off aloof and insensitive (not to mention completely off-base) is you.

Gary

 

Just note That was from an article, was going to include the link but BP does not allow a link many times and deletes post. 

Im not saying anything should be free, Im saying just dont expect everyone to handle this as anyone else, just look to history as proof.

Im not aloof and insensitive Im just pissed off at the system. Im in the same boat with rentals and tenants and clients etc. 

 

I wish I had savings, but by the end of the month there isn't anything left. It is important to remember this is a spectrum and renters include a diverse range of peoples ages, backgrounds, financial backgrounds. Not everyone will have that privilege. I think it is important to remember that we as renters are not landowners, we do not have the assets that major real estate companies have created. Maybe rental agencies that cannot allow people to stay where they are in an emergency are unsustainable? Maybe the whole way we look at rent is unsustainable and also incredibly cruel. I mean how many people are the on the streets, while rental agencies own backlogged houses that require maintenance and remain vacant? According the TheHill.com there is 31,000 homeless people vs 41,000 vacant homes in California. More than enough to house California's houseless population, but instead many are cold and in the streets. If your answer to this economic crisis is too kick people out of your properties this might just lead to a drastic increase in crime, cases of Covid-19, and your property values to go down. 

I dont mean to be so aggressive, but peoples live are on the line, and when people flourish the world is beautiful, when they suffer, because of the systems people create.....well

Originally posted by @Chris Musser :

Why do I have to smash the upvote button like 4 or 5 times just to get my vote in?

Maybe It's all the smashing? Have you tried clicking instead?

 

Backstory... Not quite 2.5 years ago, I 1031 exchanged out of a (mostly) owner occupied office building in Southern California, to (three) C class multi-family properties in the same Midwest city. In doing so, I went from 1 business tenant, to 64 apartment tenants overnight. A very steep learning curve, but I had the help of 2 property management companies to take all worries away (not).

When it all lacked the performance I expected, I tormented my management companies and started getting very hands on. I dove into the trouble areas to identify the cause of under-performance. And during that process I experimented and eventually learned a lot about whatever sweet spot there might be between compassion and a pure business stance, especially related to late rent collections. This (of course), was NOT in response to a global pandemic, but just the everyday survival on a set of investments intended to be cash-flow centric. Money I had hoped to live off from.

Mine are in a landlord friendly county where if you are diligent, stick to the agreed upon lease terms and hold a strict stance, you can have a non-paying tenant out in about a month from when they are late, which starts in the first few days of the month. This also in a increasingly strong rental market, increasingly favorable this, favorable that, etc. Nevertheless, there are/were sad stories when the first (fifth) of the month came around. And between all that a few really-really sad stories. 

Nevertheless (and remembering that all bets are off until how we are in the Covid 19 era and need a month or two to see how if plays out further)... I experimented with the whole spectrum of responses to the sad stories, ranging from total benevolence to non-negotiable evictions.

Contrary to the acts of kindness that the world probably needs now, the benevolent approach did not prove to serve my properties well. Except once in over maybe 20 situations. And that one took well over a year to work itself to a cleared balance, while simultaneously occupying a unit with a legacy rent of $200+ under market. My units pay in the rent ranges of $500 to $950 a month. What I came to learn was that once my tenants got behind by even a couple of weeks, the likely-hood was almost zero that they would ever catch up fully in any reasonable time-frame. Furthermore once they were behind, it would also possibly lead to a promise to pay with a "say anything" level of desperation. Then the next month would roll up with no payment or just $200 when they swore on a stack of bibles that would have $800. And then soon after, either an eviction or a hasty middle-of-the-night move-out with not nearly enough security to cover both damages and back rent. Then often rushing into some other apartment secured by another landlord, before the issue was on their record and the new unsuspecting landlord on the hook.

It's a good reminder that eviction, though often absolutely necessary (and not currently even an option) is an unpleasant result. Not only a sad way to displace a tenant, it is also inevitably expensive with court costs, set-out expenses and a premature turnover of a unit, sometimes left by an angry tenant and so are often damaged more than normal.

One thing that I do see is that a non-paying tenant puts both a literal and cosmic strain on the property. Even if I make certain that that the property is full funded and taken care of, no matter what.

I have come to believe that having a firm stance is the right answer. Also a consistent message that applies to all. This seems right in regards to fair-housing, which, is a on my mind as well. So whatever stance you are prepared to take, you have to hold that stance for everyone.

Is there room for side-bar conversations in particularly difficult circumstances? Yes, no, maybe.

Originally posted by @Rob Massopust :
Originally posted by @Heather Frusco:

@Rob Massopust I kind of see your point. But Rob, someone is going to pay a grown adult's living costs whether it be the Tenant themselves (the only one responsible for their situation), the LL, or the govt. i.e. american citizens - it doesn't just disappear into thin air. There is only one person responsible for failing to financially prepare or for over extending and then not being able to make rent... there can be all kinds of arguments from social status to hierarchy etc., etc..... regardless they are all mute because at the end of the day only one person is responsible for either paying or not paying their rent. Understanding just as mentioned above that their living expenses don't just 'disappear' into thin air and that someone WILL be responsible for making them... it's only logical to go to the source - the tenant - and offer them options on making rent. Again options infer that rent is still due in some manner... what some are upset about is that these options do not include 'free'... the expectation of such is called entitlement and usually always comes back to hurt those that seek it. 

Yes tenants can seem like that. When I had units in south central LA  or East LA and those low income tenants drove better cars than me, had the best gadgets and what not it seems their priorities are out of whack. But I also saw alot of carnage in 1994, 2000, 2010 and now its coming in 2020. Tenants now a days have an incredible sense of entitlement, try investing and owning in Southern CA, stupid. I had many units in rent controlled LA you talk about hard thats hard. 

We buy property for a plethora of reasons and sometimes it does not work out. The higher end stuff not immune to bad tenants and problems. I know rich people that live like that so it doesnt matter where you are on the economic ladder, stuff happens and people dont handle it well. We are headed to 30%+ unemployment. We might have less evictions and foreclosures because everyone is getting bailed out. Homeowners and Landlords are going to be able to put their loans into forbearance and tenants too. No one is going to be paying anything because the banks are just going to be bought out by the FED. SO who cares at this point. Its past the point of any economic sense at this point anyways. Nothing long term investing is proving to work. We have to own property in the swing times, cycle times we have to rethink our business models. I know I am. Back to the drawing board. We all think owning property is great. Well 2008 was not that long ago. We are still dealing with it. 2020 Covid19 is going to define this next decade. 

So I do apologize if I came off as a douche but just seen this crap for the last 30 years and its really unfair how the system from soup to nuts is designed to fail long term. 

Good luck, stay safe. Buckle up

 

Man you're whiny. Shouldn't be buying in SoCal unless you can get well below market. If it's too competitive in that region, which I know it is, then start looking out of state.  

Originally posted by @Jt Abbott :

I wish I had savings, but by the end of the month there isn't anything left. It is important to remember this is a spectrum and renters include a diverse range of peoples ages, backgrounds, financial backgrounds. Not everyone will have that privilege. I think it is important to remember that we as renters are not landowners, we do not have the assets that major real estate companies have created. Maybe rental agencies that cannot allow people to stay where they are in an emergency are unsustainable? Maybe the whole way we look at rent is unsustainable and also incredibly cruel. I mean how many people are the on the streets, while rental agencies own backlogged houses that require maintenance and remain vacant? According the TheHill.com there is 31,000 homeless people vs 41,000 vacant homes in California. More than enough to house California's houseless population, but instead many are cold and in the streets. If your answer to this economic crisis is too kick people out of your properties this might just lead to a drastic increase in crime, cases of Covid-19, and your property values to go down. 

I dont mean to be so aggressive, but peoples live are on the line, and when people flourish the world is beautiful, when they suffer, because of the systems people create.....well

1. Don't have kids before you can afford them, it's not a right. This is a huge trap many get into and somethign I avoided while in poverty
2. Don't live above your means (one of my painters collects unemployment during the winter and drives an Audi).
3. Don't be entitled

And you'll do well in America. But the mainstream culture pushes alot of less capable people in the wrong direction whcih creates a huge sense of entitlement that works against them. Not everyone has a million dollar talent that allows them to get past the rules of actual life. 

So maybe learn from the Asians who happily live with much less stuff and don't resort to violent crime because of lifestyle mistakes you made as an adult? Downgrade living, don't waste money on luxuries and pointless goods, stuff stuff, and use the govt assistance to just get your footing on solid ground. As a landlord if I see people who do that I cut them all the slack in the world. 

Originally posted by @Michael Klinger :

Backstory... Not quite 2.5 years ago, I 1031 exchanged out of a (mostly) owner occupied office building in Southern California, to (three) C class multi-family properties in the same Midwest city. In doing so, I went from 1 business tenant, to 64 apartment tenants overnight. A very steep learning curve, but I had the help of 2 property management companies to take all worries away (not).

When it all lacked the performance I expected, I tormented my management companies and started getting very hands on. I dove into the trouble areas to identify the cause of under-performance. And during that process I experimented and eventually learned a lot about whatever sweet spot there might be between compassion and a pure business stance, especially related to late rent collections. This (of course), was NOT in response to a global pandemic, but just the everyday survival on a set of investments intended to be cash-flow centric. Money I had hoped to live off from.

Mine are in a landlord friendly county where if you are diligent, stick to the agreed upon lease terms and hold a strict stance, you can have a non-paying tenant out in about a month from when they are late, which starts in the first few days of the month. This also in a increasingly strong rental market, increasingly favorable this, favorable that, etc. Nevertheless, there are/were sad stories when the first (fifth) of the month came around. And between all that a few really-really sad stories. 

Nevertheless (and remembering that all bets are off until how we are in the Covid 19 era and need a month or two to see how if plays out further)... I experimented with the whole spectrum of responses to the sad stories, ranging from total benevolence to non-negotiable evictions.

Contrary to the acts of kindness that the world probably needs now, the benevolent approach did not prove to serve my properties well. Except once in over maybe 20 situations. And that one took well over a year to work itself to a cleared balance, while simultaneously occupying a unit with a legacy rent of $200+ under market. My units pay in the rent ranges of $500 to $950 a month. What I came to learn was that once my tenants got behind by even a couple of weeks, the likely-hood was almost zero that they would ever catch up fully in any reasonable time-frame. Furthermore once they were behind, it would also possibly lead to a promise to pay with a "say anything" level of desperation. Then the next month would roll up with no payment or just $200 when they swore on a stack of bibles that would have $800. And then soon after, either an eviction or a hasty middle-of-the-night move-out with not nearly enough security to cover both damages and back rent. Then often rushing into some other apartment secured by another landlord, before the issue was on their record and the new unsuspecting landlord on the hook.

It's a good reminder that eviction, though often absolutely necessary (and not currently even an option) is an unpleasant result. Not only a sad way to displace a tenant, it is also inevitably expensive with court costs, set-out expenses and a premature turnover of a unit, sometimes left by an angry tenant and so are often damaged more than normal.

One thing that I do see is that a non-paying tenant puts both a literal and cosmic strain on the property. Even if I make certain that that the property is full funded and taken care of, no matter what.

I have come to believe that having a firm stance is the right answer. Also a consistent message that applies to all. This seems right in regards to fair-housing, which, is a on my mind as well. So whatever stance you are prepared to take, you have to hold that stance for everyone.

Is there room for side-bar conversations in particularly difficult circumstances? Yes, no, maybe.

High IQ post, agreed and enjoyed reading it. Truth is what it is, if you don't want to play the game, don't sign up for it. I always get burnt as the nice guy who goes above an dbeyond, and it gets worse with time. A dish served cold also creates a wake up to many that... it has to come from inside of me. 

This isn't war torn Palestine or Syria where things are truly cruel and unfair. 

 

Originally posted by @Rob Massopust : "I just find it laughable at how so many landlords that have never lived through a crisis thinks they can control and dictate from afar. . . . the last thing they care about is how it does not fit into your perfect little plan. Look at how many foreclosures ripped through in 2010 and these were homeowners. Tenants care even less."
------------------------------------------------------
But, but, Rob! You don't understand! The homeowners then, the tenants now.... They're all thieves!

 

 

@Jt Abbott I read your post and it appears that you signed up for an account in order to write that post. I do hope that you stick around and take advantage of all of the learning that is available though the podcasts, webinars, and forums. The reason being is many people have similar thoughts as you do about not being able to save because there isn’t any money left at the end of the month. And for most people there isn’t (in fact, for many people there is more owed at the end of the month then they started with at the beginning of the month).

When it comes to investing, the most important real estate in the world is the 6 inches between your ears. The main difference between the rich and the poor are not where they start out in life, but rather what they do with those 6 inches. A generational family fortune can be squandered away within 3 generations while somebody growing up in the hood/poverty like @Sterling White can accumulate hundreds of properties and amass a ton of wealth. What is the difference - it’s what’s in the 6 inches.

Not to come off so boldly, but if you don’t mind, I would like to share with you a few suggestions that could help shift your life forever?

First, read with purpose. I would suggest starting off with the book The Richest Man in Babylon. This book is around 100 years old and it is base for understanding money and wealth. It is one of my top 5 books of all time and I would suggest it to anyone who wants to change their life for the better. Not just financially, but in most any area of their life. Then I would encourage you to Read Dave Ramsey’s Total Money Makeover in order to understand the defense of money really well. Then follow that up with Robert Kiyosaki’s Rich dad Poor Dad. Once you have read those 3 books, don’t stop. Continue to read with purpose and your life will drastically change for the better. That doesn’t mean the friends you associate with will like you more though because once people start to change those 6 inches, sometimes, if not often, people they associated with before they started their journey of growth aren’t happy with the new person they are becoming.

Second, listen to things which educate, motivate, and inspire. Attending workshops or conferences, and listening to podcasts, Ted talks, and audiobooks will also help change and recondition one’s mind. But it can’t just be casual listening if any change is to happen. Rather it has to be immersive listening and searching for content from those who are getting the results I their lives that you want in your life.

Third, associate with others who are getting the results in life that you want. Jim Rohan is quotes as saying that “you are about the average of the 5 people you associate with the most.” If you want to elevate your life then associating with people whose lives are elevated is going to be one of the best ways to do that. I associate with other investors who own over a hundred units to understand how they handle their businesses.  They learn from me and I learn from them and we all get elevated. I also associate with other people in different industries who are high performers to see what that looks like to be a leader in that industry. I have met some of the most hard working, encouraging, and generous people over the last few years as I have started associating with top performers and I am a better person because of it.

JT, I hope the suggestions I made are helpful to you. I encourage you to follow them and then revisit the post you wrote in a few years and see the growth that you have made. Good luck to you.

Originally posted by @Shiloh Lundahl :

@Jt Abbott I read your post and it appears that you signed up for an account in order to write that post. I do hope that you stick around and take advantage of all of the learning that is available though the podcasts, webinars, and forums. The reason being is many people have similar thoughts as you do about not being able to save because there isn’t any money left at the end of the month. And for most people there isn’t (in fact, for many people there is more owed at the end of the month then they started with at the beginning of the month).

When it comes to investing, the most important real estate in the world is the 6 inches between your ears. The main difference between the rich and the poor are not where they start out in life, but rather what they do with those 6 inches. A generational family fortune can be squandered away within 3 generations while somebody growing up in the hood/poverty like @Sterling White can accumulate hundreds of properties and amass a ton of wealth. What is the difference - it’s what’s in the 6 inches.

Not to come off so boldly, but if you don’t mind, I would like to share with you a few suggestions that could help shift your life forever?

First, read with purpose. I would suggest starting off with the book The Richest Man in Babylon. This book is around 100 years old and it is base for understanding money and wealth. It is one of my top 5 books of all time and I would suggest it to anyone who wants to change their life for the better. Not just financially, but in most any area of their life. Then I would encourage you to Read Dave Ramsey’s Total Money Makeover in order to understand the defense of money really well. Then follow that up with Robert Kiyosaki’s Rich dad Poor Dad. Once you have read those 3 books, don’t stop. Continue to read with purpose and your life will drastically change for the better. That doesn’t mean the friends you associate with will like you more though because once people start to change those 6 inches, sometimes, if not often, people they associated with before they started their journey of growth aren’t happy with the new person they are becoming.

Second, listen to things which educate, motivate, and inspire. Attending workshops or conferences, and listening to podcasts, Ted talks, and audiobooks will also help change and recondition one’s mind. But it can’t just be casual listening if any change is to happen. Rather it has to be immersive listening and searching for content from those who are getting the results I their lives that you want in your life.

Third, associate with others who are getting the results in life that you want. Jim Rohan is quotes as saying that “you are about the average of the 5 people you associate with the most.” If you want to elevate your life then associating with people whose lives are elevated is going to be one of the best ways to do that. I associate with other investors who own over a hundred units to understand how they handle their businesses.  They learn from me and I learn from them and we all get elevated. I also associate with other people in different industries who are high performers to see what that looks like to be a leader in that industry. I have met some of the most hard working, encouraging, and generous people over the last few years as I have started associating with top performers and I am a better person because of it.

JT, I hope the suggestions I made are helpful to you. I encourage you to follow them and then revisit the post you wrote in a few years and see the growth that you have made. Good luck to you.

 Amen, brother.

It's the mentality and lack of fiscal and moral discipline of the broke people that help keeps them so broke.

It drives me nuts when I see someone using EBT cards to buy each of their 4 kids a $1.39 bottle of bug juice or other sugary drink and individual sized bag of chips. They have no comprehension that a bag of kool-aid and a large chip bag could save them 8 bucks a clip. Or better yet some water and fresh fruit.  These folks practically live at fast food joints as well.

Throw in 2 packs of cigarettes a day and a case or two of beer and a bag of weed and voila, continued poverty.

I could go on and on, but you get my point.

Gary

@Shiloh Lundahl   Love Jim Rohan  I spent hours of driving time listening to his tapes  ( Cassettes) not 8 track :)

I think we could all use some inspiration about now, however one finds it.. One thing i took from the you are an association of the 5 people that led me to being a Broker and associate with successful buyers and sellers and investors that model has served me well in good times and got me through the bad times.

@Michael Klinger

I liked your post.  Evictions have proven to be costly for me,  and years ago my business model evolved to only work with low eviction buildings/tenants and scenarios.  That seems obvious, but it took some time.  My area of investment is one of the tougher areas in the country for landlords.  I fully agree that workout plans do not work.  In the next three months, we are in a unique situation and I will be more liberal with rent concessions.  With the eviction moratorium in effect, I have no choice.

Originally posted by @Samuel Pentowski :

@Andrey Y. Education in the US is terrible and inconsistent.  This is what leads us to have around 16% of our population believing that Earth is flat.  It also gives us anti-vaxxers who ignore all science and simply spout heavily discredited stuff they read on websites that have no scientific validity.  We also have in America people who are told in science classes that the theory of evolution is entirely false and the Earth is in fact ~8,000 years old, and originally populated by Adam and Eve.  That is a religious theory and yet is presented as proven science that is never to be questioned to these people.  That is an unfortunate product of our education system that has little consistency or oversight and can pretty much teach whatever they want to.

Anyways, bringing the point back to the discussion of renters and their ability to pay we should wait and see what happens with real-world numbers.  Given how people tend to act, the consequences of NOT paying your rent/mortgage have been taken away for 4 months so we shall see if people will continue paying given they no longer are forced to.  I'll be optimistic and say most will attempt to, or will keep paying their rent/mortgage but if too many Americans decide to not keep their promise to pay rent/mortgage we may have another financial disaster on our hands as many LL go out of business and banks panic.  That is unlikely I think, and I think only a few won't pay their bills.  So this would only bankrupt LL's who do not keep any reserves.  Like that guy earlier who bought 10 houses cash and somehow did not have a reserve set aside for a $400/month expense on each one.  If your financial health prior was terrible going in, it'll be worse or bankrupt by the time you get out.  That said this would only the the first month of any non-payments so we shall see what the effects shall be.  What a time to be alive.

I'd rather have people think that Adam and eve populated the earth (which doesn't hurt me, my family, my neighbors) then people who think government takeover of the country (ala socialists beliefs ) is the way we should go.  As that viewpoint does have the chance of hurting my friends and family. 

Sadly all the snobby elites who love socialism think they're oh-so-smart while those 'dummies in fly over country who believe in the bible' (you know, the ones actually providing goods and services, keeping us running right now, growing our food, providing our energy, etc. are "uneducated" and dumb. 

Qualifier before saying anything on this thread:  I have not even bought my first property yet.

When this lock-down due to virus hit I asked myself what would I do in this situation.  I believe the most logical response I heard was to work with the good tenants and sign new contracts that state 1) when a job is secured that stipulate a slightly higher rent rate is paid until the month or two of missed rent is paid back 2) if the tenant moves out before the lost rent is paid back, the remaining balance comes due.  

Note that I said GOOD tenants.  I, personally, would rather have a tenant that views me as someone that is willing to work with them in hard times and STAYS due to a sense of loyalty, than have multiple units sit empty due to word getting out that I'm a money loving landlord who would kick a family out when they are suffering.  And yes word would get out.

Not all tenants will miss the April rent (I suspect well more than half will be able to pay but have no evidence to back this up) , but they will ALL hear if you treat their neighbors badly in this time.  I base this on years of retail experience.  You treat customers right, they come back.  You treat them wrong and they tell all their friends.

All this is just my inexperienced opinion. 

@Kevin Paglia I believe you are correct.  Several of the LL on this thread insist on making few attempts to negotiate with tenants and expect them to continue paying in full or they will regard it as theft.  True as that may be from one point of view, you presented another one; people will view you callous and spread the word.  All it would take are a few Yelp (or other ratings sites) mentioning that you kicked them out (or threatened to) during the COVID-19 epidemic.  No amount of nice words or explaining it was simply business will recoup that critical loss of trust and loyalty.  No tenant would then be loyal to you and you may see higher turnover in your units which cost money and lost revenues. 

This is an unprecedented event, and although only you as the LL can decide on how to proceed.  Uncle Sam ordered no evictions for 4 months, so the nuclear option for LL is gone so all that is left is negotiation.  Remember people, if you refuse to work with the tenants on how to continue getting rents during the COVID-19 they may simply refuse to pay as they know there won't be any evictions for 4 months.  Then you have no option but to absorb higher costs and they will likely damage your unit more as well as give you oh so many bad reviews as Kevin mentioned.

Originally posted by @Jt Abbott :

I wish I had savings, but by the end of the month there isn't anything left. It is important to remember this is a spectrum and renters include a diverse range of peoples ages, backgrounds, financial backgrounds. Not everyone will have that privilege. I think it is important to remember that we as renters are not landowners, we do not have the assets that major real estate companies have created. Maybe rental agencies that cannot allow people to stay where they are in an emergency are unsustainable? Maybe the whole way we look at rent is unsustainable and also incredibly cruel. I mean how many people are the on the streets, while rental agencies own backlogged houses that require maintenance and remain vacant? According the TheHill.com there is 31,000 homeless people vs 41,000 vacant homes in California. More than enough to house California's houseless population, but instead many are cold and in the streets. If your answer to this economic crisis is too kick people out of your properties this might just lead to a drastic increase in crime, cases of Covid-19, and your property values to go down. 

I dont mean to be so aggressive, but peoples live are on the line, and when people flourish the world is beautiful, when they suffer, because of the systems people create.....well

 Figure out a way to get a savings. Work harder. Side Hustle. Read Dave Ramsey. Do a budget, stick to that budget. Spend less. Automate your savings. 

Dont make excuses. Other people have figured it out. 

EDIT Shiloh said it better.  I hope you take in what he says.