Why is Rent still due during COVID-19?

328 Replies

Originally posted by @Shiloh Lundahl :

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.

This is false. The greatest predictor of poverty is the economic conditions of your parents. Somehow this thread has devolved into story swapping about tenants that would rather order takeout than pull themselves up by their boot straps. To be clear, these anecdotes are meaningless when we are talking about population level questions like economic inequality. If this thread was physicians discussing the cure for a disease as widespread as poverty, talking in terms of case studies or anecdotes would get your input immediately dismissed. Yet in this thread Joe Schmo landlord spinning tales of his tenant who just bought a big screen TV but can't make his rent is the meat of the discussion. I am happy that there are people on BP that have thrived despite the inequality of their situation at birth. But no larger inferences can be made on a case by case basis. 

To suggest that intelligence and/or willpower is the main difference between the rich and the poor is not only unsupported but a bit obtuse.



Originally posted by @Cody L. :
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. 


Cody--what are you talking about? How did a critique of American's education system garner your response of claiming people are advocating for a "government takeover of the country"? Who in this thread has said that? This type of talk is great at riling up people who agree with you but is irrelevant to this discussion. 

Rent is still due because the tenant is still using my property, which provides MY livelihood, not to mention that I am incurring expenses to keep that roof over his head.  One might as well ask, why do people still have to pay for the food at the supermarket?  Tenants can get unemployment, Medicaid, food stamps, utility shutoffs are suspended.  They will have the means to pay their rent.  Unfortunately, as a Class C housing LL, I forsee that some will see it as an opportunity to sit in the unit without paying rent for as long as they can, until the courts reopen and we can evict them.  We'll get them out eventually, but I bet I'll lose 6 months rent on the unit, and since they're marginal to begin with, I won't see any of it from them.

@Robert McNeal I clicked on your profile to understand more about your background to understand where your experience is in working with people in poverty and mindsets. I didn’t see anything on your profile. Hmmm...

As a licensed clinical social worker who specializes in helping individuals change and having years working specifically with people in poverty, I have found the books from Ruby Payne Understanding Poverty and Bridges our of Poverty to be super helpful in understanding the mindset of people in poverty and what helps them leave poverty. Statistically you are correct that being born in poverty and being conditioned with a poverty mindset is the highest predictor of groups of people staying in poverty. However, helping individuals change those 6 inches between their ears has a greater impact on the future success of those individuals than where they were born.

@Shiloh Lundahl A bit about me--I am a physical therapist and I own one rental property which is why I made a BP account but rarely have much to contribute so I don't ever post until I saw this thread. I grew up upper middle class and I have zero experience working with people in poverty. Matter of fact every single person I see on a daily basis is gainfully employed as I work in the military.

I respect your position as a LCSW particularly because we work within the same larger medical team and often share patients. I also have chosen to respond to you on several posts because you seem well meaning and articulate. None of this (my nor your personal experiences) changes the research that there are myriad factors that separate the rich and poor besides those that are inherent to the individual. Appealing to your authority as a LCSW is a logical fallacy and your personal experience, while important to you, is minimally useful to the broader discussion as is mine.

I keep getting drawn back into this thread because post after post is subtly drawing a line between landlords and renters, between the rich and the poor, that is based solely on personal merits and it is not grounded in reality. Your post just happened to be the one that came out and said it most bluntly--that the main difference between the rich and the poor is not where they start out in life but rather is inherent to the individual.

If you choose to believe this based on your personal experience than obviously I can't change your mind. But that is an awful lot of smarts and fortitude that you are requiring of the average lower class person to overcome their class of birth. This resolve, willpower etc surely is inherent in a number of poor people, but not all, just like the upper class. The ability to achieve class mobility purely on individual merits is possible for a minority of people but for the majority it is not. Are less motivated people born into rich families more entitled to "the good life" than less motivated people born to poor families? I think we can all agree that a person with a certain level of personal intelligence and motivation will achieve success regardless. But what about everyone else? This is where the socioeconomic factors of your birth become more acutely realized.

A bit more about my background--I have landed firmly in the same class as my parents largely due to my high level of education. I got good grades in high school, but I also had a stable home environment and didn't need to get a job during the school year or take care of any family members. I got an internship in college where I wore a suit to the interview that my dad bought me for that exact reason. I was able to live at home for a year after college to beef up my grad school resume. I got a letter of recommendation from a family friend in my field.

No one in my family or immediate circle is a millionaire but I have a hell of a lot of social capital that those in the lower class by and large do not. You are asking for quite a lot of change between the ears to overcome this while otherwise maintaning status quo.

Best of luck to you and thanks for the discussion.

Originally posted by @Tyler Phalen :  I agree with OP that it is theft, plain and simple, for a tenant not to pay rent
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I am so glad that you will boycott Cheesecake Factory like every other decent, right-thinking, American!

@Robert McNeal , I disagree with your post.  In my experience it is the culture that was instilled in you by your parents that counts.  Yes being socially disadvantaged can hurt, but it is not insurmountable.  However the mindset and the willingness to work hard save, and use your brain to plan and move yourself up is very important.  We don't know what we don't know.  My family grew up poor, not desperately poor, but poor.  I have lived in houses without running water or sewer.  However we dug a sewer system, and added running water.  My dad didn't get past junior high in school, luckily my mother graduated from high school and was able to help influence the need for education.  My dad eventually went back and took courses and got his GED.  The older children had to work and the money earned was used to feed our family and provide for all of us.  I didn't get to keep the money I earned until I was a junior in High school and on my own.  It wasn't money or white privilege, that I was given by my parents, it was a work ethic and the desire to better myself.  My other siblings have done poorly, well, and very well in various ways.  Not surprisingly the girls did not do nearly as well financially as the boys, perhaps in part of being prepared for a different life, and having fewer means to advance in areas where working in the dangerous oil field gave you a chance to improve your lot.  We need to change the culture and mindset to improve the tenant class and that is very difficult.

Originally posted by @Mary White :

Thank you for the thought provoking post. The problem I see going on right now other than the pandemic itself is the massive sense of entitlement in this country. I worked my butt off to get scholarships to help with college and worked again to pay them off. Yet, people are crying everywhere about their student loans and how they were duped into getting them and demanding relief. I worked my butt off for years to build a rental portfolio. I did not take my family on vacation, we lived in a very uncomfortable home with our kids, and I can personally remodel a home from top to bottom (except for electrical, plumbing and foundations) because I spent 60+ hours a week getting stuff done. Now what I hear and see is a lot of people complaining and demanding free rent, which is food off of my children's table. 

The worst part is that they are demanding it when they've been laid off for two seconds and there are a lot of resources to help them. No people should not share in the suffering equally. I hated group projects in high school where I did all of the work and the jerks in my group shared the grade I earned. How is this any different? 

We have a moral obligation to care for those in need and I treat my tenants very well, but can I carry their burdens, no. If we just forgive student debts and rent payments while also preventing evictions, we are just enabling so many people to stop contributing to society. Where does the cycle stop? 

Those are some mighty fine boot straps you have there!

 

@Shiloh Lundahl @Jerry W. @Robert McNeal  

Thanks for the illuminating and civil discussion of a complex topic. Maybe it is just my perception, but since this COVID thing started, people have been far more disagreeable on BP, so it is nice to see a back and forth that hasn't devolved. 

I think that Robert brings up a great point, we can't argue with the fact that your parent's socioeconomic status is the best predictor of your own socioeconomic status. The data doesn't lie. However, we need to ask the follow on question: Why is it such a good predictor? A corollary to that is, in the cases where people either rise above or fall below their parents status, what is different about them? 

I don't know for a fact, but I think, at least for that later questions, the issues that Shiloh and Jerry brought up, will play a role. 

Shiloh, of the two books you mentioned, which is the most accessible to the lay person? 

@Jerry W. Thanks for your input, although I'm not sure where we disagree. Surely exceptional people can find success regardless of their situation, but there is a higher economic floor depending on your socioeconomic situation at birth. Children of well off families have every opportunity to not do poorly, while that can be the default for poor families. I am not arguing that, in this broader discussion, success in regards to property ownership vs lifelong renting is devoid of personal merits, just that the opportunity for social mobility is massively different for people based on birth. But never insurmountable. But the fact of unequal opportunity at birth makes generalizations about the renting class that have been espoused in this thread an untenable stance.

@Bill F.  Totally agree. We are arguing about factors that are not mutually exclusive, like the parable of the blind man and the elephant. Socioeconomic factors at birth play a role, personal motivation plays a role, luck plays a role, etc.

Originally posted by @Robert McNeal :
Originally posted by @Shiloh Lundahl:

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.

This is false. The greatest predictor of poverty is the economic conditions of your parents. Somehow this thread has devolved into story swapping about tenants that would rather order takeout than pull themselves up by their boot straps. To be clear, these anecdotes are meaningless when we are talking about population level questions like economic inequality. If this thread was physicians discussing the cure for a disease as widespread as poverty, talking in terms of case studies or anecdotes would get your input immediately dismissed. Yet in this thread Joe Schmo landlord spinning tales of his tenant who just bought a big screen TV but can't make his rent is the meat of the discussion. I am happy that there are people on BP that have thrived despite the inequality of their situation at birth. But no larger inferences can be made on a case by case basis. 

To suggest that intelligence and/or willpower is the main difference between the rich and the poor is not only unsupported but a bit obtuse.

Robert,

Horse manure. Just because you state it with conviction doesn't mean it's true as my Dad used to say.

The main difference may not be intelligence or willpower, but it is living and savings habits. Take a gander at "the Millionaire Next Door".

Easier to start in a rich home, maybe. I believe that a stable home is more important. You know, have children AFTER marriage, stay married, stay moral, work diligently and save. You will end up well off if you live by these guidelines IMHO.

Godspeed

Gary

 

robert is right,it is not where you start,i came from a poor family.it is in you.it is your inner self.sure along the way mentoring helps.but it is you,first ,you live below you means,2nd -take resonsibilty for your actions,do not try to blame other people for your mistakes,and you will make alot of mistakes as a landlord.me personally over 30 years of doing this have fell victim to my heart  many times and have  lost money,when my head said i should not have rented to that person.so when some polititions try to run our business of landlording they should stay out of it.because if all us landlords, just ran numbers, alot of people we rent to would never be accepted.and that is were new york is headed.were landlords will run it entirely by business desisions.not half and half.

@Bill F. Of the 2 books mentioned, I prefer A Framework for Understanding Poverty (full title) by Ruby Payne. I would encourage you to get the book version. I’m not familiar with the audio for this book but the book has some great tables for seeing and comparing the mindset of the poor, middle class, and the wealthy when it comes to how they see several subjects such as continuing education (college), money, food, time, things, etc. 

For example, when it comes to time, the middle class focuses on the future and preparing themselves for it. The poor focus on the present moment, the here and now, because the they can’t do anything about the past and the future is unknown so they live for the day. The wealthy that come from money focus a lot on the past. They are expected to live up to their birthright and fear being that member of the family that becomes a disgrace or failure.

When it comes to money, the middle class views money as something to be saved. The wealthy view money as something to be invested. And the poor see money as something to be spent. So when someone in the poverty culture gets extra money it is expected that they share that extra money with others in the poverty culture who need it. Such as the brother-in-law whose car just broke down and now he can’t get to work and he needs the money to get to work otherwise he’ll be fired. If the person doesn’t lend the money to the brother-in-law then everyone in that culture sees that person as thinking they are better than everyone else and that they are turning their back on their people.

The book explains that the poverty cultures isn’t just about being financially poor, but it defines it as having a lack or resources such as a support system, an education, emotional intelligence, physical capabilities, etc. The book also goes into how one leaves poverty and explains that one of the ways someone leaves the poverty culture is having a mentor to teach the unspoken or hidden rules of the middle or wealthy class. When someone starts to understand those rules then they start being able to fit into and be accepted by that culture.

The book is definitely worth the read and helps people develop understanding and empathy for people in the different classes.

@Heather Frusco

Your analysis is spot on, but when the mob is against you, figuring out how to survive and weather the storm is the most important thing. With this situation touching so many people in so many ways, even good tenants will be challenged if it drags on long enough. Limiting your losses without losing your current tenants should be the highest priority. Consider your losses even if you could evict the non paying tenants. Your pool of quality prospective tenants who have a completely safe job is going to be a lot smaller and your are likely looking at 30-60 minimum vacancy.

The way the bailout options are being pitched, the landlord with mortgages will get no relief from eventually having to pay back any forebearance even if it’s at a low rate. Tenants should be held to the same standard and that didn’t make me an Ogre. It has nothing to do with how much cash I have and how much the tenant doesn’t have. They are called basic needs for a reason. Everything that doesn’t keep you alive, is non essential and tenants need to cut out any of these non essential expenses before they ask me to cut the rent.

We have a mortgage and HELOC for our 1st property (condo w/ 2 tenants, 1 existing and 1 brand new signed 1 wk ago and moved in today) and now another mortgage for our 2nd property (duplex-we live on one side and 1 tenant on the other who signed lease today). We have started the process of preparing to request the forbearance that were offered to us by both banks. HOWEVER, currently all 3 of our tenants have stable well paying jobs (engineers and tenured principal) and have told us that they have no financial concerns for ability to pay. With this in mind, we will continue to collect rent AND continue to pay our mortgages.

The point being, if you expect that your tenants continue to pay rent even while they are enduring a financial hardship that makes you a hypocrite if you then decide to not pay your mortgage just because banks are offering this to you right now (unless you are having financial hardships outside your investment properties such as job loss/hours cut back/reduced pay. I supposed inability to get work crews in for flips/renovations etc. presents its own issues, but I'm focused on just the tenant/rent - landlord/mortgage dynamic)

I've spoken with friends and even my own sister who are all renters about this. They have been discussing whether they should "Rent Strike" soon. My reply has been to simply COMMUNICATE with their landlords, just as we are communicating with our own tenants. People who don't communicate with their landlords to seek out options to manage their situation are not trying hard enough IMO to amend the situation they are in. I agree with the above post as well, that housing is an essential need (food, water, shelter...) but also that too many people don't take it seriously. That sweet new road bike you got to replace your old one this spring? Sell it, use the money to make ends meet for your essential needs. That student loan payment? Contact your loan service and ask for a forbearance due to hardship. That Netflix/Hulu/BlueApron/Farm CSA/neat toothbrush subscription? Not a necessity, suspend subscriptions temporarily. (This all goes for landlords too.)

Now is a great time to take a look at where you might be bleeding out money and stop the bleeding, whether you are a tenant or a property owner.

"if you expect that your tenants continue to pay rent even while they are enduring a financial hardship that makes you a hypocrite if you then decide to not pay your mortgage just because banks are offering this to you right now (unless you are having financial hardships outside your investment properties such as job loss/hours cut back/reduced pay."

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I'm not sure that even "outside" financial hardship saves one from being a hypocrite. The whole concept of investment is balancing risk versus return. If one's ability to carry an investment depended on an "outside" job or other income to pay "other" bills, then that job or other income is not "outside" the investment. So those who try to justify sticking it to tenants while seeking forbearance themselves are hypocritical.

Originally posted by @Robert McNeal :
Originally posted by @Shiloh Lundahl:

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.

This is false. The greatest predictor of poverty is the economic conditions of your parents. Somehow this thread has devolved into story swapping about tenants that would rather order takeout than pull themselves up by their boot straps. To be clear, these anecdotes are meaningless when we are talking about population level questions like economic inequality. If this thread was physicians discussing the cure for a disease as widespread as poverty, talking in terms of case studies or anecdotes would get your input immediately dismissed. Yet in this thread Joe Schmo landlord spinning tales of his tenant who just bought a big screen TV but can't make his rent is the meat of the discussion. I am happy that there are people on BP that have thrived despite the inequality of their situation at birth. But no larger inferences can be made on a case by case basis. 

To suggest that intelligence and/or willpower is the main difference between the rich and the poor is not only unsupported but a bit obtuse.

 Highly disagree with you and agree with Shiloh.

If intelligence and willpower weren't the main difference between being rich and being poor, we wouldn't be hearing about the success of immigrants from Communist Russia, communist China, Israel, etc. who came from poverty, harsh conditions, etc. only to find success in the USA.

Go ahead and read 'The Millionaire Next Door'. On average, the highest net worth among immigrants is from a few very specific countries. This is due to intelligence (mainly GENETIC (where your genes come from, which is due to where your ancestors lived, duh)), AND willpower (habits your parents and yourself instilled in you due to being used to hardships in life).

So you're right in a sense, the difference between rich and poor is due to your parents, but you are right for entirely the wrong reasons.

The 6 inches between your ears is all that matters, where those factors are genetic, epigenetic, national circumstance, or coming from a tough place in life. Poverty and hardship is an absolute STRENGTH.

Middle class Americans - their issue isn't poverty. Its a life that's too easy, with a crappy education system, a huge sense of entitlement, government free handouts, and bad role models (Britney Spears and Kardashians). They haven't faced any hardships, and the chickens have come home to roost. They were UNPREPARED for what is going down now.

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! 

 

Originally posted by @Heather Frusco :

@John Clark I'm so glad you brought up Cheesecake Factory... If you'd like Tenants to be treated like 'Cheesecake Factory'... you should beware what you wish for. Those are commercial leases and like most commercial leases... when the business makes more they pay more in rent in ADDITION to that the landlord in most commercial leases can take possession of all the businesses assets --- So are you game if residential landlords do the same... when you make more, we'll charge more and if you don't pay your rent we take possession of all the items within your unit?... Let me know.