Why is Rent still due during COVID-19?

Investor · Kennesaw, GA · Member since 2018 · 98 posts · 127 votes

6y

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!

0 Reply

Bill F.

Investor · Boston, MA · Member since 2015 · 1k+ posts · 3k+ votes

6y

@Shiloh Lundahl @Jerry W. @Robert M.

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?

4 Reply

Robert M.

Member since 2018 · 23 posts · 58 votes

6y

@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.

0 Reply

Gary L Wallman

Rental Property Investor · Beavercreek OH · Member since 2018 · 422 posts · 970 votes

6y

Originally posted by @Robert M.:

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

2 Reply

Joe SeegersPro Member

Investor · Appleton, WI · Member since 2011 · 29 posts · 29 votes

6y

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.

1 Reply

Shiloh LundahlPro Member

Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes

6y

@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.

480-206-1209 Podcast Guest on Show #287

1 Reply

BOB CRANEY

HIGHLAND, MD · Member since 2011 · 160 posts · 141 votes

6y

@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.

2 Reply

Karissa Sampson

CO · Member since 2020 · 63 posts · 40 votes

6y

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.

0 Reply

John Clark

Member since 2018 · 1k+ posts · 1k+ votes

6y

"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'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.

0 Reply

John Clark

Member since 2018 · 1k+ posts · 1k+ votes

6y

So how did @Heather Frusco do with her rent collections for April?

0 Reply

Andrey Y.

Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes

6y

Originally posted by @Robert M.:

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.

0 Reply

Patricia White

Member since 2020 · 5 posts · 0 votes

6y

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!

0 Reply

Patricia White

Member since 2020 · 5 posts · 0 votes

6y

OMG! You just said it all!!!

Entitled Tenants that's what they are.

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Patricia White

Member since 2020 · 5 posts · 0 votes

6y

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.

0 Reply

Patricia White

Member since 2020 · 5 posts · 0 votes

6y

You are the best landlord! We have business not Charity! Rent is due like Taxes!

0 Reply

Douglas Graves

Fitchburg, MA · Member since 2017 · 35 posts · 40 votes

6y

Why is rent due?

If rent isn't due/owed, it's time to evict and sell everyones home.

take the profits and retire

1 Reply

Grace Chuang

Member since 2020 · 18 posts · 3 votes

6y

Thanks for sharing this.

0 Reply

Tiffany Drahonovsky

Investor Friendly Agent · Milwaukee, WI · Member since 2019 · 53 posts · 37 votes

6y

I was expecting my tenant to pay without hassle as she's on disability so we know that her income is not impacted with COVID. So I proactively reached out to let her know that her rent had not been rec'd on 4/4 and she would be assessed a $50 late fee if funds were not rec'd by EOD 4-5-20. She pushed back, stating her rent was due on the 5th and she was ill. After some banter back and forth, I let her know that I went through the lease with her page by page in detail so she and I were on the same page with our agreement. I shared that we already have a deferral agreement for one month as she made claims that she was paying rent on the 3rd week historically when her disability came in... and I had let her spread her first month rent over 6 months in the very first month. Soooooo ultimately, I said I wanted to proactively remind her that this is a business to me and while we want to keep her and keep her happy, I will do what I have committed to on paper. I let her know that we're all aware that she's had her check for 3 weeks at that point and if she can't make her rent, she needs to be proactive and see if I can work with her IN ADVANCE of the 1st. Well, she sure found that cash fast. She has 3 dogs and 4 cats so while she was threatening to look for a new place and break her lease... it's not real easy to find a place to accept 3 LARGE German Shepards AND 4 cats.... I let her know that I'm a normal, hard working person too, and I need that rent to pay for the house she's in. I was totally upfront- if you don't pay the rent, I'll lose the house and then both of us are not happy. Boy am I learning a lot! :)

The COVID relief is there for those who need it but there are a lot of people trying to be scammy and thinking that they can not pay rent ever for April/May, not understanding that the rent is simply deferred ... it's definitely a conversation to have with your tenants proactively before things get ugly with fees and other disagreements potentially.

3 Reply

Ian WalshBusiness Member

Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes

6y

The rent situation will be case by case . Some people have reserves, some don't. Some landlords can afford to have it missed, some don't. It's really different for everyone.

0 Reply

Ron Rojas

Investor · Durham North Carolina · Member since 2020 · 3 posts · 2 votes

6y

Very well said!

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Why is Rent still due during COVID-19?

Why is Rent still due during COVID-19?

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