Why is Rent still due during COVID-19?

328 Replies

Originally posted by @Paul Dauffenbach:

@Heather Frusco What you should do is imagine yourself as a person with good character and go back and rewrite this tutorial, because this is trash. If you lack the compassion or simply do not understand the gravity of the situation, then I suggest you get educated. EVERYONE is affected by this crisis and if you feel so compelled to write this diatribe patting yourself on your back about how ‘prepared’ you are, then clearly you were not prepared. This IS everyone’s burden. Instead of being reactionary, be proactive. Reach out to all your tenants and find out how they are affected. Let them know that you care (if that is possible for you) and that we are in this together. If they have lost a job or some significant income, reduce the rent to something manageable. It will be appreciated and won’t leave you with an empty mailbox and stack of unsatisfied eviction notices. I hope this helps.

100%. If you need to conduct business as usual regarding evictions and rent collection to stay afloat then you are a pot calling the kettle black. If you have sufficient cash reserves to weather the storm and choose to not provide mitigation for your tenants, then you are being callous in the face of an unprecedented crisis. I am not sure there is space in this context to act the way OP suggests and emerge with a clear conscience unless you focus on your own situation and bury your head in the sand. 

 

The suggestion to use credit cards is just asinine. The landlord still gets their money and the tenant is sent down an even more grim path of 20+% interest and minimum payments. That's not going to help get your rent payments in full in the future either. 

I think it is a very valid point that gas, food, utilities are all not being reduced/discounted.

I see that taxes are being postponed, but not reduced.  I am sympathetic to tough times and being laid off.  Most of us have been in similar places at one time in their lives.

But I raise the question, that anyone who cannot can not meet rent, on the first month of this virus plague, will probably not be able to meet rent the following month or after that.  So what can we do?

Our bills will not stop but, maybe we can reduce them.  What about offering cash for keys to someone.  We cant evict them in multiple states (and growing) but would we lose more $ if it was empty?

It is a combo of a #s game and generosity.  But if you discount for them now, it will be expected for other months as well.  Ultimately for everyone.

So maybe offer a matching fund.  401k in many companies is matching.  So don't discount rent by 50%, match what they pay $1 to $1 or 50cents to the $1 that they pay on time.  This give incentive to keep $ flowing.

If we offer to credit them by 50 cent to $1 of rent THAT IS PAID ON TIME.  we can give charity and get cash flow.

But we are delusional if we thing someone will pay latter or be able to afford it the following month.

I hear Amazon, pharmacies, delivery services are all hiring.  Even the CEO of Lowes was on CNBC saying we are hiring.  So pass this on to your tenants who have been laid off.  If the balk at working for these places as beneath them, you will know what to expect from them.

Many a year ago, as a young family man I was in similar dire straights.  So I took anything to provide for my famity.  My family, my obligation.  I even tried selling pots and pans door to door for a while.  With Very little success.  But I did NOT sit on my *** expecting a hand out.

Just some thoughts.  No easy answer for anyone.

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! 


 This is so spot on. I think with this topic it really depends on what kind of tenants you are thinking of...When we imagine tenants as being perfectly responsible, good hardworking people, then it seems harsh to not try to work through the situation with them. However, I know that many tenants  people are simply irresponsible and want to look to someone else to pay their way every time. They want someone else to carry the burden for them whenever possible. It's human nature to some extent.

Not to get political, but it reminds me of some of the discussions I've had with folks over Bernie's student loan forgiveness plan. I worked incredibly hard for several years and made lots of financial sacrifices to pay off 60k plus loans. Meanwhile, my classmate spent his 6 digit salary on cars, vacations, and parties and still has 100k to go on his student loans. Is it right to take my tax dollars to reward his irresponsibility?

Same thing here - is it right to shift all financial responsibility to landlords? I think not. As with all things, there is a balance, but I'm not looking to become another name on someone's list of judgments that will never be paid back. I know plenty of people that would gladly wait out the judicial system while comfortably living in their landlords property - even if they could afford a cheaper property and move out. Especially now - no evictions for a couple months - why pay rent?

The world is a broken place so no perfect solution exists. Use judgement and extend grace when warranted, but not too much grace - plenty of rich "beggers" out there too.

@Scott Mac I gave all of my tenants the option of deferring April rent into May and June. No one took me up on it, but I gladly offered it, because I'm in a position to do so, whereas they by and large, are not.

And, yes it's true, that they should have done this, and they should have done that, and they would be as well prepared as we are. To expect that, however, is pure fantasy. Beyond the numbers, and the lectures of mistakes which they were never taught to avoid, they are people. And in many cases, roles are reversed, say do you have a power pack in your trunk so that you're able to jump start your car? Why not, I have a tennant who would say that that is just common sense, that it's your responsibility to be prepared. I'm definitely not a doormat, in fact I'm vicious when I need to be. but let's face it, this is something different than any of us thought we would be facing oh, we are all caught off guard. We are not better than our tenants, superior in any way, and they deserve to be treated as much. Not to mention, as part of a business model, customer satisfaction is a thing. I'm good to my tenants, and they're good to me, on average, they stay 10 years, and rarely is it necessary for me to deduct from their deposit. And, never have I had to deal with a giant mess upon move out.

That's my 2c.

@Heather Frusco so, let's just say that they've always paid, but can't pay now, what are you going to do, evict them? Risk a unit standing empty for another month, or two? I hope not, because that would be foolish from a business perspective.

One thing that does bother me, is that there are a lot of arrogant landlords out there, and so as a group, we may be more hated than lawyers. And that's not good for business.

@Heather Frusco not seeing anything unusual about your post. In Portland, just as you say if a tenant cannot pay due to being laid off they need proof of being laid off and need to contact us before the first to defer rent. It is then deferred but still due within 6 months. Of course there wil be those that don’t pay, that is a cost of doing business. I am fine with paying with a credit card, would do that in a heartbeat if a tenant. If they are working then need to pay, if laid off then can defer. It is the law here. Not being soft of nice. There may come a time when we will need to reduce rents, but not quite yet. Have reduced in the past so chances are will again.

I think some of the opinions here might change if this becomes less of a 2 month issue and more of a 1 or 2 year issue.  I think we all are fine with a little charity but at some point it becomes survival.  Like the poster before that has to pay $50k in taxes per year on her houses and can't get financing on them.  When will she have contributed enough to her tenants to please you and gain your approval as an OK human?  Once she loses all of her houses and is put out on the street?  Will that satisfy you?  

For myself I'm working with my tenants and plan to help them through this crisis as best I can, but that's a personal decision.  I don't feel it's my place to toss barbs at someone else's character because they have the crazy ideas that tenants should pay their rent eventually.  

Originally posted by @John Clark :
I agree that rent is due in full, and people "should" have reserves, but are you all going to boycott Cheesecake Factory? This just in today:  

Cheesecake Factory has reportedly decided to not pay rent for April at any of the chain’s locations because of business lost to the coronavirus pandemic.

“The severe decrease in restaurant traffic has severely decreased our cash flow and inflicted a tremendous financial blow to our business,” CEO David Overton wrote to landlords in a letter obtained by the Eater website.

I look forward to Heather Frusco denouncing Cheesecake Factory as being run by thieves.

I'm not going to boycott Cheesecake Factory for their inability to pay April rent, but I sure as hell aren't going to give them charity either. They aren't thieves, but they are financially irresponsible. Did you know that they were paying a $1.44 annual dividend? That means they paid out around $65 million to shareholders last year. The CEO that makes $2.07 million a year decided to pay out that money rather than save it for a rainy day or even use it to help pay down their $1.61 billion debt. 

Some people in this thread think we should share their pain. We should have compassion for them. I view them no differently than a tenant that bought a new car and went on vacation and has no savings to cover their rent. Sorry to hear that, but I still expect to get paid. I will not pay for your bad decisions.

Originally posted by @Tom Maricle:

I think some of the opinions here might change if this becomes less of a 2 month issue and more of a 1 or 2 year issue.  I think we all are fine with a little charity but at some point it becomes survival.  Like the poster before that has to pay $50k in taxes per year on her houses and can't get financing on them.  When will she have contributed enough to her tenants to please you and gain your approval as an OK human?  Once she loses all of her houses and is put out on the street?  Will that satisfy you?  

For myself I'm working with my tenants and plan to help them through this crisis as best I can, but that's a personal decision.  I don't feel it's my place to toss barbs at someone else's character because they have the crazy ideas that tenants should pay their rent eventually.  

 I hope the irony is not lost on you that you are proposing that property owners evict laid off tenants...in order to avoid losing their own income and housing. I understand we invest money, time, and risk into properties to reach the status of landlord, however there are plenty of scenarios where renters have the same entrepreneurial motivation and risk-taking yet are not in the property ownership group. A restaurant owner may be just as leveraged in his/her small business as we are in our RE investment businesses yet if that person happens to rent right now they could be put out on the street just the same as the hypothetical landlord in your scenario. I am not sure what post you are referring to regarding the $50k in taxes, but it sounds like that person did not have a contingency plan in place to weather a storm, which is the proverbial irresponsibility we often subscribe to the renting class. 

Regarding a 1 or 2 year issue, if by that time there is still widespread unemployment despite massive government intervention then we are probably talking about a failed state. Which is a whole different conversation of how we got to that place. 

Originally posted by @Greg M. :
Originally posted by @Mary Mitchell:

Howabout the idea that everyone should share in the pain equally??  

Well Comrade Mary, sharing the pain equally would reward those who failed to prepare/sacrifice and punish those that did prepare/sacrifice. 

I sacrificed to buy a unit. I pay to keep it in habitable condition. I sacrificed to build up reserves so that a rent interruption or major capital expense will not affect my ability to maintain ownership of the unit (and therefore allow you to continue to live there) or its habitability. The fact that you as a renter did not sacrifice and save and now are in pain is not a reason to try and have me share your pain. 

Renting is a business transaction. We rent a place for market price. Pretty simple. Now if a landlord is going to share in the pain during bad times, shouldn't they also share in the reward when times are good? Right, Comrade, we want equality! So if I as a landlord should take 50% of the market rent for the next 3 months because times are bad for you, shouldn't I be entitled to more when times are good for you?

I'm sure you are aware of the Fight For $15 movement. A lot of people here went from $12/hr to $15/hr. Should I as a landlord get a 25% bump in rent because the tenant got a 25% raise? Seems fair to share in the good times...

>A lot of people here went from $12/hr to $15/hr. Should I as a landlord get a 25% bump in rent because the tenant got a 25% raise? Seems fair to share in the good times...

If you are charging market rent, you already are sharing in the good times plus quite a bit (you had a greater share of the good times than those who are earning minimum wage).  The average rent has increased much faster than minimum wage and average wage for virtually any long term time span in Los Angeles.  The amount of household income going towards rent is near the all time high and this includes going back to when most households were single earner families.  This implies not only has rent gone up faster than wages, but it has gone up enough faster than wages that it has been able to overcome the increase in average number of wage earners per family.

In my market (San Diego), average rent has increased almost $500 over the previous 3 years.  Your comment seems to imply that low end workers should somehow be able to continue to pay for rent post increase on the same minimum salary that was in place when rent was $500/month less.

@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.

Originally posted by @Robert McNeal :
Originally posted by @Paul Dauffenbach:

@Heather Frusco What you should do is imagine yourself as a person with good character and go back and rewrite this tutorial, because this is trash. If you lack the compassion or simply do not understand the gravity of the situation, then I suggest you get educated. EVERYONE is affected by this crisis and if you feel so compelled to write this diatribe patting yourself on your back about how ‘prepared’ you are, then clearly you were not prepared. This IS everyone’s burden. Instead of being reactionary, be proactive. Reach out to all your tenants and find out how they are affected. Let them know that you care (if that is possible for you) and that we are in this together. If they have lost a job or some significant income, reduce the rent to something manageable. It will be appreciated and won’t leave you with an empty mailbox and stack of unsatisfied eviction notices. I hope this helps.

100%. If you need to conduct business as usual regarding evictions and rent collection to stay afloat then you are a pot calling the kettle black. If you have sufficient cash reserves to weather the storm and choose to not provide mitigation for your tenants, then you are being callous in the face of an unprecedented crisis. I am not sure there is space in this context to act the way OP suggests and emerge with a clear conscience unless you focus on your own situation and bury your head in the sand. 

No, just being responsible to the Tenants that truly need it, which I will determine, since I will be the one allocating those resources to them. 

@Robert McNeal The individual had properties that were paid off but relied on the rental income to live.  Due to the current situation was told by the bank they wouldn't qualify for a mortgage.  Luckily for them the same government that was imposing $50k/year worth of education taxes on her properties was the same one letting her tenants know that if they didn't pay rent there was nothing she could do.  She didn't mention how long she could last with that tax (and other expenses) if she was getting minimal rents back, but I don't see her as the villian in this story.  

I don't believe the Restaurant analogy is correctly aligned with what we are facing as landlords.  A tighter analogy would be if there were a law passed stating that someone could ask for food and get it for free, or at a discount of whatever they felt like paying, and the restaurant owner would be forced to give out that food.  Then if they were no longer able to pay their bills and close down they could be berated by someone like you for not being properly prepared for the situation.  

Originally posted by @Paul Merchant :

@Heather Frusco so, let's just say that they've always paid, but can't pay now, what are you going to do, evict them? Risk a unit standing empty for another month, or two? I hope not, because that would be foolish from a business perspective.

One thing that does bother me, is that there are a lot of arrogant landlords out there, and so as a group, we may be more hated than lawyers. And that's not good for business.

Paul, if a Tenant has not exhausted all options to help themselves there would absolutely be an imminent eviction... let me ask you something... when you have a perfect history of paying your car payment but miss enough of them, regardless of the reason... will they still repo you car?... you bet - how about when have paid your cable tv provider for years will they keep it on if you don't continue to pay for the service? As far as having a rental unit vacant vs. having one occupied with a non-paying tenant... a vacant unit wins all day long why?... well you have to put yourself on the other side to know that... because a non-paying tenant will still cause damage in a unit and will require the landlord to maintain systems, which we as responsible landlord will... we will still show up to fix the AC the HEAT the Leaky Rood etc..... A vacant unit, can still have all of that happen... but the decision falls solely on whether or not I want to do it. So to be clear in order of preference: 1) occupied with a paying responsible tenant; 2) vacant; --- as you can see 'occupied with a non-paying' tenant is no where on the list because aside from paying for you to live for free it also costs me more to have you in it when you don't pay rent vs. just having it vacant. Hope this helps. 

In the grand scheme of your life is a month or two of cash flow really going to make a difference? Maybe because Im a small fry and havent been doing this long I dont have the same perspective. But we are taking care of families. Their financial problems do become our problems. This is a once in a lifetime problem. Definitely verify BUT work with your tenants as much as you can. I would much rather get fooled by someone for showing too much compassion to someone that didnt need it than not showing enough to someone who truly did

Originally posted by @Cory Trevor:

Wow. Almost all of you are truly, undeniably, souless. The literal bottom of the barrel "investors". Look at how you scramble and justify you gutting of the already downtrodden lower class. At the single whisper of lost profits you rush to clamp down on your pathetic assets.  You expect exact or increasing returns in a global crisis? Call it business, call it whatever makes you sleep at night. You are truly doomed. This summer should be interesting, hope you make it to the hospital before they run out of ventilators! 

Cory, don't know how you 'assume' all renters are 'lower class'... which just seems discriminatory against tenants in a way, so... not cool 'labeling' tenants like that. I'll bite... what would you suggest?... Apparently LL's offering to help ONLY those which absolutely need it and offering payment and deferral options, doesn't work for you. What would be Cory's picture perfect situation of how a LL should address a non-paying tenant during this situation?  

@Account Closed Wow you go dark quick.  As I mentioned a few posts ago, I'm working with my tenants as needed but don't let that slow you in your rush to judge any landlord who isn't excited about possibly losing their savings and/or homes while being FORCED to keep other comfortably secured.  

Enjoy your perceived higher ground as you curse those who will be paying out to benefit others.  You saint you. 

Originally posted by @Dan Heuschele :
Originally posted by @Greg M.:
Originally posted by @Mary Mitchell:

Howabout the idea that everyone should share in the pain equally??  

Well Comrade Mary, sharing the pain equally would reward those who failed to prepare/sacrifice and punish those that did prepare/sacrifice. 

I sacrificed to buy a unit. I pay to keep it in habitable condition. I sacrificed to build up reserves so that a rent interruption or major capital expense will not affect my ability to maintain ownership of the unit (and therefore allow you to continue to live there) or its habitability. The fact that you as a renter did not sacrifice and save and now are in pain is not a reason to try and have me share your pain. 

Renting is a business transaction. We rent a place for market price. Pretty simple. Now if a landlord is going to share in the pain during bad times, shouldn't they also share in the reward when times are good? Right, Comrade, we want equality! So if I as a landlord should take 50% of the market rent for the next 3 months because times are bad for you, shouldn't I be entitled to more when times are good for you?

I'm sure you are aware of the Fight For $15 movement. A lot of people here went from $12/hr to $15/hr. Should I as a landlord get a 25% bump in rent because the tenant got a 25% raise? Seems fair to share in the good times...

>A lot of people here went from $12/hr to $15/hr. Should I as a landlord get a 25% bump in rent because the tenant got a 25% raise? Seems fair to share in the good times...

If you are charging market rent, you already are sharing in the good times plus quite a bit (you had a greater share of the good times than those who are earning minimum wage).  The average rent has increased much faster than minimum wage and average wage for virtually any long term time span in Los Angeles.  The amount of household income going towards rent is near the all time high and this includes going back to when most households were single earner families.  This implies not only has rent gone up faster than wages, but it has gone up enough faster than wages that it has been able to overcome the increase in average number of wage earners per family.

In my market (San Diego), average rent has increased almost $500 over the previous 3 years.  Your comment seems to imply that low end workers should somehow be able to continue to pay for rent post increase on the same minimum salary that was in place when rent was $500/month less.

Dan, no need to backpedal out of it now... you personally... should the landlord then raise rent on you personally, when you get a bonus or get a pay raise at your job? -- Greg, makes a great point for all those looking for LL's to 'share' in the bad times, if that's the case should a Tenant then also 'share' with the LL in the good times. Looking forward to the answer.  

@Mary M. I'm sorry I'm trying to follow your thought pattern which I don't agree with but respected until you mentioned... "i too live off my rentals, which are paid in full" and you then go on to say you will do ANYTHING to help out... "i will share the pain.... ie if they are short 500 i will eat 250 and then they can pay the balance over time" ... So to recap: Your rentals are paid IN FULL, you will SHARE the PAIN but are only willing to forgive $250 in rent?!?!? ....... Why not forgive it all, why not forgive 100% of the rent until the tenant is employed again (1,2 or maybe even 3+ months later)?  



"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 --"

--------------------------------

Wrong. Most commercial leases are for flat, fixed amounts and the only time you'll see a participation rent is when the business is new and the tenant needs to get established in his cash flow. If the landlord likes the tenant's business, he might agree to a participation rent. You and I both know that Cheesecake Factory and other established businesses aren't doing participation leases.

As for assets, landlords in commercial leases often provide that fixtures become landlord property at the conclusion of the lease. That is common. Other assets? rarely. Usually a judgment levy. Perchance you are thinking of possessory liens?

You called non-paying tenants thieves, @Heather Frusco , and if Cheesecake Factory DELIBERATELY isn't paying rent, then it is, per you, a den of thieves. Are you going to boycott it?