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!

honestly. lets not be the asshole landlords everyone thinks we are. Howabout the idea that everyone should share in the pain equally?? why is it just the hourly wage earner that needs to float everything?? While we are on shutdown, many people are still working and many more are getting temp jobs..... My feeling is - if a tenant is having a hardship I will share that hardship with them... and it will depend on the circumstances what that means. Be a good human.... share this pain so we ALL can come out ok and so that the public sentiment of LLs does not erode further.

The median renter household has virtually no cash savings. According to Harvard’s Joint Center for Housing Studies: -- Renters have median cash savings of $630 and the median renter net worth, including all assets, is just $5,100. -- Homeowners have cash savings 10 times as large as that of renters—$6,400—and median net worth is about 35 times as much—$173,010. Meaning most renter households have neither a personal safety net nor a way to build assets for the future. Saying that they SHOULD have saved money flies in the face of the customers earnings and lifestyle habits. Those with more earnings and better lifestyle habits tend to not be our customers (they own their own home). Renters don't earn enough to save for a home or make home payments (many never will, especially if not married), and many tend to "Live in the Moment". If they didn't have these particulars, they wouldn't need us to provide housing for them (a Leopard isn't going to change his spots, so to speak). Just my 2 cents.

You're funny! The gas station charges full price during this human crisis and they aren't greedy. The supermarket charges full price during this human crisis and they aren't greedy. The dry cleaner charges full price during this human crisis and they aren't greedy. My pool guy charges full price during this human crisis and he isn't greedy. The landlord charges full price during this human crisis and fucking motherfucker, greedy son of a bitch deserves to die. Sorry, but I'm not getting a discount anywhere on my purchases. Not sure why I should be giving them out. Enjoy your 5 Star Yelp reviews. Maybe your family can eat them when hungry. And yes, I will be happy to take payment from the government for anything and everything. Because unlike around half of the people in this country, I pay taxes. I send the government well into six figures every year. So yeah, if they're handing out free cash I'll take some of my money back.

Yeah, more greedy landlord comments. Lets be sure to look like total asses to the world during this human crises. I will help where I can, knowing I get "rewarded" by being a good person. this also, btw is good for business. I get top ratings as a LL and get lots of referrals and rarely do I have an opening. People think this type of business philosophy os weak - its not - I promise :) Eta: the govt is going to be the lender/payer of last resort - my guess is that all those that make snarky "comrade" comments will have no problem eating at the emergency fund trough - or, maybe you will be sending your cash the govt is sending back? When you do that, then lets talk :)

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?

Mary, you can certainly share in the hardship... I'm just curious and I wonder will a tenant reciprocate and share in one of your hardships i.e. mortgage late fees ?

Credit card as method to pay rent auto qualifies as person recommending being Cold Hearted.

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.

Why is Rent still due during COVID-19?

Gary L Wallman

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

6y

Originally posted by @John Clark:

@Heather Frusco "I'm sorry sir but if you are not able to realize that using a paid service without intending to pay for it, is wrong... don't really know what you would like anyone to say... I've got a tip for you... it's wrong."
--------------------------------------------
My dear lady, I understand all too well, and what I understand is that you are trying to evade and make excuses for your corporate masters. Cheesecake Factory has already announced that it will not pay rent for April, 2020, due to its desire to save cash, whilst paying dividends, paying huge and unjustified salaries, whilst not saying that it will make up April rents at all, and while drawing down lines of credit without income.

I especially like the drawing on lines of credit bit, because it is an EXACT analogy to you telling tenants to use credit cards. Yet, yet!! . . . Cheesecake Factory STILL WON'T PAY APRIL RENT!!!!!!!!!!!!!!!!!!!!!

The horror! The Horror! And yet while you whine that human tenants not paying rent is "wrong" and label them as thieves, you refuse to criticize, or label as thieves, corporations doing the exact same thing.

Your whining hypocrisy is showing, Heather. Why won't you just admit that according to YOUR standards, Cheesecake Factory is a thief?

BTW -- you say there's no Cheesecake Factory near you, but you are from union City, NJ. There's a Cheesecake Factory at
Newport Centre Mall 30 Mall Drive West, UNION CITY, NEW JERSEY.

God I can't stand whiners.

John,

No disrespect but I have no idea what you just said.

Gary

4 Reply

Heather Frusco

OP

Investor · Union, NJ · Member since 2020 · 81 posts · 312 votes

6y

@John Clark You obviously have a grudge against giving tenants options other than 'free' and are pretty wound up about the whole post. Word of advice... take a breather and realize that... shutting out information you don't agree with doesn't change it (and again still don't know what your argument is). You win... in your own mind, good luck.

3 Reply

Heather Frusco

OP

Investor · Union, NJ · Member since 2020 · 81 posts · 312 votes

6y

@Gary L Wallman geez thank you, tried to tell him... John's gone off the deep end.

0 Reply

Jeff C.

Real Estate Broker · Bakersfield, CA · Member since 2018 · 269 posts · 597 votes

6y

Originally posted by @Dan H.:

I seldom disagree with Jay, but I am confident that a mass majority of our C class tenants will make good on any rent they are short through this crisis. How sure? If I am wrong, I offer to take Jay to a steakhouse for dinner next time he is in San Diego. Not a wager, I am not expecting anything from Jay if I am correct.

This is hilarious. You can kiss that back rent goodbye. @Jay Hinrichs, how do you like your steak?!

7 Reply

Dan H.Pro Member

Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes

6y

Originally posted by @David King:

Are you jealous of my 4 votes or houses? lol. You have a lot of stories about me but you don't know anything about me except what I shared.

I accept the risk, I take risks all the time, both physical and financial. I take responsibility for my losses and injuries as a result. The core issue that bothers me is that I've been playing with a ruleset that states tenants could be evicted for nonpayment of rent. I had no idea that the government could come in at anytime and adjust the rules of the game. I had no idea that of I paid all my tax bills that the government can take control of my properties. Is private property if the government takes control of it? I feel more like my/our rights to our property are being infringed upon. I assure you that I wouldn't deal in class C or D units if I knew eviction for nonpayment is negotiable. I can't even sell now if I can't evict, at least to non-investors.

You said, "your worse than the tenants that have no reserve. Why? Because you chose to invest in RE rather than maintain the reserve." That's not accurate or true. My father taught me its better to remain silent and to be thought of as ignorant than to speak out and remove all doubt.

Also when you are concatinating you and are you spell it "you're" since it's not my worse.

I purchased a service business recently that wont return any of my love until October. It had around a 90% percent ROI and its easy AF so I had to buy it. It's doing great in this market as it is classified as a essential business. Yes I got caught reaching for more. Yes I accept my responsibility but I am not the one adjusting the rules.

Landlords that own their properties are expected to take the whole hit (100%) while no one expects any other business to be free. Yes I'm mad about that and the rule changes and the government's intervention in my business.

I'm still giggling about that I need a financial planner... Thanks you made my mood better.

Originally posted by @Dan H.:

Originally posted by @David King:

Mary the state school taxes can't be paid late. The state will evict and take my houses. I have to collect over $400 per month to cover a $5,000 school tax on each of 10 properties. That's around $50,000. I am retired so this income is all I have. Please explain how your math works for me? Please don't tell me about how the tenants are going to come to my rescue when they get their jobs back I have way more experience than that. My houses are paid off. I have tried to refinance and they say I don't make enough to pay a mortgage. If you're going to tell me about a fairy tale organization that is going to come to my rescue please post their phone number so I can call them. My wife and I will be out of money if the rent doesn't come in.

Originally posted by @Mary M.:

@Greg M. you left off utilities, mortgage companies, credit cards, banks.....etc.... and all of those are allowing payments to be delayed or added to the back of the amortization... utilities etc take amount owed and split it up over x months...

4 people voted for this post??? You are a LL. LL is a business. A well run business has reserves and performs risk management. Any financial planner would have told you to have 6 months reserve. Clearly you should not have purchased property #10 (especially for all cash) that left you with zero reserves. Likely you should not have purchased property #9 (again all cash). You are the definition of over extended due to property acquisition. This is something that is warned about everyday on BP and probably about once a week by yours truly.

You have risk due to over leverage. Now that the risk has become a problem, you act like you played no role in creating the risk. The reality is you created this high risk situation. A situation that every financial planner would have pointed out is high risk. A situation that was pointed out daily on BP as being risky.

I am not saying the tenants are coming to your rescue. I do suspect that somehow you will be rescued, but your worse than the tenants that have no reserve. Why? Because you chose to invest in RE rather than maintain the reserve. Versus many of the tenants are in their situation not due to having chose to invest the reserve, but because their living expenses do not allow them to create a reserve.

>Are you jealous of my 4 votes or houses?

I am shocked that 4 people would vote for a post that basically indicates I acquire 10 properties without having reserves that allow me to cover a $400/month expense. All the posts that discuss not over extending and a post that is an extreme case gets 4 votes. It should get negative votes. I do not worry about votes (but do admit occasionally looking at the votes of other people (I think Jay has something like 40K) but I have no idea how many votes I have but I suspect I have a lot more than 4 votes (I think I have over 1000)) and 10 houses does not impress me. I would be more jealous if you had 10 homes and the reserves to handle a $400/month expense (still not really jealous but it would not have warranted any comment on my behalf).

> you don't know anything about me except what I shared.

This is what you shared: You have 10 properties at 0% LTV but do not have enough cash reserves to cover $400/month to cover school tax. What else do I need to know to conclude that you are over extended?

>Yes I got caught reaching for more. Yes I accept my responsibility but I am not the one adjusting the rules.

"Reaching for more" could be a euphemism for over extended. You are over extended and complaining about the change of rules? Rules often change at a times of crisis. This is why any financial planner (that you laugh about) would have told you the safe thing is to have at least 6 months reserve. You act like you could not have benefitted from the advice of a financial planner, but the situation you complain about any decent financial planner would have provided guidance that would have allowed you to not be in such a situation if you had taken their advice.

I am sorry you are in this situation. I am sorry for anyone impacted from this virus, not just physically but financially. I have lost a fortune in the last 3 months (one of my investments had a huge hit prior to Wuhan virus). You are in many ways fortunate as you own 10 properties with no loans. You can take Jay's advice and try to sell one to cover the school tax if necessary. It would have been easier and less impact if you were less extended. With reserve, you keep the 10 properties and when this blows over in a couple months (hopefully) consider building up a reserve with your great cash flow before acquiring RE #11.

Good luck

0 Reply

David King

Member since 2020 · 16 posts · 43 votes

6y

Not going to 11, maybe one day back to 10 after I sell one.

When I did stocks I got margin calls and my theory was if you're not getting margin calls you're not trying. I go all in.

If you are comfortable with the government controlling evictions that's your business. Its foolishness for them to have control. Have you seen their budgets, do governments make money (not litterally)? That's because they are clueless how to make money. I am uncomfortable with clueless people having control of my business.

If they don't allow evictions then the rental houses won't make money. If 40-60% of the houses in some suburbs are rentals and landlords can't make money with them, they'll start selling them. If they go down 20% or so then some people will be under water and start walking away and that process can runaway quickly.

We missed the stock market crash. We don't have to have a real estate crash if landlords don't start selling. We must have power to evict, that alone encourages prompt regular monthly payments and that makes the business work. It's in everyone's best interest for real estate to succeed.

You got to stop touting financial advisors, especially ones that havent retired. You care the most about your money, there isn't anyone that cares more. Financial advisors have to make money for their firm first, or they lose their job. Their family second or they get divorced then you're number three. Tax pros yes, financial advisors, no way.

1 Reply

Jay Bob

New York, NY · Member since 2019 · 65 posts · 15 votes

6y

@Heather Frusco

No one knows what will happen tomorrow. As a landlord, I'm worrie myself. Everything is going to alright.

1 Reply

Account Closed

Real Estate Broker · Columbus, OH · Member since 2019 · 119 posts · 151 votes

6y

Not everyone's situation is the same, but I have several projects going on at once and also have a fair amount of odds and ends work to do at my properties. If one of my tenants were to lose their job, an option could be to offer to hire them on as grunt labor to make a dent in rent owed to me. It could also shed some light on whether or not the person actually has any intention of paying (by seeing if they accept your offer or not), or if they just want to be a victim. If they decline, what's their excuse then?

2 Reply

Account Closed

Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes

6y

@Heather Frusco Im going to offer another perspective. Keep in mind Im a landlord and investor in A B and C class properties. The A class property tenants have no excuse for not having savings and are actually paying rent. The C class tenants have zero reserves. We make money on those tenants because they are willing to pay 800 to 1000 dollars per month on homes with mortgages under 300. If they had savings and reserves they would not be tenants and you would have no business. So in a cataclysmic event like this we need to be more understanding. Having said that, once they get 1200 to 2400 dollars checks and still dont pay then by all means take action

2 Reply

Mary M.

Rental Property Investor · Portland OR · Member since 2018 · 2k+ posts · 3k+ votes

6y

Originally posted by @Heather Frusco:

@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)?

:) pretty sure I said “for example” It was an example.... it was not a statement of what i will actually do... I dont see the huge disaster that others see coming - the govt is going to give folks 100% of their wages if they lost work - this includes the self employed They also are sending 1200(per month?) to every adult..... so i am not that worried

0 Reply

Maya V.

Oakland, CA · Member since 2013 · 48 posts · 5 votes

6y

Anish Tolia, I'm in Oakland with just one SFR with a couple as tenants. is there more of a clear guideline for Berkeley/Oakland?

0 Reply

Matt Law

Member since 2020 · 1 post · 1 vote

6y

Thanks for this Heather. Reading this madness on facebook from tenants is driving me crazy.

1 Reply

Jerry W.Pro Member

Moderator

Investor · Thermopolis, WY · Member since 2012 · 4k+ posts · 4k+ votes

6y

Wow, huge thread and very polarizing. I know I shouldn't post but what the hell. First this is a good discussion for the most part. For the poor souls who have no intellect and turned it into calling as mean of names as you could I simply deleted your post. Use arguments not name calling. We are not 8 year olds. By all means disagree, argue, debate, but name calling is a sign you have exhausted your intellect.
Second, @Dan H., I agree with some of your posts, but have no idea why you posted them. Could you elaborate on your point? If a LL did not keep enough reserves does he deserve to have folks not pay rent and to not evict people because he had it coming? The LL made a mistake and will likely pay for it by losing everything. The tenant will be evicted and move on, actually he will stay if that state passed a no eviction law.

@John Clark, are you saying The Cheesecake factory not paying rent makes it ok for no one else to pay rent? I think the mall owners should be able to evict them if they choose, or not to. Suggesting someone is immoral for insisting upon them performing a contract they agreed to do is pretty judgemental. Are you willing to take the hit yourself? Will you pay the rent for every tenant that does not pay @Heather Frusco? If you think it is an obligation and it is a moral thing, then by all means pay their bill yourself.

@Account Closed, you are pretty quick to throw rocks. What is your answer? If you really want to be taken seriously suggest an answer to the problem not just sit in moral judgement.

@Mary M. to be honest it is a lot easier to tell someone they should eat half of a tenant's shortfall when your own rentals are fully paid for. Back when all of them had mortgages that might have been harder to do or even impossible. There is always risk in building a business. Most fail, those who make it deserve to reap the rewards of the risk.

Now that I have jabbed most of you I will give my 2 cents so you can in return jab me back. If you poke someone in the nose it is only fair they get to poke back. First I have some short term rentals. They lost money the first year, made a little month next year and smoked it last year. It looked they would triple the income of a regular rental this year. I just lost every single booking for almost 3 months. Back to not covering utilities. Was I wrong to take 3 years and forecast the income for this year? That hurt. My cleaning lady has lost a lot of income too. I had 2 empty units in January that I was fixing up from a tenant who trashed one, and the other simply needed updating. I had 6 units open up in February. Most were long time renters. Divorce, heart attacks, job changes, etc. I lost $4K in rent in one month and gained an additional $2K in utility bills, ouch. I have never in 25 years had that many folks move out in one month, not even in May. My calculations provide for me to cash flow easily with 1 in 12 units empty (8 1/2%), I never dreamed it would be (20%). Last year was a bit painful as we had a very bad hailstorm that took out 20 of my roofs. Does anyone really think insurance companies pay for the full loss? Not even close. Luckily I have 4 of the units rented back, just in time for Coronavirus to set in. Guess what? I don't have any property above a C+. My cleaning lady, a waitress and a bartender are among my tenants. To make matters worse I am not a very good LL sometimes and have 2 tenants on payment plans already.

Here is my plan. The cleaning lady will be cleaning 2 units I purchased in hopes of making them into VRs hehe, that won't happen this year. The waitress and the bartender will be offered the option to go to work for me painting their houses, cleaning up yards, and other assorted jobs up to $200 over their rent amount at $15 per hour. I might try them out on doing a low roof, as I really need to put 16 more roofs on.

I don't fault anyone who feels that they need to evict tenants who don't pay rent. But by the grace of God there go I. I am blessed to not be missing my mortgage payments because of shortfalls. Twenty years ago the margins were a lot slimmer. It could still happen. I will be in a bind if I lose another 5 or 6 tenants. I can make my mortgage payments for 6 months, but not taxes or insurance if I lose 20 tenants next month. things are going to get hard folks. I have seen at least 3 really bad recessions and I interviewed my grandparents who lived through the great depression for a history project. We really don't know what tough is. Millenials, gen x and Y have no idea of hardship, but that is not their fault that they lived in such prosperous times.

My moral code says to help who I can, but to be honest I think it is in my best interests to do so from a financial viewpoint. In some markets you can rerent places in a week. I have had places empty since January that have not rented. I have had lookers, but I have learned no tenants are better than bad tenants. I spent a lot of time and money getting good tenants in. If I can work out a deal I will try to keep them. I have done it before, sometimes it worked out, sometimes not. In six months I may be kicking folks out and evicting them, so no rocks from me.

I believe we are going to be hit hard by this recession. I think a lot of LLs are going to be put out of business, and I think a lot of folks will be evicted and move into their parents basement or share some fleahole with other folks to save money. I am still amazed however that our politicians managed to remember why they were in Washington DC long enough to jointly pass the biggest aid bill probably ever, but definitely in our lifetime. The WPA may have been larger adjusted for inflation. The stimulus may actually work, but I doubt it. This is still a great country however, and maybe when times are tough we will pull together and not have ANTIFA and few white supremacists running around thinking beating people up is the way express your outrage over the latest political whim. Maybe we will share our toilet paper supplies with the elderly person next door who is afraid to go to the grocery store because of the virus. Maybe we will pool resources with our friends and even strangers to help those in need out.

We have a great nation, we are the most giving nation in the world. When tidal waves hit, when earthquakes and floods hit, it is Americans who are first to open our purse and our hearts to help. Remember we are all in this together. We all rely on others to feed us, give us income from jobs or sales or rent, and even our clothes are made by others, they are shipped by train or rail, the farmers feed us but use tractors and fuel made by others. We will get out of this sooner if we all work together and give a little. If we don't, we all lose.

God bless.

Now it's your turn to whack me. :)

20 Reply

Dan H.Pro Member

Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes

6y

Originally posted by @Gary L Wallman:

Originally posted by @Dan H.:

Originally posted by @Gary L Wallman:

Originally posted by @Dan H.:

Originally posted by @Heather Frusco:

Originally posted by @Dan H.:

Originally posted by @Greg M.:

Originally posted by @Mary M.:

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.

In coastal So Cal the LL have had years of good times. The rents have increased faster than inflation, minimum wage, and average salary. Did they share with the tenants? Admittedly many have by charging below market rent because, even charging below market rent, the returns have been great. But not all LL passed the good times to the tenants and I really do not expect the LL to have charged below market rent to the tenants to share the good times. I think charging below market rent beyond what is financially advantageous (such as to keep good tenants) is poor business.

Similarly, being a LL is a business. Businesses should 1) build reserves 2) should know risks. In the case of a LL, the extent of likely tenant reserves. The LL is typically compensated for this higher risk. It is one reason that rent to value ratios are higher in lower class/poorer areas than in more affluent/higher class areas.

We have LTR rentals from C to B+ class areas (We have 2 STRs in a class A area) with a majority being in the C class. I expect the C class tenants will have less reserves and therefore more difficulty making rent than the B class tenants (but ironically only 2 tenants have talked to us about potential issues and one was from a B class unit)when they loose their jobs. The point is the rent reflects the risk. C class have higher rent to RE value in part because most of the tenants do not have the reserves to handle layoffs for an extended period of time and the LL is compensated monthly for this higher level of risk.

None of our tenants that fall behind in rent will be getting evicted. Not now, not later. Not because evictions are currently banned, but because it 1) I consider it immoral 2) I know the level of reserves my tenants have and took on the known risk when I purchase and rented in class C areas. I have been compensated for this risk every month for years. 3) I have built up the reserves to be able to cover the rents for a protracted time 4) I am not over leveraged (very related to #3).

Every LL should have 6 months reserve. Every financial planner would indicate this. If you do not, then you are over extended per what virtually any financial planner would indicate. Every LL should know and understand the risks of their investments including the likely reserves of their tenants. If you want to reduce the risk of tenants not paying then purchase class A RE and accept the lower reward that is associated with the lower tenant risk. Or stay our of RE. What I am against is the LL who has been receiving rent appropriate for the amount of risk, crying up a river when the risk comes and bites them.

Now that the explanation is out of the way on to the questions: I believe LL do raise rents with increased salary or bonus. It may not be the moment of the raise or the bonus, but the statistics show that it has occurred for decades in coastal So Cal. It is referred to as market rent. For the bad times, the LL has already been compensated for the bad times. Again it is referred to as market rent. The market rent has built into it the associated risk factors including the risk of non-payment due to prolonged job loss.

Dan,

You buy in "C" class areas, but find evictions immoral? Do you find it immoral when a tenant destroys your property? Or is that ok because of the greater risk and return of "C" class as well. California is definitely in a world of it's own.

I never said I find evictions immoral. I find evicting someone that can not pay rent due to the Wuhan virus (I prefer to call it by its source over how it looks) to be immoral.

We screen very well. In many years of being a LL, we have had 2 LTRs with heavy damage (and one of those was a B class). I charged them appropriately for the damages.

Your analogy though is highly suspect. In the one case, a tenant causes heavy damage and is responsible for the damage. The other case is the result of an issue that resulted in a 3M increase to unemployment in one month (from ~0.3M to ~3.3M). There may be some people who deserve some blame, but it is not the majority of these people. So your analogy is to compare/contrast an item that the tenant is 100% responsible for with an item that the tenant has minimal responsibility (I use the word minimal because ideally everyone builds reserves, but it is very challenging for a class C tenant to build reserves). I suspect you can see the flaw in the analogy. If not, I cannot help.

Good luck

Dan,

I think my analogy is spot on. People don't not pay you due to the virus. They don't pay you because of their lack of reserves. The same lack of reserves you rail to landlords about not having in sufficient quantity and expect them to give away. I'm sure if any LL's tenants actually contracted this virus, we'd be more then happy to carry them for 3 or 4 months.

Gary

Your initial analogy compared a tenant damaging a unit to a tenant that cannot pay due to impact from Corona virus. That is a horrendous analogy.

Now to this comparison that compares the tenant with no reserves to the landlord with no reserves. I believe both should have reserves, so I do not consider it as poor a comparison. However, the LL, when they purchased, should have allocated for reserves or not have made the RE purchase. If they did not, they chose to take a risk. The tenant should build a reserve but one reason that most tenants are tenants (especially in C class and below) is that their income limits their opportunity to build reserves. Without reserves, they are at a constant risk associated with financial hiccups such as a layoff. The difference is that they have less choice in this risk level than the LL who has purchased without adequate reserves.

I regularly have posted about the benefits of leverage. I challenge anyone to find a post where I extol the benefits of leverage without the warning to not over extend. To me one is over extended if they cannot handle a worse case scenario such as the Great Recession or this virus. This implies I have always advocated having reserves to handle this situation. Not having this level of reserves is taking a risk, a risk the LL has chosen (which contrasts with the tenant that cannot build these reserves).

0 Reply

Tre James

Rental Property Investor · Atlanta, GA · Member since 2020 · 11 posts · 3 votes

6y

@Greg M.

I see why people hate Landlords. This is why.

2 Reply

Dan H.Pro Member

Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes

6y

Originally posted by @Jerry W.: