Why is unpaid rent so high?

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Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes

I've read news reports that say up to 20% of rent has gone unpaid in the last couple of months. I manage 350 units and all but one has paid (we extended grace far longer than normal but now we're in the process of eviction). I network with hundreds of property managers around the country and almost all of them are in the same boat as me.

My only thought is that the higher percentage of unpaid rent must be with private Landlords. Maybe they don't run a tight ship and Tenants are taking advantage of the situation?

What's your experience? What are you hearing in your market?

And do you expect it to get better now that COVID restrictions are being lifted, or will it continue to worsen?

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Corby GoadeBusiness Member

Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes

I manage around 100 units in my market. When the quarantine hit, we proactively reached out to every tenant and listed all kinds of community resources, everything from food pantries to childcare help to rent assistance. We asked any tenants who were expecting to have trouble paying rent in May to contact us and work on a plan together. We had about 10 do so, and we came up with payment plans for each, and we had a couple meals delivered to those tenants as well. Every one of them paid ahead of the agreed upon schedule. So- we had about 10% pay late, but nothing went unpaid.

I am wondering if either lower income pockets were hit especially hard or if HUD basically giving a pass to all subsidized housing skewed the numbers that way.

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Barbara Housewright
Investor · Cape Coral, FL · Member since 2016 · 5 posts · 6 votes
6y
We self manage six rentals in Florida. All of our year round tenants have paid early or on time but our AirBnB has been empty since March. We paid full refunds to our people who cancelled during Covid but we are looking at an empty rental probably until season in January.
3 Reply
Benjamin L.
Investor · Denver, CO · Member since 2014 · 26 posts · 6 votes
6y
It is lower end properties that are seeing late payments. The other issue is that people are taking longer to pay rent, so by June 6 it may be 20 percent late, but by the end of the month, most people are caught up.
3 Reply
Ken Goodman
Investor · Los Angeles, CA · Member since 2017 · 29 posts · 15 votes
6y
Private landlord w/nine units on the east coast. 100% rent collected through June.
2 Reply
Susan Maneck
Investor · Jackson, MS · Member since 2014 · 1k+ posts · 769 votes
6y
One of the reasons rent was slow is that the stimulus and unemployment checks were slow to get to people. For most of my tenants enhanced unemployment paid better than their jobs, but if they aren't getting those checks they are in line at the food banks. Where I expect problems is around September and October. Many of my tenants work for the local schools and expect there will be fits and starts when they reopen and these are hourly employees, not like the teachers who get paid regardless.
2 Reply
Marie London
Investor · Westbury, NY · Member since 2015 · 11 posts · 5 votes
6y
2 out of 9 tenants in Baltimore paid :(
4 Reply
Matt J.
Rental Property Investor · Hugo, MN · Member since 2014 · 283 posts · 257 votes
6y
In Duluth, MN - 6 units, 6 fully paid for both April and May. And I've heard from other landlords in the area that they've had no issues receiving payment either. Seems like media hype to me to say there's a massive drop in rent collections. Heck, a lot of people right now are making more on unemployment and with their stimulus checks than they did when they were working, so why would they not have money to pay their rent the past couple of months?
4 Reply
Bill F.
Investor · Boston, MA · Member since 2015 · 1k+ posts · 3k+ votes
6y
Originally posted by @Nathan Gesner:
Originally posted by @Mary M.:
Not sure your sources, but the stats I am seeing says about 93% of rent is being paid.

You can track it here https://www.nmhc.org/research-...
ps - i am in the middle of a 1031, but before I closed on my downleg I was at 100% collection in my 10 units

I'm referring to news articles that cite numbers like 20% or even as high as 30% of renters not paying.
nmhc shows almost 20% haven't paid rent by the 16th of the month so maybe journalists write the stories early in the month and never follow through to the end when tenants catch up.

As the saying goes, there are lies, damn lies, and statistics. Looking at one number in isolation is meaningless.
A benchmark must be used provide context for the analysis to have any usefulness:
This shows the benchmark is between 83-82%. Now the change in methodology that was mentioned is valid, but since the data they collect for payment up to March 6th 2020 was 69%,
and that occurred before the stimulus checks were cut and the data methodology was changed, we can make an assumption, that at least for April, May, and June, that the apples to apples comparison under the original methodology isn't lower than that.
So the actual unpaid rent has changed around 10% due to COVID. But that is just for payments by the 6th of the month.
At the end of the day, all that matters is that your tenants don't get behind on rent, so the above graph shows that rent collection has declined 1-2% from this time last year.
So the real question is , why has collections only fallen such a small amount?
I'd hazard to guess that since this survey is of professionally managed apartments and that professionally managed apartment buildings tend to be more C+, B, A class that it is probably a fair assumption to say that COVID hasn't hit these areas as hard as the more fragmented smaller landlord space.
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Ray Slack
Investor · White Haven PA · Member since 2014 · 363 posts · 221 votes
6y
Private Landlord and all 15 tenants have paid.. While some were late all paid. Waived late fees on those that paid before the end of the Month (May)
A few thought they didn't need to pay because our state suspended evictions. Once we explained that we would still file eviction and it would remain on their credit report for 7 years and the actual eviction would take place in July when evictions began again they would have a judgement against them for the back rent.. They paid too.
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Laura Verderber
Rental Property Investor · Fairhope, AL · Member since 2017 · 70 posts · 52 votes
6y
I've got 6 rentals spread out over FL and AL, so take my small sample size for what's it worth. But all of my tenants have paid every month. One has been paying late but she had did that occasionally before coronavirus hit. I proactively reached out to tenants when all this started. I waived late fees and didn't raise rent when it was time to renew. All of my tenants stayed in place so I had no vacancies. I'd like to think it's because I do credit checks and B class properties, but I suspect it's more because I own in more landlord friendly states.
1 Reply
Steve Dearing
Investor · Dublin, OH · Member since 2015 · 7 posts · 5 votes
6y
I own 70 units in Ohio, all paid but one.
3 Reply
Richard Prillerman
Rental Property Investor · Southeast, USA · Member since 2020 · 31 posts · 13 votes
6y
I had an interesting situation. Tenants couldn't pay rent on April 1 and so notice was sent to them along with a list of resources to help with financial assistance. It actually turned out they had genuine issues with their bank accounts being compromised. Issue was straightened out and ultimately got full rent payments for both April and May and everything has been fine since. It's times like these when I really appreciate having good tenants.
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Susan K.
Real Estate Agent · Palm Beach Gardens, FL · Member since 2017 · 205 posts · 124 votes
6y
Originally posted by @Nathan Gesner:
The problem is that media is such a mess, I can't tell if they're manipulating facts to push an agenda if they're just really bad at their job!

All of the above!

1 Reply
Ed B.
Real Estate Investor · Sacramento, CA · Member since 2010 · 298 posts · 103 votes
6y
deadbeat, worthless tenants! I hate
0 Reply
Philomena Crea
Member since 2020 · 10 posts · 4 votes
6y
@Wesley W. Could you post a copy of your letter
0 Reply
Ed B.
Real Estate Investor · Sacramento, CA · Member since 2010 · 298 posts · 103 votes
6y
Nathan, I have to take offense at your suggestion that possibly some landlords "don't run a tight ship and Tenants are taking advantage of the situation?" I manage properties in Oregon and California, and in both places evictions are stalled. Courthouse in California isn't even open! Nobody knows when things will reopen--it's up to the governors. There certainly are some tenants taking advantage of the current ban on evictions, but blaming landlords is unfair when they are at the mercy of the pandemic and
1 Reply
Debbie J. Skora
Investor · TX · Member since 2020 · 56 posts · 54 votes
6y
It seems there is a big disparity between multi-family and single family housing rentals. I have all single family and have received 100% of rent.
2 Reply
Debbie J. Skora
Investor · TX · Member since 2020 · 56 posts · 54 votes
6y
Originally posted by @Ed B.:
Nathan, I have to take offense at your suggestion that possibly some landlords "don't run a tight ship and Tenants are taking advantage of the situation?" I manage properties in Oregon and California, and in both places evictions are stalled. Courthouse in California isn't even open! Nobody knows when things will reopen--it's up to the governors. There certainly are some tenants taking advantage of the current ban on evictions, but blaming landlords is unfair when they are at the mercy of the pandemic and
Nathan's response to anything is generally that any issue you might be having is because you don't know how to landlord. Don't take it personally!

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Wesley W.
Rental Property Investor · The Vampire State · Member since 2013 · 2k+ posts · 2k+ votes
6y
Originally posted by @Ed B.:
Nathan, I have to take offense at your suggestion that possibly some landlords "don't run a tight ship and Tenants are taking advantage of the situation?" I manage properties in Oregon and California, and in both places evictions are stalled. Courthouse in California isn't even open! Nobody knows when things will reopen--it's up to the governors. There certainly are some tenants taking advantage of the current ban on evictions, but blaming landlords is unfair when they are at the mercy of the pandemic and

Self managing is not for the faint of heart, and there is a lot to know to do it profitably and sustainably. ALL of us have made tons of mistakes along the way to get where we are now. I would argue that rents not being paid due to a landlord "not running a tight ship and tenants taking advantage" is not anything new, or unique to this situation. There are literally hundreds of posts on this forum that reinforce that idea. I don't think he's blaming landlords. The tenants are the ones not fulfilling their contractual obligations.

2 Reply
Wesley W.
Rental Property Investor · The Vampire State · Member since 2013 · 2k+ posts · 2k+ votes
6y
@Philomena Crea

It's really nothing special. It's a nearly verbatim copy of @Brandon Turner's found here.
0 Reply
Remington LymanBusiness Member
Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
6y
Originally posted by @Steve Dearing:
I own 70 units in Ohio, all paid but one.

Where are your units located?
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Corby GoadeBusiness Member
Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
6y
@Brett Lee Thanks! Landlords tend to forget that our tenants are the people who make this all possible. Find good tenants and treat them like human beings (rather than the "lord of the land") and everything becomes so much easier!
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Nathan GesnerBusiness Member
Moderator
OP
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
6y
Originally posted by @Ed B.:
Nathan, I have to take offense at your suggestion that possibly some landlords "don't run a tight ship and Tenants are taking advantage of the situation?" I manage properties in Oregon and California, and in both places evictions are stalled. Courthouse in California isn't even open! Nobody knows when things will reopen--it's up to the governors. There certainly are some tenants taking advantage of the current ban on evictions, but blaming landlords is unfair when they are at the mercy of the pandemic and

If it doesn't apply to you, why would you take offense?
Before COVID, there were plenty of Landlords running poor businesses. They don't screen, or they do it poorly. They let tenants pay whenever they want, sometimes going for months without a payment. They let renters move in friends and family without permission.
When a Landlord runs their business poorly, a situation like COVID will only exacerbate the situation. The tenant knows the Landlord is weak, so they use COVID as one more excuse to pay late - or not at all.

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Joe SplitrockPro Member
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Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
6y
Originally posted by @Nathan Gesner:
Originally posted by @M Jane Garvey:
I have been hearing news reports and politicians quoting them. They are claiming a high non-payment rate. Reality - the NMHC rent tracker is tracking payments from large complexes using Yardi software. They were above 90% each month during this crisis. For smaller landlords, I surveyed my membership at Chicago Creative Investors Association and found that April collections were 94% on a 97% occupancy. May was about 90% when I surveyed on the 7th - several owners said their info was misleading because they had rents due on the 15th. In any case, I think the news took a snapshot in time (early in the month) and then spread it around like it was a permanent picture of reality. It served their purpose of making the situation look horrible and the impending threat of evictions huge.
The problem is that media is such a mess, I can't tell if they're manipulating facts to push an agenda if they're just really bad at their job!

I used to think it was agenda, but I can't even figure out what agenda they have anymore besides sowing discord. I realize now it is about manufacturing stories and creating click bait. There is also the reality that journalism as a profession is dying. Anyone with a computer can be a journalist. Editors and fact checkers are a thing of the past. You can write a fictitious story and just state "an unnamed source familiar with the details" as the entire basis for the article. There is little legal recourse for people writing inflammatory, false or damaging articles. In the old days when a journalist got caught lying, their career was over and they faced slander lawsuits. Somewhere along the way we shifted from news to opinion based information and it is driven by clicks using social media to drive the demand.

Connecting this all back to real estate... It is crucial that a landlord, property manager or investor protect their image on social media. You can be crucified for a single comment taken out of context. It is important for us to combat the false narrative with the actual reality. People are paying rents. Eviction is primarily a tool to remove irresponsible people or trouble makers who make bad choices. It is not used to throw good people with hardship out of their home. Landlords are good people who care about their tenants. Are there exceptions - yes in everything in life. But if the last week has taught us anything, it is to not judge the majority based on the minority. One bad landlord doesn't mean all are bad, just like one bad tenant doesn't mean all are bad.

I will get off my soap box now. Great discussion thread...
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Lindsay DavisBusiness Member
Real Estate Broker · Birmingham, AL · Member since 2019 · 327 posts · 203 votes
6y
@Nathan Gesner I’ve seen similar numbers reported in the news, but am also not seeing anything that high. I’m based in Birmingham, Alabama and we’ve seen some impact from COVID, but nothing like 20%. We still have 9% outstanding rent for May, which is actually a slight improvement over April, even though everyone seemed to think May would see some of the worst rent collection.
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Luka Milicevic
Real Estate Agent · Nashville, TN · Member since 2015 · 2k+ posts · 2k+ votes
6y
@Jeff Little How about selling these class A Nashville homes? :-)))
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