What is the plan when tenants can’t work and cannot make rent payments?
It has already started for me.
I was speaking with my wife about this very issue this morning. We have not yet felt the effects of the hit our tenants will feel if they cannot or do not pay their rent. However, we have decided, and this is not for everyone, that we will require them to forfeit their deposits for the month they miss. If they miss again, we will evict.
Like you, we finance our properties and the banks are not going to allow us to miss paying our notes. It's a business transaction. Thus, we treat our tenants the same way: it's a business transaction. They have a place to live in exchange for paying their rent.
This is not a hard line, it is a real world line. We don't get to miss our house payment. We have saved for these possibilities. Once they make their lack of preparedness my problem, I will deal with it like its my problem. That may mean they are without a place to live, which is not my problem.
Others will disagree with me, but others are not paying my bills or paying for my properties. You need to do what is best for you.
@Brian Boyd I agree 110%! I wonder if governments are going to cause a problem with eviction. I’m assuming TN is more landlord friendly than NY.
On a side note. How is the market where you are?
@Arthur P. - TN is a very business friendly state and middle Tennessee is booming. I know Phoenix just put a moratorium on evictions but I haven’t heard about anywhere else yet.
I tend to believe a moratorium on evictions would violate property rights of the owner and is unconstitutional.
What part of NY are you currently invested?
I have personally contacted all of my tenants (11 units) and asked them to contact me if they have any job related closures that effect their ability to pay rent. I also told them if their ability to pay rent was affected, we will work out arrangements on the rents. Currently no tenants are having issues, but if they do, I intend to allow for partial rent deferments until our city and their individual jobs stabilize and return to normal. This will not be rent forgiveness, but a delayed payment plan during these times. That is my personal plan. It is worth noting that effective this past Sunday, the Mayor of my city has halted all evictions, so I am not in a position that allows me to threat eviction due to lack of rent payment.
@Brian Boyd Invested in suburbs of New York City. Prices are overinflated now and looking elsewhere. It is more difficult than I thought to learn a new area but trying
I am in NY a lot, in fact, I will be there this weekend. However, I would never think to buy up there. The laws, regulations, taxes and other headaches are too much. I am heavily invested in Chattanooga, Knoxville, and just outside of Nashville. When we decide to go out of state we will likely look at Indiana, Alabama, Kentucky, Missouri and maybe Idaho or Iowa. Have you considered investing out of NY?
I like the idea of using the deposit for a month, which may allow them time to get unemployment or other government help, which I suspect there will be a lot of help coming soon for those people who can't work because if this, and hopefully a possibility of even the banks freezing mortgage payments for a couple months if it gets really bad to help homeowners and if so hopefully that will apply to rentals as well given the situation. Just would have to get true documentation for their work loss due to covid-19 and not them just saying it to get out of paying rent.
I fully expect that most places are going to put a moratorium on evictions during this time. We are already seeing it in a lot of major cities across the country.
I'm in Oklahoma, so we are just starting to see the beginning of it. My husband and I had this conversation yesterday. We are in the position that we could decrease our monthly rents by over 30% across the board and still cover PITI. If our tenants legitimately can not pay their rent due to job loss, we will work with them on a case by case basis to come up with reasonable payment options.
From a strict business mindset, I would rather have a good tenant pay 25-50% rent for a few months to "weather the storm" than have to do an eviction, make-ready, vacancy and re-leasing.
In Denver the City has pulled officers from eviction duty. They know rents may be slow after closing all the restaurants and bars and putting tens of thousands of people out of work.
Also spoke with 2 bankers this morning and this is one of their top two concerns they are watching. They have a big percentage of their loans out to small businesses and land lords.
Lets hope the next few weeks brings some calm to the markets