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.
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.
@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.
Developer · New Orleans, LA · Member since 2015 · 1k+ posts · 898 votes
6y
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.
Real Estate Broker · Pinellas County · Member since 2016 · 166 posts · 114 votes
6y
@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?
Investor · Idaho Falls, ID · Member since 2016 · 912 posts · 629 votes
6y
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.
Rental Property Investor · Edmond, OK · Member since 2017 · 1k+ posts · 1k+ votes
6y
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
Real Estate Entrepreneur · Owasso, OK · Member since 2015 · 220 posts · 154 votes
6y
@Mike Bonn Interesting to hear the bankers' perspectives. I've also heard mention of government-control of foreclosures during these hard times.
@Cassi Justiz I get what you're saying about bars and restaurants closing. The flip side of that is that our tenants won't be wasting as much income on bar and restaurant food (nothing against it, but you see my point).
Overall, this is an economic nightmare. I explained to my kids yesterday that this last week we've just had will be written in the history books. Unprecedented, and impactful to so many. The ripple effect is unbelievable.
Very insightful post and discussion. I don't know how we will handle if tenants cannot pay rent due to these crises, but I think we will lean on the side of grace however much we can.
@Michael Slockers I do hope the government comes up with a solid plan for these businesses and their workers. I think for investors its wise to keep an eye on what is happening on the finance side. There still is plenty of flow of funds in the traditional and non QM mortgage markets. That being said the traditional rates are low but they are overwhelmed (this will correct itself) and title companies hope the counties stay open so they can update their commitments. Interesting times always lead to some opportunity.
Rental Property Investor · Lakeside, CA · Member since 2018 · 49 posts · 57 votes
6y
If you use their deposit for rent and down the road (assuming things get back to "normal") they decide to move, what incentive would they have to clean or repair the property?
Investor · Idaho Falls, ID · Member since 2016 · 912 posts · 629 votes
6y
Or have them sign an agreement that if they use the deposit now, they have to repay it, possibly splitting it out over several months until repaid. But I like the other option mentioned by @Cassi Justiz to help by lowering the rent temporarily to keep them there, if they are good tenants. Since it may be hard to fill a vacancy anyway with less people getting paid and even then, a month later the new tenant may be in the same situation.
Real Estate Agent · Chattanooga, TN · Member since 2018 · 258 posts · 136 votes
6y
@Brian Boyd
Those are the exact areas I’m looking at! I’m about to be moving to to Dalton, GA and will be looking heavily in Chattanooga, Knoxville, Huntsville, and Atlanta
Real Estate Broker · Pinellas County · Member since 2016 · 166 posts · 114 votes
6y
@Brian Boyd I am actively looking for out of state investment but having a hard time finding good information and everywhere I look seems overpriced. I’m in FL now and trying to learn the area. NY investments I’ve had for years now and provide a great return but I’m thing I have to change my expectations or wait a year or two. I think this is the beginning of the next recession.