Landlords will you give tenants affected by virus a break on rent

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Landlords will you give tenants affected by virus a break on rent

Jay HinrichsBusiness Member
Real Estate Consultant 路 Summerlin, NV 路 Member since 2014 路 45k+ posts 路 66k+ votes
I am curious how the landlords on this site will handle tenants whose jobs are going to be impacted by all the conventions being cancelled and hotel rooms being cancelled and flights being cancelled etc etc.

We know or I think we know this should not be a long term affect .. but short term our work force tennants could see a disruption in their income and most dont have much if any savings.

How will you handle that will you allow them to skip a month and then just add it to the remaining lease pro rata..

Or will you take the stance no rent here comes your 3 day notice and eviction process ?

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Brian BoydPro Member
USA 路 Member since 2019 路 305 posts 路 536 votes
6y

I think this post assumes that the banks are going to give the owners a break on the mortgages? If not, then this post assumes small businesses are charities that give away housing for free. The majority, if not all, of the members on this site are here to make money and are doing so through sacrifices that include saving their own money to invest in these properties. For profit entities vs. Non or Not for Profit companies are very different in their missions. 

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  • Brian BoydPro Member
    USA 路 Member since 2019 路 305 posts 路 536 votes
    6y

    I think this post assumes that the banks are going to give the owners a break on the mortgages? If not, then this post assumes small businesses are charities that give away housing for free. The majority, if not all, of the members on this site are here to make money and are doing so through sacrifices that include saving their own money to invest in these properties. For profit entities vs. Non or Not for Profit companies are very different in their missions. 

    51Reply
  • Jay HinrichsBusiness Member
    OP
    Real Estate Consultant 路 Summerlin, NV 路 Member since 2014 路 45k+ posts 路 66k+ votes
    6y

    @Brian Boyd  the banks could give leeway if this was severe enough just like the GFC.. Or just like the airline industry they are not charging cancellation fees.. and I bet some hotels are doing the same thing.. I had to cancel a flight and Alaska air even gave me back my first class upgrade coupons which they were not obligated to do.. 

    I think there Is a little more to it though..  you have a good tenant and like most work force tenants they have little to no savings.  they get furloughed for a month.. what do you do.

    boot them and have a turn over or work with them through this world wide issue ?  

    I understand your position sounds like you would not work with them. 

    Myself If I new they worked in an industry that is directly affected and it was easy to verify there income was interrupted because of what is happening I would choose to work with a good tenant over booting them and having a vacancy .. vacancy cost money as we all know.  But if its just an excuse then for sure its normal operating procedures . 

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  • Jay HinrichsBusiness Member
    OP
    Real Estate Consultant 路 Summerlin, NV 路 Member since 2014 路 45k+ posts 路 66k+ votes
    6y

    @Brian Boyd  I could see some Airbnb landlords get stress tested in the markets that are heavy to convention activity .  it will be interesting to see how they handle cancellations.. and risk having poor reviews if they don't give refunds due to peoples reluctance to travel during this period of time.

    to me personally I think this thing is totally over blown by the US media.. I mean here in Vegas we had our first confirmed case. and it was over an hour on TV interviewing the state health officials.. I mean 1 person in 2.5 million that live in this valley..  And given all the international travelers that come here to me that's pretty remarkable really.  But flip side is many conventions have been cancelled here in Vegas and I hear same for Orlando.

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  • Marc Winter
    Real Estate Broker 路 Northeast PA 路 Member since 2017 路 2k+ posts 路 2k+ votes
    6y

    Got to be on a case-by-case basis.  

    In general, I'd rather the short-funded tenant seek out help from local charities or relatives, etc.  No easy answer for this one, IMHO, this Corona will be contained quickly in USA... but with a 'global' economy freaking as it is, "you might feel a little pinch" the dentist says as the needle goes into your gum.

    Everyone:  hang in there, stay calm, be safe.

    8Reply
  • Levi T.Pro Member
    Rental Property Investor 路 Tucson AZ / Nice FR / Washington DC 路 Member since 2016 路 1k+ posts 路 1k+ votes
    6y

    It is a complicated question, compassion vs livelihood. My people will follow SOP, and evict accordingly. I assume a small percentage will make it to my desk to review, but for the most part, I would have to draw the line if cashflow for basic operation expenses started to come into question. It can quickly turn into a portfolio destabilization event, and once that happens... You know how that went from 08 event.

    For now the COVID-19 is not at a death rate that is any level of concern, however if this S-type prediction is true, we are going to have real problems.. For now, I expect maybe 1-3 renters per 100 to be affected by this.

    1Reply
  • Bjorn AhlbladPro Member
    Investor 路 Shelton, WA 路 Member since 2017 路 6k+ posts 路 6k+ votes
    6y

    @Jay Hinrichs The mayor of San Jose Ca has proposed a bill calling for no evictions for those affected by the virus-you could argue that may be everyone. As LL's we are an easy target these days, but we will not get a break from taxes, insurance, mortgages, gas, and all the other expenses. If the government gives me a break I will pass it on to my tenants, and that is unlikely. We haven't gotten to the bridge yet so I'm saving my huffing and puffing till then.

    5Reply
  • Jay HinrichsBusiness Member
    OP
    Real Estate Consultant 路 Summerlin, NV 路 Member since 2014 路 45k+ posts 路 66k+ votes
    6y
    Originally posted by @Bjorn Ahlblad:

    @Jay Hinrichs The mayor of San Jose Ca has proposed a bill calling for no evictions for those affected by the virus-you could argue that may be everyone. As LL's we are an easy target these days, but we will not get a break from taxes, insurance, mortgages, gas, and all the other expenses. If the government gives me a break I will pass it on to my tenants, and that is unlikely. We haven't gotten to the bridge yet so I'm saving my huffing and puffing till then.

    it will be interesting its not out of the question that govmit could step in to help all involved from landlord to tenant.

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  • Ronald Starusnak
    Property Manager 路 Syracuse, NY 路 Member since 2016 路 601 posts 路 384 votes
    6y
    Originally posted by @Jay Hinrichs:

    @Brian Boyd  I could see some Airbnb landlords get stress tested in the markets that are heavy to convention activity .  it will be interesting to see how they handle cancellations.. and risk having poor reviews if they don't give refunds due to peoples reluctance to travel during this period of time.

    to me personally I think this thing is totally over blown by the US media.. I mean here in Vegas we had our first confirmed case. and it was over an hour on TV interviewing the state health officials.. I mean 1 person in 2.5 million that live in this valley..  And given all the international travelers that come here to me that's pretty remarkable really.  But flip side is many conventions have been cancelled here in Vegas and I hear same for Orlando.

    I think the actual cases are much higher. We're talking confirmed vs not even tested. There are reports that there aren't even enough tests. Many investors can only shoulder so many non-payments or late payments. I think it's important to perhaps start a discussion with lenders now. 

    1Reply
  • Bjorn AhlbladPro Member
    Investor 路 Shelton, WA 路 Member since 2017 路 6k+ posts 路 6k+ votes
    6y

    @Jay Hinrichs I did my taxes last week and was wishing hard for more deductions. "Be careful what you wish for"-I guess those deductions will show up next year?;))

    0Reply
  • Account Closed
    Wholesaler 路 Jacksonville, FL 路 Member since 2019 路 55 posts 路 47 votes
    6y

    The reason I require my tenants to make 3.5X their monthly rent is so they can still pay their rent when unexpected things in their lives happen. Not sure how this virus is going to effect the income of my tenants but at the end of the day it's business. If my tenant gets a cold or the flu I am not giving them a break on the rent as it's their contractual duty to pay me to live on the premises.

    5Reply
  • Jim K.
    Handyman 路 Pittsburgh, PA 路 Member since 2018 路 5k+ posts 路 13k+ votes
    6y

    @Jay Hinrichs

    The last time we had a conversation like this, it was about government workers affected by the federal shutdown. My stance was that if you work for the government, you could have seen a shutdown coming, and you should have been prepared. Perhaps my unforgiving stance was heavily informed by the fact that I used to live in Greece from 2001-2007, the years of the socialist glut of arrogant, lazy, good-for-nothing government workers, when the government didn't even keep track of how many people worked for it.

    I think this situation is very different. This is not the regular comic relief of a showdown to keep the funding coming, something every federal government worker knows is a standard feature of their life that can always get out of hand. This pandemic is an act of God. As landlords, WE would have to be blind not to see this eventually coming and prepare. The world has known that this has been going on since January. My wife has had a great deal of education in infection control and transmission over the years. We've built a large part of our business around renting to health-care workers. We're prepared with the reserves in place to handle this. And in the low C-class segment, we know we're among the most vulnerable landlords to this sort of income interruption from our tenants.

    I'll be going with Option No. 1 with multiple options when it happens to us, allowing a month of missed rent and giving the tenant the option to prorate the rent over the rest of the year, over six months, over three.

    3Reply
  • Jay HinrichsBusiness Member
    OP
    Real Estate Consultant 路 Summerlin, NV 路 Member since 2014 路 45k+ posts 路 66k+ votes
    6y
    Originally posted by @Account Closed:

    The reason I require my tenants to make 3.5X their monthly rent is so they can still pay their rent when unexpected things in their lives happen. Not sure how this virus is going to effect the income of my tenants but at the end of the day it's business. If my tenant gets a cold or the flu I am not giving them a break on the rent as it's their contractual duty to pay me to live on the premises.

    I am not talking about the tenant getting sick.. I am talking about the tenant working for a company whose revenue is slashed due to this virus and has to do temporary layoffs.. Where work force tenants may go a month or so without income but then go right back to work.. And as we know or should know most work force tenants have little to no savings..  If U are pretty certain its a one month interruption how would you handle that?.. have a vacancy and a turn over  have a potential eviction that goes on for a while.. or work with the tenant to keep them in place and pay back rent over time? 

    I have dealt with plenty of tenants that got sick ( cancer) or PSD real bad.. And again those are situations that you as an individual work out in your own way given your financial condition and how you feel about a certain tenant.. 

    my classic was the tenant who told my PM they just had a new baby ( which I believe they did) record cold winter they could not afford heat and rent could I do something.. so of course I say sure.. don't pay two months and add it to the rent and pay over the course of the coming year.. end of two months they up and left  LOL. 

    and for sure I can see how investors that are highly leveraged with little to no real reserves might react differently than those who might own the real estate free and clear or if they missed a month or two of rent its just no biggee

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  • Jay HinrichsBusiness Member
    OP
    Real Estate Consultant 路 Summerlin, NV 路 Member since 2014 路 45k+ posts 路 66k+ votes
    6y
    Originally posted by @Jim K.:

    @Jay Hinrichs

    The last time we had a conversation like this, it was about government workers affected by the federal shutdown. My stance was that if you work for the government, you could have seen a shutdown coming, and you should have been prepared. Perhaps my unforgiving stance was heavily informed by the fact that I used to live in Greece from 2001-2007, the years of the socialist glut of arrogant, lazy, good-for-nothing government workers, when the government didn't even keep track of how many people worked for it.

    I think this situation is very different. This is not the regular comic relief of a showdown to keep the funding coming, something every federal government worker knows is a standard feature of their life that can always get out of hand. This pandemic is an act of God. As landlords, WE would have to be blind not to see this eventually coming and prepare. The world has known that this has been going on since January. My wife has had a great deal of education in infection control and transmission over the years. We've built a large part of our business around renting to health-care workers. We're prepared with the reserves in place to handle this. And in the low C-class segment, we know we're among the most vulnerable landlords to this sort of income interruption from our tenants.

    I'll be going with Option No. 1 with multiple options when it happens to us, allowing a month of missed rent and giving the tenant the option to prorate the rent over the rest of the year, over six months, over three.

    its like airline pilots  they know going in that layoffs are common in the industry.. so they must be prepared.  But for your everyday blue collar worker who gets laid off for a month because the hotel they work at has no business because of this or the catering company has had all their gigs cancelled .. you know what ever the reason.. for me I just know vacancy just kills the returns even if you go a month without rent it tends to be better than a vacancy . and in some areas or asset class its not just missed rents that's the risk its having a vacant house that is subject to looters squatters and getting stripped. 

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  • E.S. Burrell
    Rental Property Investor 路 MI 路 Member since 2019 路 192 posts 路 205 votes
    6y

    When we screen, aren鈥檛 we looking for the best Tenant who knows how to pay rent on time, has a bank account savings with emergency fund money in it, good references , etc. These are the Tenants that I believe we will not have to worry about because they鈥檙e not living paycheck to paycheck. I have Tenants who were laid off when GM went on strike and did not miss a beat. That鈥檚 the whole point in why good LL screen potential Tenants for income, character, and integrity.

    If the Gov鈥檛 shuts down certain employers, a bad tenant will use this as an excuse but a good tenant will get out there and hustle because they have a lot to lose while a bad tenant has nothing to lose. Am I right? @Sue K. and @Marc Winter my online mentors 馃槉

    3Reply
  • Matt M.
    Specialist 路 Easton, PA 路 Member since 2018 路 1k+ posts 路 2k+ votes
    6y

    @Jay Hinrichs

    Jay I was just talking to my wife about your questions. She brought up about tenants being able to collect unemployment or not if their job shuts down due to corona. If that鈥檚 the case, there should be no interruption of paying rent. We would also let someone pay over time if they lost work because of this.

    2Reply
  • Greg H.Pro Member
    Moderator
    Broker/Flipper 路 Austin, TX 路 Member since 2013 路 4k+ posts 路 4k+ votes
    6y

    There is a flip side to this question as well......

    Will tenants pay double rent if their landlord is affected ?  I think we all know the answer is no.  Why is that ?

    11Reply
  • Jim K.
    Handyman 路 Pittsburgh, PA 路 Member since 2018 路 5k+ posts 路 13k+ votes
    6y
    Originally posted by @E.S. Burrell:

    When we screen, aren鈥檛 we looking for the best Tenant who knows how to pay rent on time, has a bank account savings with emergency fund money in it, good references , etc. These are the Tenants that I believe we will not have to worry about because they鈥檙e not living paycheck to paycheck. I have Tenants who were laid off when GM went on strike and did not miss a beat. That鈥檚 the whole point in why good LL screen potential Tenants for income, character, and integrity.

    If the Gov鈥檛 shuts down certain employers, a bad tenant will use this as an excuse but a good tenant will get out there and hustle because they have a lot to lose while a bad tenant has nothing to lose. Am I right? @Sue K. and @Marc Winter my online mentors 馃槉

    What property class are we talking about here, E.S.?

    0Reply
  • Jim K.
    Handyman 路 Pittsburgh, PA 路 Member since 2018 路 5k+ posts 路 13k+ votes
    6y
    Originally posted by @Matt M.:

    @Jay Hinrichs

    Jay I was just talking to my wife about your questions. She brought up about tenants being able to collect unemployment or not if their job shuts down due to corona. If that鈥檚 the case, there should be no interruption of paying rent. We would also let someone pay over time if they lost work because of this.

    PA, they're going to be skipping a holding week when they register for unemployment, Matt. The best tenants in the C'class won't even know it and won't prepare for it because they haven't applied for UC since forever.

    1Reply
  • Jill F.
    Investor 路 Akron, OH 路 Member since 2016 路 2k+ posts 路 4k+ votes
    6y

    @Jay Hinrichs For us these would be handled just like any other hardship payment plan request--  a routine part of doing business.

    3Reply
  • Anthony Rosa
    Rental Property Investor 路 New York City 路 Member since 2019 路 703 posts 路 538 votes
    6y

    What's the difference if its the Coronavirus vs a laid off tenant or a tenant that has another illness or injury and can't work. Either way they aren't working and although I sympathize I'm not a charity. Lenders don't want to hear my hardship excuses they want their loans paid.

    10Reply
  • E.S. Burrell
    Rental Property Investor 路 MI 路 Member since 2019 路 192 posts 路 205 votes
    6y
    Originally posted by @Jim K.:
    Originally posted by @E.S. Burrell:

    When we screen, aren鈥檛 we looking for the best Tenant who knows how to pay rent on time, has a bank account savings with emergency fund money in it, good references , etc. These are the Tenants that I believe we will not have to worry about because they鈥檙e not living paycheck to paycheck. I have Tenants who were laid off when GM went on strike and did not miss a beat. That鈥檚 the whole point in why good LL screen potential Tenants for income, character, and integrity.

    If the Gov鈥檛 shuts down certain employers, a bad tenant will use this as an excuse but a good tenant will get out there and hustle because they have a lot to lose while a bad tenant has nothing to lose. Am I right? @Sue K. and @Marc Winter my online mentors 馃槉

    What property class are we talking about here, E.S.?

    @Jim K.  You pick 馃槉 

    3Reply
  • Account Closed
    Member since 2019 路 1k+ posts 路 1k+ votes
    6y

    @Jay Hinrichs

    I do my best to screen out the paycheck to paycheck applicants. I do have a fair number of masters / PhD students but by be good news there (for me, not then) is that most have student loans and the government will gleefully put them further in debt on the regular schedule. Rent is due regardless of the toilet paper count at Costco.

    0Reply
  • Bill F.
    Investor 路 Boston, MA 路 Member since 2015 路 1k+ posts 路 3k+ votes
    6y

    @Jay Hinrichs great question for the community. 

    The answer depends on the tenant class, the nature of their job, location, and the individual. At first approximation I think you are right to believe that in most cases a bit of forbearance is the right call, but only if they ask and can back it up. I wouldn't go around advertising the option of not paying

    Is kicking an airline pilot living in Buffalo to the curb in the middle of March a wise choice? Heck no. 

    What about an accountant in Austin? Different story.  

    Also, a bit off topic, but common refrain of 'will the bank give me a break on the mortgage? I'm running a business here, not a charity' kinda puts the cart before the horse. 

    If one views RE as a business, then the tenant is the customer. In a host of other industries, customers are extended credit all the time; 60-90 day terms aren't uncommon, RE is an outlier in this regard. I bet there are lots of warehouse owners who are letting rents slide around the Long Beach area right now due to the impacts of COVID-19 and the trade wars. It is the logical thing to do. The same idea holds true for residential RE, I think. If the tenant is worth keeping and has a high likely hood of recovering, extend credit, this isn't that big of a deal. 

    If it is OK to demand that the tenant has cash reserves to pay there bills, then that also applies to the REI as well. If the REi can't cover 1-2 months of delayed rents, then that is an entirely different can of worms.

    Also, what are the costs of evictions, turnover, screening, and placement? Those costs play a big role in this decision as well. That's why in the CRE space, payments or both rent and loans are more flexible. There is not free lunch and there is an opportunity cost to everything.

    6Reply
  • Jared Wilbraham
    Rental Property Investor 路 South Florida 路 Member since 2020 路 9 posts 路 0 votes
    6y
    Originally posted by @Brian Boyd:

    I think this post assumes that the banks are going to give the owners a break on the mortgages? If not, then this post assumes small businesses are charities that give away housing for free. The majority, if not all, of the members on this site are here to make money and are doing so through sacrifices that include saving their own money to invest in these properties. For profit entities vs. Non or Not for Profit companies are very different in their missions. 

     A very short and concise way of looking at this serious matter. Thank you.

    0Reply
  • Jay HinrichsBusiness Member
    OP
    Real Estate Consultant 路 Summerlin, NV 路 Member since 2014 路 45k+ posts 路 66k+ votes
    6y
    Originally posted by @Jill F.:

    @Jay Hinrichs For us these would be handled just like any other hardship payment plan request--  a routine part of doing business. 

    sounds like you have a plan and  deal with hardships  from time to time..  I just know how much it costs us when we have a vacancy..  And I was thinking the answers would be more like..

    " Hey up to this point great tenant"  but their job is affected by the Virus.. seems like many landlords would actually be money ahead to work with them rather than boot them out and risk an eviction and turnover..

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