Wholesaler · Kansas City, MO · Member since 2015 · 41 posts · 13 votes
So Ive had my first Covid-19 related event happen, One of my tenants had her hours cut at work and had her roomate loose her job so she cannot make rent anymore. She needs to break the lease and move back in with parents. She qualified well and passed a credit check no problem, signed a 16month lease as well. Im a new landlord (three years, three units total).
finding the balance between "you signed a lease so pay up" and "its ok go ahead and move and il relist it" is a bit of a challenge, especially in these times.
im thinking of offering maybe a 40% discount for a couple months and seeing what happens with all of this. I dont really like the idea of trying to get a decent tenant at the moment. luckily this property (duplex) will still cashflow at 40% rent reduction so its better than nothing.
@Seth Larson your tenant has said they can’t pay. They are asking you release them. If you do not, and they can’t pay, they won’t. And in the current Tate of affairs, landlords can’t do anything.
Therefore, you will have a non paying, frustrated tenant caged in. They start to let your property go, while not paying, while you can’t evict.
@Seth Larson can you imagine a scenario where the tenant refuses to pay anything, destroys the place, and essentially becomes a protected squatter? If so, let them go now.
@Seth Larson can you imagine a scenario where the tenant refuses to pay anything, destroys the place, and essentially becomes a protected squatter? If so, let them go now.
I dont operate my business out of fear.. and i screen my tenants.. so no.. and im struggling to find the value in your comment, care to elaborate?
@Seth Larson your tenant has said they can’t pay. They are asking you release them. If you do not, and they can’t pay, they won’t. And in the current Tate of affairs, landlords can’t do anything.
Therefore, you will have a non paying, frustrated tenant caged in. They start to let your property go, while not paying, while you can’t evict.
@Seth Larson we have differing opinions, and that’s okay. And to be honest, I’m not sure what Exactly I would do. I would just hate to be in the position of the worst case scenario. That’s all.
It seems that you’re okay with only receiving 60% of the rent since you will still cash flow, so offer her that and go from there. Just communicate and be clear to her what the terms are (ex. 40% deduction for 2 months & doesn’t have to be paid back, etc.)
Monkton, MD · Member since 2014 · 32 posts · 15 votes
6y
Is there any hope of renting it to someone else or has COVID shut down your area completely? If you can find a replacement at 100% of rent, maybe it's worth it to cut the tenant loose.
Investor · Akron, OH · Member since 2016 · 2k+ posts · 4k+ votes
6y
@Seth Larson Especially with the pandemic, I'd let that go, it wouldn't look good for you making that arguement in court. What's most important is to regain possession of the property
Rental Property Investor · Atlanta, GA · Member since 2019 · 67 posts · 20 votes
6y
@Seth Larson I don’t think the discount is a bad idea if the tenant can and is willing. I recently had a tenant who had her job affected by the pandemic. However, she agreed to pay half of the rent on the 16th of the month, and the remainder at the end. Now obviously this is a late payment, but it’s better than nothing. May be another option for you.
At the end of the day, if the person is genuinely affected by this pandemic, and really has no way of paying and wants out, then I’d just let them go. It’s better than dealing with an angry tenant anyways.
All good responses and advice here. I agree with the percentage idea, if you can get it take it, if not let them go and take possession. As stated here, if you can get them out quickly that's a huge plus. Here in NY the governor just extended the "no eviction" law until August 20th and I have a few tenants playing that card. depending how hard hit your state is, we are all going to potentially lose money that we may never get back.
Property Manager · Lancaster, PA · Member since 2016 · 72 posts · 75 votes
6y
Have they applied for unemployment? They should receive unemployment from their jobs, plus the additional $600 from the federal government. What about their $1200 stimulus checks/deposits that they should have received?
I don't like offering a discount. I would prefer communicating with them and finding a good solution for everyone. How much can they pay this month? Make a payment plan that will work for them and waive late fees if they stick to the program.
For example: if rent is $1000 per month but they can only afford to pay you $500. Then accept the $500 and have them pay $1100 for the next few months until they are caught up. That should allow for their unemployment benefits to kick in or for this shutdown to end.
Is NY the only State where the Governor suspended Evictions for 6 months? I guess now I need a little advice, what would you guys do in this situation. we have completely lost our leverage to to use that as motivation to get a tenant back on track. Yes, when things get back to normal, we can proceed, but at the moment we can't do anything until August, and even then the courts will be so backed up - it's crazy.
Real Estate Attorney and Investor · Scottsdale, AZ · Member since 2011 · 23 posts · 15 votes
6y
@Seth Larson
If you think you can find another paying tenant it seems like you would be better off cutting a deal to let her out of the lease. For my units, we maximize profit by minimizing low/no rent periods and out of pocket expenses and then keeping paying tenants as long as possible.
I’ve even committed to partial deposit refunds if the vacating tenant meets all my conditions at move out - no damage, cleaned spotless, etc. in order to have the unit re-rented as quickly as possible.
Wholesaler · Kansas City, MO · Member since 2015 · 41 posts · 13 votes
6y
Thanks everyone for the responses, Im still going back and forth with the tenant discussing options. making sure she has explored all sources of income.
On a related note: How hard is it to get a unit rented at the moment? I dont have a ton of reserve funds to have a vacancy for 3-4 months.
Huntsville, AL · Member since 2018 · 577 posts · 864 votes
6y
We had one tenant have difficulty paying their April rent - we immediately offered them the option of breaking the lease and waiving the penalties/fees attached with breaking the lease early to avoid any chance that they would just stay in the house essentially "rent free" for any extended period of time; interestingly, after we offered to let them out of their lease, their April payment was made in full - not sure if this was a coincidence or not, but we got the full April rent paid without any threats or negotiating. I would gladly let the tenant leave voluntarily and list the property rather than receive partial rent or develop a disgruntled renter.
Rental Property Investor · Concord, NC · Member since 2016 · 1k+ posts · 3k+ votes
6y
I've listed two rental SFHs in the past month in Concord, NC. My phone blew up both times. I do list at around 90% of market rent to attract interest and select great long term residents.
Real Estate Investor · Williamson County, TX · Member since 2011 · 1k+ posts · 961 votes
6y
@Seth Larson I imagine your tenant is not going to stay and your decision is whether or not to offer her a deal to end her lease...my daughter bought out of her lease with a 2 month rent penalty with an apartment complex. She may or may not take the deal. She may not have the money to do so. She may have to risk you filing a judgement. I think you already signed up for the risk you took in allowing roommates dependent on each other to afford rent and your tenant is acting honorably in communicating vs sneaking out in the middle of the night. You can lower the rent to what she can afford with the stipulation that you can show the place to prospective tenants and give her a reasonable notice to move once you find someone. While she tries to find another roommate. That might work. Preserve her credit and give you a little break on vacancy costs. Or have her move back with her parents and pay partial rent during vacancy. She knows you will do your best to fill the unit to get back to full rent payments. Kind of win-win lose-lose.
Thanks everyone for the responses, Im still going back and forth with the tenant discussing options. making sure she has explored all sources of income.
On a related note: How hard is it to get a unit rented at the moment? I dont have a ton of reserve funds to have a vacancy for 3-4 months.
I'm also in KC with a soon to be listed rental.... I highly doubt you're going to see that kind of vacancy unless something is wrong with you unit. People are looking for change, not a ton of rentals available and I'd wager things will stay steady as we head into the summer.
If you're willing to take such a large discount to fill vacancy do some math and find a lower monthly price to really set yourself apart as a plan b.
What I wouldn't want is a tenant who can't pay rent feel like there stuck in your unit because they can't afford to pay a penalty. They'd likely have motivation (financially) to return the unit pristine to get back their deposit and it'd lower your turnover costs significantly. Also would be great way to get them out quickly, sooner out sooner clock ticks for deposit return.
Evictions on the other hand... Going to take time an money. Not impossible, but I wouldn't be surprised to see it drag on for months with a backlog and probably reduced capacity once they're started back up.... Which who knows when that will be.
If you read this far, your value here is getting them out asap...low turnover costs by them leaving it clean...and then listing asap.
Is NY the only State where the Governor suspended Evictions for 6 months? I guess now I need a little advice, what would you guys do in this situation. we have completely lost our leverage to to use that as motivation to get a tenant back on track. Yes, when things get back to normal, we can proceed, but at the moment we can't do anything until August, and even then the courts will be so backed up - it's crazy.
What I'm doing is starting to invest elsewhere and will eventually sell off my NY portfolio. I'm really sick of running my business in a fair and ethical way and getting punched in the face. I'm sick of trying to figure out ways to mitigate my business risk when the deck keeps getting stacked in a unilateral way. In NY, landlords now have all the financial and legal responsibility for their properties but none of the control.
To the OP - this is a good time to evaluate the "benefits" of a term lease versus M2M. I only offer M2M leases. I don't see any upside to a term lease, and I do not want a tenant living in my property if they no longer want to be there. I elaborate here.
Investor · Chicago, IL · Member since 2009 · 1k+ posts · 1k+ votes
6y
Great post. In these times, landlords need to do a workout. Breaking a lease is not good. But it is responsible that the tenant offers to give you back the apartment, rather than continue to rack up unpaid bills. Try the rent reduction. And then even possibly allow her to vacate. I have a Covid application package that makes tenants prove-up their hardship, else there could be false "claimants."
Unemployment has spike to high levels, so most sizeable landlords are going to have defaults. As states open, some of this will heal itself, but it is predicted that unemployment levels will remain high for awhile.
Rental Property Investor · Canton, OH · Member since 2017 · 1k+ posts · 1k+ votes
6y
@Seth Larson
Did she receive her stimulus check? Any unemoyment? If so, could she use that to get by for another month or two until she lands on her feet? If not, I would weigh the opportunity cost of lowering her rent, versus allowing her to break her lease (i.e. cost of vacancy). If you do allow her to break her lease, just be professional about it. I would explain that she signed a legal agreement however considering what's going on in the world these days you want to work with her. Ask her if she can clean the place so it's basically spotless since you're allowing her to do this.
Specialist · Plano, TX · Member since 2020 · 2k+ posts · 861 votes
6y
Do you know if they qualify to receive the stimulus check and/or unemployment? If so, these aid could help them with rent. And if you're able to offer the 40% discount you mentioned, your tenant should definitely be able to make rent rent. I think it's very considerate of you so offer a discount and think of ways to help your tenant.
So Ive had my first Covid-19 related event happen, One of my tenants had her hours cut at work and had her roomate loose her job so she cannot make rent anymore. She needs to break the lease and move back in with parents. She qualified well and passed a credit check no problem, signed a 16month lease as well. Im a new landlord (three years, three units total).
finding the balance between "you signed a lease so pay up" and "its ok go ahead and move and il relist it" is a bit of a challenge, especially in these times.
im thinking of offering maybe a 40% discount for a couple months and seeing what happens with all of this. I dont really like the idea of trying to get a decent tenant at the moment. luckily this property (duplex) will still cashflow at 40% rent reduction so its better than nothing.
thanks for any advice.
Develop a promise to pay program. If they want out just get them out and move on. Keep the deposit and call it a day.