Are C class tenants in worse shape than b class?

Question

I have eight active sf rentals. Six are c class and two are low B. Last month the b class tents both came through with full payments, but two of the six c class tenants could not pay due to Covid Layoffs. What are your experiences with c class tenants? How do I tell the delinquent tenants they need to pay if they want to stay ? I’d hate to put them out, plus eviction court is temporarily cancelled.

Corby Goade · Answer

We don't really invest in class C areas, but have had a few tenants that have struggled over the past few weeks. A couple things to keep in mind;

-You need to gently remind them that, after they've bought themselves food, you are to be paid next. Before their car payment, before their heating bill (most utilities aren't allowed to shut off service right now anyhow).

-You should have an amicable business relationship with all of your tenants, not a friendship, but they shouldn't be afraid to communicate with you if there's trouble. Make sure they know you will work with them to find a solution to their issue. I find that creating a plan with steps that they can fulfill within a  specific time frame, which in turn, sets you in to motion- either with a positive or negative consequence, works well.

-Finally- remember that they are human beings and we are all struggling in some way right now. If you CAN work with them, you should. We have several tenants right now who have been traditionally pretty solid. The ones who notified us that they are struggling to pay rent and are working on it, we sent them all meals and a note telling them that we are here to help. All of them got paid up within a week. Lots of landlords forget that we are in the customer service business and you catch more flies with honey. It's easy to threaten tenants and create stress- that just keeps them from communicating with you.

Best of luck!

Account Closed · Answer

Yep, generally they have much lower personal reserves and most are in labor/service jobs that you can't do working from home.

For my C tenants in temporary financial distress I have waived late fees. We both know my hands are tied on evictions, so no sense in getting hostile about it.  I have one tenant that constantly lies and makes up excuses, so I reminded them I can still file the eviction paperwork with the court right now, which is enough to get them on the dockets that future landlords will see. That magically got them back on their feet.

Matt Ziegler · Answer

@Corby Goade: I respect your approach, we have several SFH and a couple of duplexes. The relationships and good communication have been key over the years, especially now. We are in the people business, and treating people fairly and with compassion can't be overlooked. It is just good business.

Account Closed · Answer

Not sure about Dayton area, but Franklin County (Columbus Ohio) was still accepting the filings all through the pandemic, and you get a case number. The courts just aren't in session yet.

Aaron Burns · Answer

The majority of my units are class C and I've only missed 1 month of rent out 10 units over the last 2 months.  Many of my laid off tenants are making almost as much, or more, in unemployment.

Cj Powderhorn · Answer

I have properties in Memphis - one A and the rest are probably C to D based on this forum.  I actually sent an email to my property managers prior to ANY laws regarding late rent, eviction, etc. to NOT charge late fees and work with the tenants.  I do believe as a landlord that I have a responsibility to my tenants-that is why I am conservative with my reserves, etc.  I have worked with tenants in the past who have lost their jobs and had other hardships.

When I have to make a major repair (replace a roof) and the tenant insists on being there, I give them a $50 discount at the end of the project on the next month's rent.  Does if really matter to me? No.  But the good will it builds for someone living month to month makes a huge difference.  The tenant in this property is in a 'bad' area in Memphis and he has been there for 8 years!

is it both smart  and compassionate business? I think so.  To us, it may be one of one, one of 10,or one of 100 rentals but to the tenants it is their HOME.  Turn the tables a bit and think how you would feel in that same situation. I have friends who are PA's, dentists, business owners and they are in the same situations right now - albeit on a grander scale-but not being able to pay your rent/mortgage or have to sell your home if it is $500 or $5 million is a scary place and a bit of compassion may be the difference between a renter who stays for years or a renter who eventually is evicted and leaves the home in poor condition.

I received all of my rents for April and May. I also give credit to my property managers as they added the ability to pay with a credit card - and they are paying the fees in lieu of charging the tenants or owners.  They also treat everyone with respect which I think has built enormous credibility.

Jumping off my soapbox now :) Don't forget tomorrow is Mother's Day!

Jeff Schechter · Answer

We run a successful Turnkey company in Indianapolis.  We're almost predominantly C-class, and have had very few issues.  Properties are renting up easily and quickly (with self-showing technology).  The only issue we are having is with one of our B-class tenants who lost her job.  Like mentioned above, this is likely due to government programs, unemployment benefits, etc.

CJ M. · Answer

@Gordon Starr

It depends. I've had both B & C class tenants who were impacted by coronavirus. I will say the C class units were way easier to re-rent though.

Karen F. · Answer

The Class C tenants probably are getting stimulus money, plus unemployment with enhanced benefits, also may be eligible if laid off for SNAP and Medicaid.  Communicate this to them.  Stay in close communication with them.  Let them know if there are other bills they can defer = for example, utility bills, car payments.  They'll pay when they have the money - which may be any minute.

Gordon Starr · Answer

All very interesting.. food for thought, then action.

Are C class tenants in worse shape than b class?

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