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- Cody, WY
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Why is unpaid rent so high?
I've read news reports that say up to 20% of rent has gone unpaid in the last couple of months. I manage 350 units and all but one has paid (we extended grace far longer than normal but now we're in the process of eviction). I network with hundreds of property managers around the country and almost all of them are in the same boat as me.
My only thought is that the higher percentage of unpaid rent must be with private Landlords. Maybe they don't run a tight ship and Tenants are taking advantage of the situation?
What's your experience? What are you hearing in your market?
And do you expect it to get better now that COVID restrictions are being lifted, or will it continue to worsen?
- Nathan Gesner
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I manage around 100 units in my market. When the quarantine hit, we proactively reached out to every tenant and listed all kinds of community resources, everything from food pantries to childcare help to rent assistance. We asked any tenants who were expecting to have trouble paying rent in May to contact us and work on a plan together. We had about 10 do so, and we came up with payment plans for each, and we had a couple meals delivered to those tenants as well. Every one of them paid ahead of the agreed upon schedule. So- we had about 10% pay late, but nothing went unpaid.
I am wondering if either lower income pockets were hit especially hard or if HUD basically giving a pass to all subsidized housing skewed the numbers that way.
- Corby Goade
Many of my residents were under the impression that they don't have to pay rent because we can't evict them yet, despite us being very clear with what the laws cover. The community I manage has 239 units.
5 of them have not paid rent since March. About 10 are still making payments on May and have not paid June. This was with payment plans, follow up, and advising residents on emergency assistance. Even some of my residents didn't bother to apply for unemployment until a week ago or didn't bother applying for rent assistance.
I have had multiple tenants get very angry/threatening with me because we "weren't being understanding" even though we gave payment plans to everyone that asked. I'm not sure if it's the community/area but there have been lots of people that seemed to think they were entitled to not pay, ignore us, not reach out, and not bother to find help for themselves.
@John Farady
Sadly I am very familiar with Seattle and there socialist policies. Thank God my rentals are outside of the city or I would probably be in very tough shape.
Seattle was super dangerous with homeless epidemic. Now people are literally running police out of the city such as Capital hill. Police are terrified and many are calling in sick etc. So glad I do not live in Seattle and even more glad I did not become a police officer.
My advice for anyone who owns Seattle real estate is to sell asap! But then again what do I know??...
All 3 properties continue paying on time, as usual. All 3 household have benefited financially from Covid stimulus, no one adversely affected yet (one retired, 1 on SSI, 3rd is "essential workers" (grocery clerks). I did touch bases with everyone at the beginning of this, & have been checking in periodically while it's been going on. Since I have only 3 properties that's not hard. Properties are in rural northern CA, where incomes are low, & housing is in extremely short supply. No good tenants are inclined to play games if they have a nice place at an affordable rate.
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I've been warning people from the beginning. You can't lay off millions of people, kill the economy, revive the economy with trillions in "free" handouts, and expect no repercussions. I'm no financial wizard but it just violates the foundational laws of financial responsibility and there will be consequences.
Two months ago I said we would see a quick, strong recovery this summer but we will eventually pay the Piper.
- Nathan Gesner
It's so frustrating that both parties keep printing money. Inflation will happen and at this rate the US dollar won't be the world's currency forever. China and Russia see this and have been buying A LOT of gold (which is very wise of them).
You're right - it's not going to be pretty and it honestly saddens me.
This is why the courts should have remained open to hear evictions. If a tenant can't prove they filed for unemployment, applied for assistance, kept in contact with their landlord, etc. - then why should they stay in the property? On top of all this, there are people who have money, but are spending it elsewhere. They hear "eviction ban" and they think "free rent". Hardship relief should be proven through due process, not given automatically.
The most frustrating thing was that we had court dates for 3 evictions that were filed before covid. So those people have gotten to live rent free in my building for an extra three months. It's ridiculous that even existing cases are being ignored and we have no recourse.
I have been hearing news reports and politicians quoting them. They are claiming a high non-payment rate. Reality - the NMHC rent tracker is tracking payments from large complexes using Yardi software. They were above 90% each month during this crisis. For smaller landlords, I surveyed my membership at Chicago Creative Investors Association and found that April collections were 94% on a 97% occupancy. May was about 90% when I surveyed on the 7th - several owners said their info was misleading because they had rents due on the 15th. In any case, I think the news took a snapshot in time (early in the month) and then spread it around like it was a permanent picture of reality. It served their purpose of making the situation look horrible and the impending threat of evictions huge.
My rents have been slow but all my tenants have paid at least the majority of their rent.
- Real Estate Broker
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The problem is that media is such a mess, I can't tell if they're manipulating facts to push an agenda if they're just really bad at their job!
- Nathan Gesner
100% paid every month this year except 1 in June, not covid related.
Give them ONE chance and no more. Over-indulging tenants will only make it so they feel the rent is not a priority.
To throw another data point out there, we collect rent for thousands of small independent landlords with portfolios that range between 1-20 units across the US. Since April, 98% of rent payments on our platform have been received on time, with 100% being received by the end of the month.
I don't put much stock in the numbers released by the National Multifamily Housing Council for a variety of reasons. One being after the bombshell they released in April that only 69% of tenants made their payments on time, they changed their methodology to include partial payments, payment plans, and using security deposits which bumped up May and June to 80%.
Private landlord. I have 4 tenants in 2 properties in Syracuse NY and all but one has not been late. The one late rent in May was due to her being put on a 14-day quarantine because her mother (doesn't live with her) tested positive for COVID. She contacted me and didn't know how her work would respond and so she feared she might be late for May. I told her we'll work it out once she knows more. She paid me May on the the 26th (I removed the late fee's) and then June's on the 5th a few days ago. One tenant communicated she had lost her job and wasn't sure when UI would kick in, but she didn't end up being late.
@Nathan G. We manage about 250 SFH in the Savannah area and we only have 1 tenant that couldn't pay and is going on a payment plan.
This is the single biggest factor which determines the action a tenant takes when things go badly. Renting to unreliable tenants is just asking for trouble down the road.
I screen thoroughly. If they don't make the standard, I reject them and wait for a better applicant. I believe that is why all my tenants have paid. Some had to pay late and in multiple payments, but I forgave late fees and they all worked with me.
As always, quality matters.
Your Comment: "My advice for anyone who owns Seattle real estate is to sell asap! But then again what do I know??..."
You're a smart man. ;-)
I was heavily invested in Seattle with properties in Fauntleroy, Magnolia, Madison Park, Columbia City and others but have sold all of them. The social risk far exceeds the monetary profit nowadays in Seattle. I don't regret one bit about selling. I've found Phoenix/Mesa and the San Antonio to Dallas corridor to be far more landlord friendly and realistic.
I'm invested in syndication, multifamily opportunities. The General Partners in most of my deals used conservative underwriting as part of their proforma combined with abundant reserves collected from investors on the front end. Now with Covid-19, they have implimented solid strategies to do workouts with those who needed to pay reduced rents or forebearance. These represented less than 3 % of the total units under management. My take away is, the best syndicators in MF, choose projects in cities with growing employment, no state income tax, great school systems and increasing but still reasonable rents. Texas and Florida seem to be the best fit for that criteria. Unfortunately , my home state of California and high tax New York, do not make the cut. California is the appreciation bet. In, Santa Clara County where I live, the median price is $1,335,000 for a SF home. Run the numbers and your negative hundreds of dollars. However, most SF & MF properties since the 2008 crash have double in price. Email me for the best performing syndication general partners.
I'm sure you can tell. I know I can!
I don't count any of those things as rent being paid, and neither does my balance sheet.
We received all rents for April and May although some were pretty late. We have received about 80% of June rents. Two tenants always pay mid month and I expect them to pay as usual. That leaves two. One of those is a new property and they haven't been "trained" yet. They're inherited and there's no contract. I think they'll pay. Another property, the couple is getting married and going on their honeymoon. I'm apparently funding that. When I asked when I could expect June rent they told me of their travel plans and that they would be out of town. We've had these tenants for a while and they tend to be shaky in on time payments but always pay it eventually. In July, we're planning on going back to collecting late fees for those that don't pay on time. I also need to get several tenants on our contract. Here in Georgia, we don''t have an eviction ban.
I read that a similar article: "69% of Rent Unpaid!" But then read deeper. Here's what I recall:
1. They counted it "paid" only if it was paid on the 1st. Paid in full on the 2nd? Counts as "not paid."
2. If renter paid $999 of a $1000 lease… it was counted as "not paid." No partial rents counted as payment.
3. Their baseline was that only 82% of rent is EVER paid on time (who has that baseline?)
4. They EXCLUDED all Section 8 payments (logic being those are always paid on time anyhow, so they were excluded).
100% of my landlord friends (and me) have 100% collections here in Northern Colorado. And as the depth of comments here support, this "non payment" is a very localized and fortunately rare happening. Lesson in this for all of us… careful with those headlines!
Giving my son's roommate three months but that's a gift to son who doesn't want another roommate. Said roommate will earn the next two months by working for us. After that he has to find a job or leave. Gave another tenant half off of one month until unemployment kicked in. After July, if they are not employed, they too will have to leave. (Extra unemployment runs through July.) Everyone else (out of 13 total) paying on time.