Why is unpaid rent so high?

[Nathan Gesner]

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?

[Barbara Housewright]

We self manage six rentals in Florida. All of our year round tenants have paid early or on time but our AirBnB has been empty since March. We paid full refunds to our people who cancelled during Covid but we are looking at an empty rental probably until season in January. 

[Benjamin L.]

It is lower end properties that are seeing late payments. The other issue is that people are taking longer to pay  rent, so by June 6 it may be 20 percent late, but by the end of the month, most people are caught up. 

[Ken Goodman]

Private landlord w/nine units on the east coast.  100% rent collected through June.

[Susan Maneck]

One of the reasons rent was slow is that the stimulus and unemployment checks were slow to get to people. For most of my tenants enhanced unemployment paid better than their jobs, but if they aren't getting those checks they are in line at the food banks. Where I expect problems is around September and October. Many of my tenants work for the local schools and expect there will be fits and starts when they reopen and these are hourly employees, not like the teachers who get paid regardless. 

[Marie London]

2 out of 9 tenants in Baltimore paid :(

[Matt J.]

In Duluth, MN - 6 units, 6 fully paid for both April and May. And I've heard from other landlords in the area that they've had no issues receiving payment either. Seems like media hype to me to say there's a massive drop in rent collections. Heck, a lot of people right now are making more on unemployment and with their stimulus checks than they did when they were working, so why would they not have money to pay their rent the past couple of months? 

[Bill F.]

Originally posted by @Nathan Gesner:

Originally posted by @Mary M.:

Not sure your sources, but the stats I am  seeing says about 93% of rent is being paid. 

You can track it here https://www.nmhc.org/research-...
ps - i am in the middle of a 1031, but before I closed on my downleg I was at 100% collection in my 10 units 

I'm referring to news articles that cite numbers like 20% or even as high as 30% of renters not paying.

nmhc shows almost 20% haven't paid rent by the 16th of the month so maybe journalists write the stories early in the month and never follow through to the end when tenants catch up.

As the saying goes, there are lies, damn lies, and statistics. Looking at one number in isolation is meaningless. 

A benchmark must be used provide context for the analysis to have any usefulness: 

This shows the benchmark is between 83-82%. Now the change in methodology that was mentioned is valid, but since the data they collect for payment up to March 6th 2020 was 69%,

and that occurred before the stimulus checks were cut and the data methodology was changed, we can make an assumption, that at least for April, May, and June, that the apples to apples comparison under the original methodology isn't lower than that. 

So the actual unpaid rent has changed around 10% due to COVID. But that is just for payments by the 6th of the month. 

At the end of the day, all that matters is that your tenants don't get behind on rent, so the above graph shows that rent collection has declined 1-2% from this time last year. 

So the real question is , why has collections only fallen such a small amount? 

I'd hazard to guess that since this survey is of professionally managed apartments and that professionally managed apartment buildings tend to be more C+, B, A class that it is probably a fair assumption to say that COVID hasn't hit these areas as hard as the more fragmented smaller landlord space.  

[Ray Slack]

Private Landlord and all 15 tenants have paid.. While some were late all paid.  Waived late fees on those that paid before the end of the Month (May) 

A few thought they didn't need to pay because our state suspended evictions. Once we explained that we would still file eviction and it would remain on their credit report for 7 years and the actual eviction would take place in July when evictions began again they would have a judgement against them for the back rent.. They paid too. 

[Laura Verderber]

I've got 6 rentals spread out over FL and AL, so take my small sample size for what's it worth. But all of my tenants have paid every month. One has been paying late but she had did that occasionally before coronavirus hit. I proactively reached out to tenants when all this started. I waived late fees and didn't raise rent when it was time to renew. All of my tenants stayed in place so I had no vacancies. I'd like to think it's because I do credit checks and B class properties, but I suspect it's more because I own in more landlord friendly states.

[Steve Dearing]

I own 70 units in Ohio, all paid but one.

[Richard Prillerman]

I had an interesting situation. Tenants couldn't pay rent on April 1 and so notice was sent to them along with a list of resources to help with financial assistance. It actually turned out they had genuine issues with their bank accounts being compromised. Issue was straightened out and ultimately got full rent payments for both April and May and everything has been fine since. It's times like these when I really appreciate having good tenants.

[Susan K.]

Originally posted by @Nathan Gesner:

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!

All of the above!

[Ed B.]

deadbeat, worthless tenants! I hate

[Philomena Crea]

@Wesley W. Could you post a copy of your letter

[Ed B.]

Nathan, I have to take offense at your suggestion that possibly some landlords  "don't run a tight ship and Tenants are taking advantage of the situation?"  I manage properties in Oregon and California, and in both places evictions are stalled.  Courthouse in California isn't even open!  Nobody knows when things will reopen--it's up to the governors.  There certainly are some tenants taking advantage of the current ban on evictions, but blaming landlords is unfair when they are at the  mercy of the pandemic and

[Debbie J. Skora]

It seems there is a big disparity between multi-family and single family housing rentals.  I have all single family and have received 100% of rent.

[Debbie J. Skora]

Originally posted by @Ed B.:

Nathan, I have to take offense at your suggestion that possibly some landlords  "don't run a tight ship and Tenants are taking advantage of the situation?"  I manage properties in Oregon and California, and in both places evictions are stalled.  Courthouse in California isn't even open!  Nobody knows when things will reopen--it's up to the governors.  There certainly are some tenants taking advantage of the current ban on evictions, but blaming landlords is unfair when they are at the  mercy of the pandemic and

Nathan's response to anything is generally that any issue you might be having is because you don't know how to landlord.  Don't take it personally!

[Wesley W.]

Originally posted by @Ed B.:

Nathan, I have to take offense at your suggestion that possibly some landlords  "don't run a tight ship and Tenants are taking advantage of the situation?"  I manage properties in Oregon and California, and in both places evictions are stalled.  Courthouse in California isn't even open!  Nobody knows when things will reopen--it's up to the governors.  There certainly are some tenants taking advantage of the current ban on evictions, but blaming landlords is unfair when they are at the  mercy of the pandemic and

 Self managing is not for the faint of heart, and there is a lot to know to do it profitably and sustainably.  ALL of us have made tons of mistakes along the way to get where we are now.  I would argue that rents not being paid due to a landlord "not running a tight ship and tenants taking advantage" is not anything new, or unique to this situation.  There are literally hundreds of posts on this forum that reinforce that idea.  I don't think he's blaming landlords.  The tenants are the ones not fulfilling their contractual obligations.

[Wesley W.]

@Philomena Crea

It's really nothing special.  It's a nearly verbatim copy of @Brandon Turner's found here.

[Remington Lyman]

Originally posted by @Steve Dearing:

I own 70 units in Ohio, all paid but one.

 Where are your units located?

[Corby Goade]

@Brett Lee Thanks! Landlords tend to forget that our tenants are the people who make this all possible. Find good tenants and treat them like human beings (rather than the "lord of the land") and everything becomes so much easier!

[Nathan Gesner]

Originally posted by @Ed B.:

Nathan, I have to take offense at your suggestion that possibly some landlords  "don't run a tight ship and Tenants are taking advantage of the situation?"  I manage properties in Oregon and California, and in both places evictions are stalled.  Courthouse in California isn't even open!  Nobody knows when things will reopen--it's up to the governors.  There certainly are some tenants taking advantage of the current ban on evictions, but blaming landlords is unfair when they are at the  mercy of the pandemic and

If it doesn't apply to you, why would you take offense?

Before COVID, there were plenty of Landlords running poor businesses. They don't screen, or they do it poorly. They let tenants pay whenever they want, sometimes going for months without a payment. They let renters move in friends and family without permission. 

When a Landlord runs their business poorly, a situation like COVID will only exacerbate the situation. The tenant knows the Landlord is weak, so they use COVID as one more excuse to pay late - or not at all.

[Joe Splitrock]

Originally posted by @Nathan Gesner:

Originally posted by @M Jane Garvey:

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.

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! 

 I used to think it was agenda, but I can't even figure out what agenda they have anymore besides sowing discord. I realize now it is about manufacturing stories and creating click bait. There is also the reality that journalism as a profession is dying. Anyone with a computer can be a journalist. Editors and fact checkers are a thing of the past. You can write a fictitious story and just state "an unnamed source familiar with the details" as the entire basis for the article. There is little legal recourse for people writing inflammatory, false or damaging articles. In the old days when a journalist got caught lying, their career was over and they faced slander lawsuits. Somewhere along the way we shifted from news to opinion based information and it is driven by clicks using social media to drive the demand. 

Connecting this all back to real estate... It is crucial that a landlord, property manager or investor protect their image on social media. You can be crucified for a single comment taken out of context. It is important for us to combat the false narrative with the actual reality. People are paying rents. Eviction is primarily a tool to remove irresponsible people or trouble makers who make bad choices. It is not used to throw good people with hardship out of their home. Landlords are good people who care about their tenants. Are there exceptions - yes in everything in life. But if the last week has taught us anything, it is to not judge the majority based on the minority. One bad landlord doesn't mean all are bad, just like one bad tenant doesn't mean all are bad.

I will get off my soap box now. Great discussion thread...

[Lindsay Davis]

@Nathan Gesner I’ve seen similar numbers reported in the news, but am also not seeing anything that high. I’m based in Birmingham, Alabama and we’ve seen some impact from COVID, but nothing like 20%. We still have 9% outstanding rent for May, which is actually a slight improvement over April, even though everyone seemed to think May would see some of the worst rent collection.

[Luka Milicevic]

@Jeff Little How about selling these class A Nashville homes? :-)))