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?

[Wesley W.]

Originally posted by @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.

You've got to remember they are taking data from across the entire country and at all price points and aggregating it together.  We all know that real estate is local!

Think of the data in terms of a Punnet Square (remember Gregor Mendel from middle school science?).  On one axis you have the politics/regulation of a region - generally, liberal areas will have more delinquency because of the prevailing mentality, public messaging and restrictions on contract enforcement currently in place; the other axis will have the Class of property (A, B, C, D) - and the lower income tenants are going to have had less to fall back on in terms of reserves and rent/income cushion and will tend to have higher delinquency.  Obviously, there are exceptions - but I think that's why some people on this thread are experiencing widely disparate results and thinking others are inflating numbers.  We really are managing in quite different "worlds" depending the aforementioned factors.

[Kevin Futrell]

I have eight doors and they all paid.  One was late by a week.

[Moseler Perkins]

@Nathan G. Savannah, GA everybody we've talked to say the same thing. Some of the multifamily in the downtown area took a hit because of stay Alfred and the mass exodus of students from SCAD. But they have mostly rebounded and approaching that 95% mark again. Freinds that are residential landlords have all said 5 or less no payments. I think all of those though figured it out and got on a plan or moved out without a problem. I've only heard of 1 resident that is taking advantage of the system and not moving out or paying

[Steve Dearing]

Originally posted by @Remington Lyman:

Originally posted by @Steve Dearing:

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

 Where are your units located?

 Central Ohio

[Russell Brazil]

Looks like unpaid rent might be overblown. While rent was late in April, it was mostly in by the end of the month.  Looks like collections were only off by 3.1% in April and 1.5% in May compared to 2019.

https://dc.urbanturf.com/artic...

[Barbara Housewright]

I haven’t seen posts about the short term rentals. Is the problem only in Florida?

[Kristin Bassett]

I have had 100%, on time every month. I own a small single family/small-plex management company here in Portland, Oregon, focusing on long-term hold accidental landlords/owners. Am slowly moving to taking on select smaller multifamily for investors. Our renter protections would have eventually required payment in full. After sending out an update email regarding the rent deferral, all owners insisted that they would not evict for any reason during a pandemic.

[Jason G.]

I have six units in the Atlanta Market and have a PM manage the units and my parents have four units in NYC/Long Island that they self-manage.  All of our tenants are current on rent.

[James Hamling]

One has to almost wonder if the popularized media of so many not paying rents, vs our actual data speaking differently, if it may be more so a marketing message than a conveyance of information? I know it sounds nuts, but it's the only way I can make sense of it, as it really is feeling as if popularized media almost wants rent strikes on scale, is hoping for such a movement. 

Our data with a few hundred managed properties have been less than 2% variance year over year, very thankful. That said we haven't just sat back and waited to see, we have been very proactive on it to mitigate all possible, if and when. 

[Robert Winters]

I only have about 10 tenants all managed by PM companies and I have not had a single missed rent payment (knock on wood). I did have one that lost her job due to COVID shops closing but she asked for a little extension on getting us rent and then ended up paying on time anyway!  One even paid late fees for being 3 days late.  hopefully it keeps up like this!  i feel for people purchasing AirBNB properties and not being able to rent them out at all. I have heard of several that have lost 5+ months or rents.

[David Green]

I think that for the most part tenant payments will continue on time in most parts of the country because of the government injections of money. The problem will be when those stimulus checks stop while eviction bans keep getting extended. Everyone I've spoken to has received there rents on time but are less optimistic about the coming months. 

[Martin Neal]

@Nathan G. I wonder what the percentage was before the pandemic?? Either way, all the landlords I know are collecting 90+% rent. I don’t think it will continue to get worst, but I do believe we will see a big wave of evictions coming. The landlords who are not collecting rent probably don’t run a tight ship.

[Jill F.]

My current tenants are all paid up on rent (and a few of my regulars on the struggle bus caught up with their stimulus checks), but I'm in the process of buying a 10-unit and a week before closing we just found out from the title company that one tenant has not paid April, May, or June-- Of course it's the tenant in the recently reno'd nicest, most expensive unit. :(. The courts in that city (akron suburb) told us they started hearing evictions again last week.  I saw a ruling in the city of akron that if you file there before July 6, you'll have to submit proof that your loan isn't federally guaranteed (and subject to care act restrictions) or youl'll be dismissed and have to pay court costs.

[Nathan Gesner]

Originally posted by @Martin Neal:

@Nathan G. I wonder what the percentage was before the pandemic?? Either way, all the landlords I know are collecting 90+% rent. I don’t think it will continue to get worst, but I do believe we will see a big wave of evictions coming. The landlords who are not collecting rent probably don’t run a tight ship.

 For me, it's been almost identical. I participated in studies from National Association of Residential Property Managers (NARPM). They surveyed 1,094 property managers with a combined total of 293,713 rentals.

Almost 70% of all renters had paid rent in full by April 1st.

81% of all renters had paid rent in full by May 1st.

Results for June should be out in a week or so. 

[Wesley W.]

Originally posted by @Russell Brazil:

Looks like unpaid rent might be overblown. While rent was late in April, it was mostly in by the end of the month.  Looks like collections were only off by 3.1% in April and 1.5% in May compared to 2019.

I would love to see this broken down by region.  Also, here's more flawed data.  "Collections were off by 3.1% and 1.5%."  I don't know anyone that would have sent a COVID case to collections already.  In NY it's prohibited to report unpaid rent to collections until at least August 20th.  As I previously reported, NY is having a marked increase in delinquencies. June results soon!

[Steve Babiak]

Originally posted by @Wesley W.:

Originally posted by @Russell Brazil:

Looks like unpaid rent might be overblown. While rent was late in April, it was mostly in by the end of the month.  Looks like collections were only off by 3.1% in April and 1.5% in May compared to 2019.

I would love to see this broken down by region.  Also, here's more flawed data.  "Collections were off by 3.1% and 1.5%."  I don't know anyone that would have sent a COVID case to collections already.  In NY it's prohibited to report unpaid rent to collections until at least August 20th.  As I previously reported, NY is having a marked increase in delinquencies. June results soon!

 I think that the word “collections” in Russell’s post was probably intended to be something more like “collected rents” or “collected payments”. Whereas Wesley is using the word more along the lines of “sending this to a company that specializes in extracting payments on judgments”.

Just different possible uses for the same word. And I don’t think there is anywhere in the USA where the latter use of the word is happening with freshly defaulted renters.  Just the ones where the default was prior to March 2020.

[Remington Lyman]

Originally posted by @Steve Dearing:

Originally posted by @Remington Lyman:

Originally posted by @Steve Dearing:

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

 Where are your units located?

 Central Ohio

Yeah, I assumed. Which neighborhoods? I am in Old North, Franklinton, and Southern Orchards 

[Wesley W.]

Originally posted by @Steve Babiak:

Originally posted by @Wesley W.:

Originally posted by @Russell Brazil:

Looks like unpaid rent might be overblown. While rent was late in April, it was mostly in by the end of the month.  Looks like collections were only off by 3.1% in April and 1.5% in May compared to 2019.

I would love to see this broken down by region.  Also, here's more flawed data.  "Collections were off by 3.1% and 1.5%."  I don't know anyone that would have sent a COVID case to collections already.  In NY it's prohibited to report unpaid rent to collections until at least August 20th.  As I previously reported, NY is having a marked increase in delinquencies. June results soon!

 I think that the word “collections” in Russell’s post was probably intended to be something more like “collected rents” or “collected payments”. Whereas Wesley is using the word more along the lines of “sending this to a company that specializes in extracting payments on judgments”.

Just different possible uses for the same word. And I don’t think there is anywhere in the USA where the latter use of the word is happening with freshly defaulted renters.  Just the ones where the default was prior to March 2020.

Ah.  Yes, you are correct.  I still stand by my claim that the delinquency rate is very state specific, and painting the situation with a "national brush" and publishing aggregated data is not completely useful.

[Steve Babiak]

@Wesley W. - oh, I agree with that. There are too many factors that enter into this to just attribute it to COVID-19 and the economic fallout from that. 

[Louisa Priore]

We have 18 rentals.  Everyone has paid.  We have one tenant who pays late every month but always gets caught up mid month.  Covid did not change anything for us regarding collecting rents.

We are in several high-demand markets and our properties are all above average compared to the standard.  Our rents are on the top end of the market and our standards are very high.  Our rents are due on the 25th of the previous month and late after 5pm on the 1st.  That's the grace period.  We do not waive fees for any reason. We are very strict.

We do not expect things to change because we have already established that it's hard to get into one of our rentals and it's easy to get a tenant out. Virginia is a landlord friendly state. I am about to attend a zoom meeting regarding the changes happening on July 1 in VA, so if anything major is shared, I will update this post.

[Clint Bolton]

I concur with pretty much everything that's been posted on this thread. We have 40+ units and everyone paid on time except for 3. Two of those caught up quickly and one we are evicting (the one that's being evicted is one of those that had been trouble for a few months already). Otherwise it's been normal for most managers and owners in my area.

[Edward Johnson]

I am an active landlord of one unit. For this quarantine my tenant has paid on time(is working) and does not anticipate missing any payments. A key to this definitely screening tenants up front, exhaustively so. B/C I do not live near my unit(3 hrs by car) I use a property manager to do all the up-front screening, taking the applications, verifying the references. After providing me with a selection of candidates and any recommendations he may have, I make the decision on which tenant to place. After that I manage the property. Additionally I meet each of my tenants and give them my personal expectations as how I would like our relationship to work. Open communication is important. They have my # and I have theirs. I perform periodic inspections(2-3 per year), as well as performing basic maintenance(suck out dryer vents, change out leaky faucets, replace air filters), which gives me good insight as to how the property is being cared for. They will take care of property and immediately notify me of serious issues. In emergencies that require an immediate response I will often contact my PM and use his recommendation, or use the tenant's recommendation, if they have one. I try to be very flexible, but ask that the tenants contact me ASAP if they think there might be payment delay. I am much more disposed to flexibility if they notify me as soon as they know there is an issue, rather than me finding out after the problem surfaces. Also, my annual rent increases have been very modest and predictable, pretty much just to match inflation plus or minus to the nearest $25(ie most are either $25 or $50). It works for me. I'm looking forward to purchasing another property next year!

[Bruce Runn]

I've received 99% of my rent.  I have let 2 sets of people out of leases rather than not taking a hit and those were re rented.  My only problem has been a commercial space where a hair salon had to shut down due to covid and I let them out of the lease.  It will be more difficult to lease it back up since so many small business have been hit and we aren't fully open in Minneapolis

[Wesley W.]

@Mary M.

Okay, for those people that are interested (and for those that think that rent is getting paid elsewhere like it is in your particular market):

A coalition of NY Landlords have been completing a monthly survey since the eviction moratoriums have been in place, reporting how many tenants are not current on their owed rent.  The survey was typically offered on the second week of each month (to offer a similar comparison month-over-month); this month is was issued on June 11th.

The respondents were landlords across the entire state of NY, with a bias towards Upstate (NYC landlords are included, but under-represented in this data).  The sample includes landlords that only have one unit to several that manage hundreds of units each.  I am not aware if the results are weighted based on the number of units; I suspect so because the number of units was a required field in the survey.

In April, collectively the group reported a 25% delinquency.  In May, it was 38%.  The results from June are now out: 43.25% delinquent as of June 11th.

[Mary M.]

@Wesley W. those numbers are bad - i would  like to know details. 

The link I provided above is reporting 80% rent collection overall.