Folks saying that “nearly a third” of rents weren't paid seem to get that from this WSJ article. I think this is far overblowing the reality for most landlords here on BiggerPockets.

To kick things off, the dataset used for that headline comes from a database of 13.4M apartment renters. Only ~12 million rented residences in this country are in apartment buildings with 10 or more units. There are ~45 million total rented residences (out of 125M units of total housing stock) and most of those are single family homes (18M+ and growing) and duplexes, triplexes, quadplexes, and smaller multifamily properties.

Another way of putting that is to say that most renters in the US live in single family homes or in 2-10-unit complexes. It appears that the owners of this smaller multifamily property (which is what BP investors overwhelmingly on) are getting a much higher percentage of rent.

Second, "nearly a third" implies that normal is 100% of rent collections. In March 2020, about 81% of anticipated rents are collected in the first "week of March". That dropped to 69% in the first five calendar days of April. This is a 15% decline, not a 1/3rd decline.

Additionally, April is an unusual month just in terms of how the calendar dates fall. April 1st was a Wednesday. April 5th was a Sunday. For context, March 5th was a Thursday. Rent checks cannot be cashed on Sundays because banks are closed. The article is also unclear about whether we are comparing March 1-5 to April 1-5 or the "first week" of March to April 1-5.

To get a good picture of collections, one should compare the first five business days. I bet that collections from the first through the sixth of March and April are materially closer than collections the first through the fifth. No one published a followup with that data.

Now, all that aside, we are certainly seeing a drop in rent collections. No doubt about it. And, many landlords are reducing rent, or forgiving portions of rent. I'm sure that on top of not collecting rent from some tenants, many landlords who do receive rent will collect less than the full amount due.

But don't go around fearing the sky is falling for the everyday landlord quite yet. I have a feeling that the overwhelming majority of rent strikers will be folks with poor credit scores. The rest won't risk their credit and their homes long-term for an undisclosed period of short-term "free" rent.

As has been discussed ad infinitum on this platform, your screening process should not allow for tenants with bad credit.

Scott Trench

Podcast Guest on Show #223