Arthur,
I was speaking with my wife about this very issue this morning. We have not yet felt the effects of the hit our tenants will feel if they cannot or do not pay their rent. However, we have decided, and this is not for everyone, that we will require them to forfeit their deposits for the month they miss. If they miss again, we will evict.
Like you, we finance our properties and the banks are not going to allow us to miss paying our notes. It's a business transaction. Thus, we treat our tenants the same way: it's a business transaction. They have a place to live in exchange for paying their rent.
This is not a hard line, it is a real world line. We don't get to miss our house payment. We have saved for these possibilities. Once they make their lack of preparedness my problem, I will deal with it like its my problem. That may mean they are without a place to live, which is not my problem.
Others will disagree with me, but others are not paying my bills or paying for my properties. You need to do what is best for you.
Good luck!
Lots of great discussion. I wonder if in this case it is better to have only a few investments, or to have a large portfolio? I suppose there are many more factors at play such as true cash flow, equity, tenant-base, etc.
Even with my worst-case-imagination-cap on (I bought it on ebay), I still can't imagine how this will financially devastate us. We will still continue to pay our mortgages, taxes, etc. We have some reserves. Again, I encourage all landlords to really consider a grace-filled approach to issues your tenants may experience. This in unprecedented.
Probably worthy of an entirely separate forum post, I wonder how many of the landlords who get in trouble would accept government help if it were offered?
In the case of the bailout talks I've heard, the scenario would not be "free money", but moreso the government saying: "I'll pay you 6 months of lost income on the basis that we have a 5% equity in your home." This is completely hypothetical of course but this is what sounds like may be offered to major airlines, etc: Bailout money in exchange for stock/equity.
I wouldn't take it but then again I hope to not get in a situation that desperate...
I guess that the thing. Some of us have a good backing of reserves and some probably are worried about making ends meet this month. I would hate to have to give up equity or take on a new loan to weather this storm and I hope very few of us have to.
I believe the difference here and with many businesses is that are (or will be) put in a situation where the government will be saying we have to stay open (ie keep renting) and have few weapons to insure we get paid (ie no ability to evict even the worst tenant). Nobody want's to evict tenants (good ones) but there should be a plan to assist us in keeping these people adequately sheltered.
Life is still good, I say this because I have money in the bank, food in the pantry and a job. In 3 months one of those situations may be different and in six months 2 may be different. If this goes a year, all three of my gifts may be gone.
So here's my thought, take it or leave it.
This is definitely a one-off situation. It's not like people who lost their job can just get another one in a lot of cities as businesses have come to a screeching halt.
I'm lucky that my tenants are great people, always pay rent on time and we've had no issues in the last 3 years. I'm going to work with them because I have cash reserves (and I bought some SPY puts to weather the market crash) and I wouldn't be able to fill the unit anyway with the Illinois shelter-in-place order going into effect until 4/7 (just announced).
I don't know about you guys, but the last thing I want when this is all over is either a tenant I have to evict because of a global crisis completely out of their control or one that resents me because they had to prioritize rent over food/soap/necessities.
You guys do you, but it's insane to me that people are considering punishing tenants because their entire industries are shutdown, especially when all you guys are going to be sitting on your hands for months with pissed off tenants that you can't evict anyway.
Hello everyone, I hope you all are safe and spending good times with your families.
I just want to share a link that may address all the questions and concerns we have been sharing. It's a free webinar from the American Apartment owners Association about "How will this crisis affect evictions, liability, lawsuits, and policies moving forward?"
https://register.gotowebinar.com/register/1015931557528683532
I believe if we come together as landlords we can find different strategies to survive this crisis.
Lastly, have a great weekend everyone.
@Brian Boyd they already put a pause on evictions in my county! Plus if we move to a shelter in place situation there.wont be anyone to do the eviction either...
So, what to do then
I live in San Diego with a rent moratorium in place and here is what I would do. Please feel free to share with me your thoughts on this approach.
If reached out by a tenant, I would submit them a letter that per the moratorium, a late payment should be "due to a loss of income or substantional medical expenses, caused by COVID19 pandemic." Therefore, they need to submit the following to be eligible for late payment. They will be legally held for any incorrect info.
1.Proof of loss of job or substantial medical Coronavirus expenses
2. Proof of not having adequate fund in all bank accounts to pay rent. Bank statements required.
3. Commitment to prioritize rent over other loans and debt payments
If they do submit them and sign the form, I will waive late fee and work with them for a payment plan. I understand the moratorium does not stop landlords from submitting the notice to pay or quite and then unlawful detainer! They just stop the eviction. So I would still go through this process in case the tenant does not pay the rent as planned.
@Blaise Nageondelestang You need to take care of yourself and your family first. Stay healthy, stay safe, call your banks and see if they will work with you (likely they will). Start there and all this will pass soon. These are strange times, keep informed and this will pass. Once it passes, you can take action but be safe and take care of yourself.
@Arthur P.
My plan is to stop collecting rent. It's not like I could evict anyways since my local court closed, and I'm not going out extra pressure on good tenants in bad times.
My local court closing is essentially like a silent pause on rent anyways.
James - that is a very generous position and i'm sure your tenants will be appreciate it. But what about your mortgage payments on the properties? Do you plan to "pause" mortgage payments as well? Or do you own your properties free and clear?
Probably worthy of an entirely separate forum post, I wonder how many of the landlords who get in trouble would accept government help if it were offered?
In the case of the bailout talks I've heard, the scenario would not be "free money", but moreso the government saying: "I'll pay you 6 months of lost income on the basis that we have a 5% equity in your home." This is completely hypothetical of course but this is what sounds like may be offered to major airlines, etc: Bailout money in exchange for stock/equity.
I wouldn't take it but then again I hope to not get in a situation that desperate...
Whoa whoa whoa whoa there. Where did you "hear" this? Where did you hear that the government of the United States Of America is offering bailout money in exchange for an equity position in private companies??? The USA took over FNMA because FNMA was going to fail. Yes, they were supposed to sell it off and now that you have me thinking on it, I'm not sure if they ever did. We all understand how insanely dangerous and stupid that is, RIGHT????
I gave April rent as a gift to my three tenants today. Not a deferment, a gift. Told them to buy food instead. Bought them some stuff to help keep the plumbing working and informed them they had better not break it because I won't be coming out in a quarantine to fix it. I told them we would see what next month brings next month and for today, we all need to look out for each other and spread the love.
I dunno. I say uncertain times maybe need uncertain measures.
@Arthur P. Here’s an email we wrote to our tenants if it helps anyone:
**NOTE: this is Canadian so you’ll have to edit it for US**
“Hello,
We have been continuing to monitor the situation surrounding COVID-19. We are sending an email to all our tenants to address any job layoffs or lack of funds caused by this outbreak.
We understand these are unprecedented times and that a lot of people may be confused and uncertain, especially when thinking of their financial stability. If you are experiencing financial issues due to this situation, we recommend staying up to date with the several government programs offering financial aid to those in need and to apply as soon as they become available.
If you are directly affected by the COVID-19 because you are sick or quarantined and you have not yet applied for EI benefits, please submit your application as soon as possible. We've included the link for more information: (link)
If you are still worried of not being able to pay next month's rent or any future rents and have exhausted all your options through borrowing from family members or other, we ask that you please send us an email prior to the rent's due date explaining your situation along with proper documentation. At that point we will assess and come up with a plan together.
In the meantime, we would also like to inform you that due to isolation requirements, any maintenance request will need to be postponed until further notice, unless of a major issue.
We want to sincerely thank those who are working hard within the essential services of our community and to all others who are staying home to help avoid the spread.
Our best wishes to you and your families.”
...
2. The Oregon Rental Association has put out a rent deferral contract. I am going to look at that today and understand all the options and again think about it as it may apply to the professions of my different tenants given job reductions and cuts. The association has asked that we please do everything to prevent evictions; as rent control legislation is already very real and active and we do not want this crisis to make that worse. That would not be good for anyone! Be smart, kind, and compassionate - - - you will be remembered for life!
...
Link to the agreement mentioned in that snippet, for those who want a good starting point for their own agreement:
https://store.oregonrentalhousing.com/pdf/Landlord_and_Tenant_Deferment_Agreement.pdf
@Timothy Newton man, dont be so sure. I have bet on RE and the fact nothing like this could ever happen, but it. Changes daily. Do not bet on the government!
@Michael Potts. Great point! I think the uncertainty and how long this will last is part of the fear. Further, when government jumps in and make legal mandates, it further escalates the fear due to the uncertain risks. But, I agree with the nature of your post.
@Todd Powell I’m not but they are much more secure than individuals right now.
What is the plan when tenants can’t work and cannot make rent payments?
It has already started for me.
Well I guess that they won't pay, which means you can't pay the bank, which means many will foreclose, which means the banks will go bankrupt, which means the government will print money they don't have to bail out the banks, which means your taxes will increase to pay for the money we didn't have to bail out the banks (and fund the huge lump sum golden parachutes that their board of directors will receive), which means we will have slick politicians make new laws and regulations we don't understand that favor the banks so in 10-20 years we can do it all over again.
Have fun...
Please go to your local rental association websites for more information on specific options in your state based on your laws and potential free to very low cost rent amendment documentation (The Oregon association gave it for free early this week - so I now feel like my membership has more than paid for-it-self). Oregon already has a very simple document that gives you lots of options to work through with tenants. I imagine that most other state have already done this or that they very soon will. While I live in California - - joining the Oregon based rental association and receiving their low cost legal documents, monthly newsletters, and contact resources was the very best financial decision I made last year!!!!!!! DO-NOT-WAIT if you have not done this. They are generally very cheap to join and will give you experienced options specific to your state that will help keep you out-of-trouble.
I posted a link at this link:
@Arthur P. And others
I am not a landlord (by choice) so here's my take
The FEDERAL government is steeping up and assisting those from the local and county levels and especially small businesses who are and who will be affected but the CONVID -19. THAT SAID, with discretion, the American people have been given a "choice " of to work or not to work. That said #2- the federal government has been very verbal regarding unemployment, compensation, stimulus relief, employers relief/assistance and the whole one yards, etc. I do believe we ALL ARE ALL IN AND ALL HANDS ON DECK TO HELP EVERYONE regardless if you're a tenant, mortgagee payer, landlord, etc. I know BOA, utility companies (and many will follow), student loan servicers, etc are SUSPENDED payments and being flexible with terms. Let's be understanding but not foolish. We are all given and receiving the same information. We all are taking a hit on every aspect! Good luck to all
...
2. The Oregon Rental Association has put out a rent deferral contract. I am going to look at that today and understand all the options and again think about it as it may apply to the professions of my different tenants given job reductions and cuts. The association has asked that we please do everything to prevent evictions; as rent control legislation is already very real and active and we do not want this crisis to make that worse. That would not be good for anyone! Be smart, kind, and compassionate - - - you will be remembered for life!
...
Link to the agreement mentioned in that snippet, for those who want a good starting point for their own agreement:
https://store.oregonrentalhousing.com/pdf/Landlord_and_Tenant_Deferment_Agreement.pdf
Thanks for sharing this link. My portfolio is in Idaho, but it can serve as a useful template.
...
2. The Oregon Rental Association has put out a rent deferral contract. I am going to look at that today and understand all the options and again think about it as it may apply to the professions of my different tenants given job reductions and cuts. The association has asked that we please do everything to prevent evictions; as rent control legislation is already very real and active and we do not want this crisis to make that worse. That would not be good for anyone! Be smart, kind, and compassionate - - - you will be remembered for life!
...
Link to the agreement mentioned in that snippet, for those who want a good starting point for their own agreement:
https://store.oregonrentalhousing.com/pdf/Landlord_and_Tenant_Deferment_Agreement.pdf
Thanks for sharing this link. My portfolio is in Idaho, but it can serve as a useful template.
The link below also has some forms that you might wish to utilize in some way.
http://www.marei.org/landlords-legal-update-from-attorney-julie-anderson/
@Brian Boyd FYI -a universal band foreclosures and evictions tentatively for of 3 months. May be extended. -Housing and Urban development.
Do not evict tenants. What about Us, next notch up in the pecking order. No guidance, I suppose we just handle it.
@Paul Merchant Paul, be safe and stay healthy. Hopefully, this will peak sooner than later and we can all get back to normal. In the mean time, please stay safe.
Call your lenders. See if they will work with you. Our courts have already started hiking hearings telephonically. As things progress and we figure out work arounds we can start adapting.
Good luck and be safe.
NJ has put a moratorium on removals and eviction court dates but is still allowing filings to be made. Be sure to check state laws about using the security deposit while a tenant still resides in the property. You might need them to sign an agreement for the security to be applied this way.
In Virginia you are not authorized to use their security deposit as rent. I have done in in the past, but had tenant sign an amendment authorizing such change.