Backstory... Not quite 2.5 years ago, I 1031 exchanged out of a (mostly) owner occupied office building in Southern California, to (three) C class multi-family properties in the same Midwest city. In doing so, I went from 1 business tenant, to 64 apartment tenants overnight. A very steep learning curve, but I had the help of 2 property management companies to take all worries away (not).
When it all lacked the performance I expected, I tormented my management companies and started getting very hands on. I dove into the trouble areas to identify the cause of under-performance. And during that process I experimented and eventually learned a lot about whatever sweet spot there might be between compassion and a pure business stance, especially related to late rent collections. This (of course), was NOT in response to a global pandemic, but just the everyday survival on a set of investments intended to be cash-flow centric. Money I had hoped to live off from.
Mine are in a landlord friendly county where if you are diligent, stick to the agreed upon lease terms and hold a strict stance, you can have a non-paying tenant out in about a month from when they are late, which starts in the first few days of the month. This also in a increasingly strong rental market, increasingly favorable this, favorable that, etc. Nevertheless, there are/were sad stories when the first (fifth) of the month came around. And between all that a few really-really sad stories.
Nevertheless (and remembering that all bets are off until how we are in the Covid 19 era and need a month or two to see how if plays out further)... I experimented with the whole spectrum of responses to the sad stories, ranging from total benevolence to non-negotiable evictions.
Contrary to the acts of kindness that the world probably needs now, the benevolent approach did not prove to serve my properties well. Except once in over maybe 20 situations. And that one took well over a year to work itself to a cleared balance, while simultaneously occupying a unit with a legacy rent of $200+ under market. My units pay in the rent ranges of $500 to $950 a month. What I came to learn was that once my tenants got behind by even a couple of weeks, the likely-hood was almost zero that they would ever catch up fully in any reasonable time-frame. Furthermore once they were behind, it would also possibly lead to a promise to pay with a "say anything" level of desperation. Then the next month would roll up with no payment or just $200 when they swore on a stack of bibles that would have $800. And then soon after, either an eviction or a hasty middle-of-the-night move-out with not nearly enough security to cover both damages and back rent. Then often rushing into some other apartment secured by another landlord, before the issue was on their record and the new unsuspecting landlord on the hook.
It's a good reminder that eviction, though often absolutely necessary (and not currently even an option) is an unpleasant result. Not only a sad way to displace a tenant, it is also inevitably expensive with court costs, set-out expenses and a premature turnover of a unit, sometimes left by an angry tenant and so are often damaged more than normal.
One thing that I do see is that a non-paying tenant puts both a literal and cosmic strain on the property. Even if I make certain that that the property is full funded and taken care of, no matter what.
I have come to believe that having a firm stance is the right answer. Also a consistent message that applies to all. This seems right in regards to fair-housing, which, is a on my mind as well. So whatever stance you are prepared to take, you have to hold that stance for everyone.
Is there room for side-bar conversations in particularly difficult circumstances? Yes, no, maybe.
