Owning residential properties and renting them to tenants is a business. However, many landlords are currently struggling.
Because of the coronavirus pandemic, many states have suspended evictions and tenants are having a hard time paying rent because of layoffs and reduced hours. However, many landlords have mortgages to pay on those properties. So covering expenses and keeping their operations running can be tricky.
Shravan Parsi, CEO and founder of commercial real estate company American Ventures and author of “The Science of the Deal: The DNA of Multifamily and Commercial Real Estate Investing” said in an email to Small Business Trends, “Collections is the most immediate concern. With the large number of layoffs there are many tenants who aren’t able to pay rent. Leasing is a major concern as well. With shelter in place orders, coupled with social distancing requirements, getting prospective tenants to your property is difficult.”
Coronavirus Tips for Landlords
If you’re a landlord who’s not sure where to turn due to the current pandemic and economic crisis, especially if tenants continue struggling to pay rent in May, here are some tips to help you navigate the situation.
Use Reserve Funds
Ideally, landlords should have a bit of extra cash built up to cover basic payments when tenants aren’t able to pay rent. You may not have enough to cover everything when payments are slowed to such a massive scale, but try to scrounge up whatever you can to stay afloat until more people are able to get back to work.
Parsi says, “My advice would be for landlords to find a way to create a reserve fund to cover any cash flow interruptions and do whatever they need to in order to continue making their debt payments. As long as they don’t default and are able to keep their property, I think we will see a rebound once we make it through this difficult situation.”
Reach out to Lenders
If you don’t have extra cash available, reach out to your lenders to discuss what options they may offer for property owners who can’t cover their expenses. Do this as soon as possible, ideally before you default on any payments. Lenders and financial institutions are generally aware of the struggles people are facing. So they may have existing programs available to help you stay afloat until people can start making their payments again.
Try to Work Out Payment Plans
Collecting reduced rent is usually better than collecting no rent. If you have tenants who aren’t able to pay the full amount, you might give them the option of making smaller payments now and spreading out the rest later. This may help you cover some of your expenses in the interim so you can hopefully avoid defaulting on at least some payments.
Offer to Renew Tenants with No Increases
For those who are having trouble keeping residences filled, it’s likely in your best interest to try and keep as many current tenants in place as possible. If you have apartments or houses that you might have otherwise raised rent on, see if you can get more people to stay in place by keeping rates steady. This may serve as an incentive for them to continue paying some rent and help you avoid struggling to fill vacant spaces.
Balance Sensitivity with Realism
The current situation is unprecedented, both for landlords and their tenants. Though the financial concerns of your business are valid, so are the financial concerns of people struggling to make rent payments. As you make decisions moving forward, especially once some industry restrictions are lifted, it’s important to balance your own financial needs with compassion.
Treating people well during unprecedented times may help you keep long-term tenants happy and give them the room they need to recover so they can once again make payments on a recurring basis. This doesn’t mean you need to completely disregard your own struggles. But if you can reasonably give people some leeway if they’ve generally been good tenants in the past, it may help your business in the future.
Make Your Voice Heard
Ideally, Parsi would like to see some assistance provided within the industry to help property owners make ends meet during such a difficult time. You may not have much control over decisions that are made on a larger scale. But in speaking with industry groups, local business organizations, or government entities, you may be able to clearly communicate the needs of business owners like you and encourage positive initiatives.
Parsi added, “I would like to see financial assistance offered to landlords to cover their debt payments or offer deferrals on debt payments. With moratoriums being placed on evictions in most jurisdictions, without also offering assistance to landlords they are left in the extremely difficult position of not being able to collect rent and also not able to make their debt payments.”