These are extraordinary times in many ways and that includes how to be a landlord during the coronavirus. First of all, I hope you and your family are healthy. I also want to share my knowledge and expertise as rent payments come due during this difficult time. This is not a time to panic. We do have solutions. We will get through this together.
How to be a Landlord With Perspective
There are three distinct time horizons that we need to be dealing with right now.
- Short term financial solutions.
- Mid term financial solutions.
- Long term financial positive prospects.
Most of this blog deals with short term financial solutions but let’s start with the long term outlook. The general estimate is the economy will return to some version of normal by this fall (or sooner). When it does, the residential real estate market is going to explode. You are going to want to be part of that explosion. As an indicator of what’s in our future, most states have designated new home construction as an “essential service” during these times of stay at home proclamations. Government permitting offices are remaining open or online to support this effort. There is still a housing shortage. The real estate markets will explode as soon as people are back on the streets. You’ll want to be prepared for this and I’ll cover it more in upcoming blogs.
But let’s start with what is important today…
Food and Rents are Top Priorities Right Now
April rents are due for the first time since the coronavirus erupted all across the country. The situation is changing rapidly but at least 34 states have issued some type of moratorium or guidance on evictions. In fact, the CARES Act has a provision for a 120-day moratorium on evictions for federally subsidized housing or a property with a federally backed mortgage loan. This is a time for compassion and working together. Food and rents are priorities for all of us. Solutions are much more important than evictions.
How to be a landlord means you are probably more financially savvy than your tenants are. You need to be working on a plan in case a tenant or two misses a payment. The plan might mean helping tenants figure out their financial priorities. Start with the fact that a moratorium on evictions does not mean rent is not due – because it is. It also helps when tenants understand that if you can’t cover your financial obligations on the property, both you and they will eventually be in jeopardy. Besides paying your lender, you also have to pay property taxes, insurance, utilities, common area expenses, etc.
Rent is only a second priority to putting food on the table. Both renters and landlords should be checking with creditors and utility companies to see if they are offering financial hardship assistance. Tenants need to look at postponing other bills so that the rent gets paid. You don’t want to be mean about it but let them know that you are a small business that depends on the rent payments to keep a roof over their head.
Most importantly, keep communication with tenants open. There are specific subjects you can talk to them about that will help both of you get through the next weeks and months:
- Take the initiative to start a conversation with your tenants. If they make it clear that they cannot pay the full rent, begin talking about options that both of you can consider.
- Make sure they understand the full rent is going to be due sooner or later.
- Ask if they have considered paying the rent with a credit card. You can arrange for this by billing them through a company like PayPal. You might also consider using a property management company that accepts credit cards. Personal bank loans are another option.
- Ask them to look into rental assistance programs that are offered – both nationally and locally. They can contact the Department of Housing and Urban Development (HUD) or your state or city’s housing agency. They can Google “city/county rental assistance,” to find even more options.
- If they will be collecting unemployment, the CARES Act intends for unemployment checks to cover their full paycheck. The answer can be changing the days when the rent is due to coincide with unemployment checks. You can be flexible by allowing 2, 3, or 4 payments to equal the full monthly payment and wave late fees.
- Focus on covering your costs rather than making a profit. Ask your tenant, “How much CAN you pay toward your rent?” Ask them if they have looked at other bills they can defer to pay more towards the rent so that the back payments won’t be too large.
- Ask if they have a plan to bring the payments current within the next couple of months. Let them know that whatever you agree to is going to need to be added to the lease agreement as an addendum in some form of an Emergency Rent Deferral Plan.
- An emergency plan might look something like this. The rent owed is $1,500 and they can pay $500 this month. They have deferred $1,000. They plan to have their CARES Act stimulus check in time to pay the rent for May. What you want to do is have a deferral plan that starts making up the missed $1,000 beginning in June. A reasonable strategy is spreading it out over the next 10 months. Beginning in June, they must pay an additional $100 per month to repay the deferred $1,000. The adjusted monthly rent due will be $1,600.
Making decisions without enough thought usually results in bad decisions. The most important thing you can do is create a plan with your tenant and put it in writing. That way, both of you know how you are dealing with this coronavirus issue. Landlords are not trying to make a profit off this economic meltdown. We’re trying to survive just like our tenants are. We care about them. We care about their families. We care about their homes. To do this, the rent still needs to come in.
What Landlords Can Do for Themselves
Maybe you’ll have tenants that don’t want to work with you but I doubt it. If you are using the Sandwich Lease Option, they have a strong financial incentive to stay current with the rent. If they don’t, you’ll eventually have to evict them. Until you resolve issues with any uncooperative tenants, you want to take your own action to keep your business financially viable for the short term. You should have already put off any improvement projects that you had planned as part of the social distancing requirements.
You too should be checking with creditors and utility companies to see if they are offering financial hardship assistance. This can apply to your personal residence along with any utilities that you cover for tenants. A few insurance companies have already announced they will defer a couple of premium payments without penalties or late fees. Some localities have announced postponing when property taxes are due. In all cases, you should make sure you have things in writing.
You want to talk to your creditors also. If you are in a sandwich lease option, you can talk to the seller. Between the tenant, seller, and yourself, you all can share the financial burden.
If you have a mortgage on a property, you want to be talking to your lender the same way your tenants are talking with you. Many lenders have implemented special waivers due to COVID-19. Your lender may also offer hardship programs that aren’t getting media attention. For right now, don’t worry about May and June. Things are changing so fast that new answers are certain to be available by then.
Be optimistic about the strong rebound coming in late summer or fall. You’re going to want to jump in big time after this passes because real estate investing will be back stronger than ever.
- Learn the basics: Investing In Real Estate With Lease Options.
- Next are the details: Buying and Selling With Lease Options.
- Create your Wealth Building Arsenal.
- Personalized Coaching.
- Cooperative Lease Options.
- Get the Deed “Subject To.”
- Working with Realtors.
What matters today is that you take action to be ready for tomorrow.
By Wendy Patton
For more than 35 years, I’ve used the Sandwich Lease Option System to earn myself and my students millions of dollars. From my experience, I know there is plenty of room and opportunity in the real estate investment market for everyone wanting to participate to find profitable deals. It’s because of that fact and my personal success that I share the Sandwich Lease Option System with others.
If you found this information useful, please visit again soon at wendypatton.com.
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