Landlords and the CoronaVirus

Many investors have emailed me to wonder what I am doing about the CoronaVirus.  That is what the topic is in this post, Landlords and the CoronaVirus.

The Minnesota State Governor has declared a moratorium on evictions, and the State Attorney General says he will prosecute any landlord that attempts an eviction.

Meanwhile property taxes are due, mortgage payments, insurance, HOA dues, utilities, lawn care, etc.

Landlords and the CoronaVirus do not mix in this environment.  What do you do?

Landlords and the CoronaVirus

If you are concerned about the virus, and how to protect yourself, please see this video.

It Starts with Great Tenants

No landlord is exempt from the CoronaVirus.  Landlords and the CoronaVirus do not even sounds good as a phrase, (although it may help SEO searches…)

If you have already taken my advice from this blog about getting quality tenants, you are already ahead of the game.  Tenants with decent credit scores, and careers, not jobs.  I want tenants with an emergency fund, which quality tenants have.  And tenants that are civilized enough to let you know what is happening, rather than go into radio silence.

Larger deposits help.  I typically do a 125% deposit in comparison to the monthly rent.  Then, as rents go up, the deposit still covers a month of rent.  The tenant will still have a bit left of deposit left after the last month’s rent if they attempt to use the deposit for the last month’s rent.  They are less likely to stiff you, and less likely to move in to begin with, if that was their strategy.

Less Risk means Less Worries

Most of my buildings are paid off.  My mortgages are less than 7.5% of my rent collected, and the total monthly mortgage payment (P&I) is only about 62% of my monthly property tax bill.

When you can make your mortgage payment relatively easy, it’s less stress.

The Monthly Text

Assume you are going to get rent.

Just as most places you owe send a statement, I send a text, every month, to all my tenants.  I have posted about this before.  I send it on the 28^th, and this month I sent it on the 25^th.  My rents are a lot faster collected when I send it out, compared to when I do not.  I have done a test and it made a large difference.

The text goes like this.

“Group Text.  Reminder, Rent is due soon.  If you have already paid your rent, thank you very much!”

This month I included a sentence “If you have been financially affected by the CoronaVirus, please contact me directly”.  SO far, no one has contacted me, and I am ahead of schedule for rents collected vs. rents due.

The Rent Collection Problem Starts

You may get an email like one of my friends did, it goes like this.

I was hoping I didn’t have to reach out to you.

But due to the current situation, I cannot pay the 1,200 this month.
I will have to cancel the payment arrangement for this month.

Please get back to me ASAP and let me know what we can set up.

Life Happens

In this case, the tenant was a restaurant server.  She was no longer working.  That is understandable.  With the current situation, you HAVE to help.  It is the humanitarian thing to do.

What I would do?

The layoffs stared ~03/15/2020.  Tenants should have been thinking about paying rent in two weeks at the end of the month.  If they have a roommate, and the other roommate is still working, there should be some money for the landlord, perhaps half.  Even $100.

 I would verify that the tenant is laid off. With the stimulus, everyone gets a $1,200 check soon. $2,400 per couple. If they have a kid, that’s another $500 per kid. If they are unemployed, they get an extra $600 per week. It brings their unemployment check to almost their full pay. There is no reason not to pay rent.

There are also emergency assistance payments available from the counties, although if you cannot evict so the tenant is not in immediate danger of losing their home, maybe emergency assistance will not give them money?

I can see offering them to pay 50% by the 1st, and waiving late fees. Then when they get their money, pay the rest that is due by the 15th. By May 1, they should be back on track and paying on time.  Maybe waive 25% of the rent for two months, then charge 125% for two months?

Regardless of what you do, make sure you get the agreement IN WRITING!

My mortgage company offered me a deferral. Skip three months of rent, then on the fourth month, pay the new payment, plus all three backlog payments to be 100% caught up.  I took them up on it, although I plan on continuing to pay my mortgage payments.

A renter that is behind on April, was woefully unprepared or is gaming the system. They will never catch up. They need to move on.

What to do with the Problem Tenant

There will be some sub-par tenants that try to game the system.  They Skip rents, go into radio silence, refuse to work with you.  They need to go as soon as you can get them out.

These are tenants that refuse to sign a payment plan, or refuse to acknowledge that they owe you rent.

If they are on a month-to-month lease, give them a lease non-renewal.  Tis is not an eviction, but it lets them know you are not renewing their lease.  They are not paying rent, so you can do that.  In Minnesota, we can do that for any reason.

Raise their rent for the period that they are a holdover.  I would raise it 10%, or whatever the maximum was with rent control.

Get a judgment.  Once they are out, get a judgment for unpaid rent and damages.  Pursue it.  They had a chance to work with you, and they refused.  The tenant was not concerned about destroying you financially, do not worry about them.

Are you having trouble paying, or collecting rent?