Times are tough for many around the nation right now, especially with a large part of the workforce being unemployed. While we can all hope that things return to normal soon, this “new normal” will likely be our reality for quite some time. Without an official end date for the COVID-19 crisis, many landlords are worried about being able to maintain their properties, pay their insurance and property taxes, and make mortgage payments. Fortunately, there are a number of things you can do to make sure that you’re still able to meet your financial obligations – while helping your tenants at the same time.
Communicate with your tenants
In many areas, tenants are required to give their landlords notice if they aren’t able to pay rent due to COVID-19. While it’s likely that many tenants will let you know, you may still want to check your local regulations to find out the timeframe they’re supposed to do this in. If you have tenants that won’t be able to pay rent, you may be able to work with them to set up payment plans while keeping in line with your local laws.
Ask for verification
It’s important to have some compassion and be willing to help tenants who need it, but you should still ask for verification if a tenant says they can’t pay rent because of COVID-19. Some tenants may have had a loss of hours, but can still afford rent; others may have lost their jobs completely. It’s unfortunate, but some people may try to take advantage of the situation.
If a tenant says they’re unable to pay rent but their verification says otherwise, you may still be able to serve a notice to pay or quit depending on your local laws. You may not be able to actually remove them until the state of emergency has ended, but it will send a strong message. Make sure that you’re also treating all of your tenants equally – especially if they’re living in the same building. Showing favoritism or discrimination could lead to legal issues.
Encourage your tenants to pay what they can
If you have tenants who are affected by COVID-19 in some way, work with them to see if they’re able to make partial payments. For example, if a tenant has lost half their income, offer them half off their rent until this is over. Be sure to let them know in writing that their partial payments don’t satisfy their full rent obligation, though. Once they’re working again, you can prorate the amount they owe over a period of 6-12 months and add it to their normal monthly rent payment.
If a tenant is unable to pay all or some of their rent, you may be able to work with them to come up with a payment plan. For example, if the rent is $1,500 per month, they may be able to pay $250 per over the next 6 months. If they still aren’t able to pay their rent the following month, you can extend the payment period for an additional 6 months. If they start working regularly again, you can tack on the additional $250 to their normal monthly payment until the full amount has been repaid.
Check with your lender
One of the biggest fears for many landlords right now is that the loss of rental income could lead to defaulting on their mortgage payments. If you’re concerned about this, reach out to your lender and be transparent about the situation. Let them know how much income you’ve lost per property, your monthly expenses, and how much you’ll be able to pay each month to avoid defaulting. Your lender may be willing to lower your monthly payments or help you qualify for a low-interest loan to help pay for the difference.
Check if you qualify for a government loan
If your lender is unwilling to work with you, you can look into whether you qualify for a government loan, like SBA Economic Injury Disaster Loans (EIDL). This 30-year loan offers up to $2 million in assistance for rental property owners and is available in all U.S. states and territories. The interest rate is 3.75% and no payments are necessary for the first 12 months. The funds must be used for working capital needs.
Offer virtual tours and rental incentives
It may be difficult to fill vacancies right now, especially with social distancing. One solution is to offer live virtual tours of your vacant units. These can be done over Facetime, Zoom, or other video chat apps and work much the same as if you were showing the unit in person. You can point out the features of your property, like new cabinets or appliances, and answer questions in real-time. If you’re having trouble filling vacancies, you may also want to consider offering rental incentives, like a month of free rent, waiving the security deposit, or offering a free parking spot for a year.
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