Even the best tenants fall on hard times.
- An unexpected conflict at work can leave them without income for a season.
- Medical needs can drain the bank account while stressing out your renters.
- A global market downturn, such as COVID-19, can cost them their income.
Many otherwise-high performers losing their livelihoods with minimal warning has been a direct consequence of the COVID-19 crisis. As your Leesburg property management guide, we want landlords to consider how the novel Coronavirus outbreak may be directly impacting your renters right now. Through no fault of their own, they may not be able to pay rent in full.
That said, there's no reason to go to extremes. Some landlords may feel an outpouring of compassion and cancel rent for a month or two—but there are unintended downsides to such kindness if it's unsustainable for you as the property owner. On the other hand, landlords who remain too rigid about their rent policies may find themselves with a vacant property due to a tenant having to move out as soon as eviction is a possibility.
The in-between solution—which has many of the benefits of both—is to create a payment plan. Let these pieces of wisdom guide you as you build your tenant payment plan for struggling tenants.
Please note: This blog is not intended to act as legal advice. When in doubt, reach out to your skilled attorney or an expert in Leesburg property management! Gunn Property Services is proud to assist and support property owners during these troubled times.
Don't Cancel or Waive Rent: The Future Is Uncertain
One of the challenges of being compassionate and canceling or waiving rent is that the world can change again. While no one wants to think about a situation that would be worse than a global pandemic, it is possible that your tenants may go through other future crises on a smaller, less comprehensive scale.
If your renters know that hardship causes you to cancel rent, they are more likely to lean on you during these situations. This is a harsh truth to stomach since one would hope that kindness would simply be met with gratitude, but there are many, many different kinds of tenants out there. You need to have a policy in place that offers the same playing field to every renter.
- Rather than calling a break in the rent "canceling" or "waiving" rent, make it clear that the totals laid out in the lease still stand. Exercise your flexibility, however, on the timing of those payments.
- If tenants planned originally to have the cash flow to pay rent when they signed the lease, it's time to talk through when they will regain that cash flow.
Work With Your Tenant's Actual Financial Situation
Each tenant experiences things like the pandemic's economic impact differently. For instance, one tenant may have a steady job and simply need 2-3 weeks off to recover from the novel Coronavirus; while they may be late with their rent payment, if they haven't had a loss of income, they can pay later that month.
- When do they anticipate having cash flow again?
- How much can they pay immediately versus in a week or a month?
These answers form the first piece of the puzzle for how your personalized payment plan will work. Leesburg property management companies make these kinds of plans with tenants frequently, because it is better to get all of the rent over time than none of it if it seems likely that the tenant will soon be back on his or her feet.
Take Your Cash Flow Priorities Into Consideration
- You'll also want to make sure your finances can take the hit that low cash flow may cause this month.
- Payment plans impact your business, possibly causing you to dip into a rainy day fund to pay for repairs and other ongoing expenses.
- However, if you don't have as much of a savings buffer as you'd like, you may need to be more firm on the payment plan's terms to be realistic with your tenants. Your bills must be paid as well.
Spread Payments Out, Getting Larger Over Time
When possible, your tenants will appreciate the ability to spread their future payments out. An alternative like paying double the rent next month will be a very difficult pill to swallow.
Instead, have them pay small, token payments during the height of their crisis and then scale the payments up over time as they regain stability. This is a great way to gain trust and build rapport with your tenants while also focusing on getting the full value out of your Leesburg rental property over time.
Do you need expert insight and guidance that will help you handle the concerns of late or missing rent payments? As the leader in Leesburg property management, we've seen it all here at Gunn Property Services. We want to be your guide through this trying time. Contact us today to learn more!