5 Tips for landlords during a pandemic

2020- the year of the respiratory disease known as corona virus that shut our country down for hopefully a short time. The volatile DOW Jones has dropped by nearly 10,000 points over the past 30 days. Per the CDC, the best way to prevent infection is to avoid being exposed, therefore social distancing became a new way of life. This has resulted in many people working from home, being furloughed or even laid off. Our world sure is interesting and ever-changing.

From an investor’s standpoint, when a crisis hits, it’s important to make a plan. When you own investment properties, it could be a real possibility that your renters cannot pay rent during this time. As a landlord, that could create problems between you and the bank. So here are some tips to help landlords and tenants during this uncertain time.

1) Communicate with your renters

First and foremost, it’s important to make sure that your renters are all doing okay, and find out if they have been laid off or furloughed. If your renters have not, then it’s probably safe to say that rent will be paid like normal. Reach out and find out how things are going, and you may get a sense about their future and yours as well.

2) Offer a small discount to those that pay on time

If you have enough cash flow and are concerned that your tenants are not going to be able to afford all of their rent, an idea is to offer a small discount if rent is paid on time. That gives incentive for renters to come up with the money, and get a bit of a discount as well, while it also allows for you to make your mortgage payment even if you don’t get as much cash flow for a few months.

3) Apply your renter’s security deposit toward a reduced monthly rent

If you have a tenant that has been laid off and/or cannot figure out how to pay rent, a great option is to offer to use their deposit to help cushion their rent payment. You can arrange the numbers to however would work best for you, but here’s an example. Let’s say one tenant has a $1000 deposit, and you let them use $500 this month, and $500 next month toward rent just so they can make their payment. Again, this would be at least some money to go toward your mortgage even if you aren’t cash flowing as before. Make sure to sign an additional lease that adds on additional money per month after the two month grace period that will work back up to their deposit amount.

4) Offer to let your renters pay with a credit card

This could be an option, however you may need to call your bank and get a square credit card reader, and you will be subject to additional service fees. However, this would be better in my opinion than no rent payment at all.

5) Offer an emergency rent deferral option

This could be your worst-case scenario option. You could offer your tenants a deferral in rent payments until they are working again (which is hopefully just a month or two). After the deferral period, they can work to recoup their lost payments over the course of their lease remainder. Like the option of using the security deposit, you can sign a new lease that charges them an additional amount after the deferral period. This could get tricky depending on how long your renter’s have left in their lease, but maybe they would agree to extend it so you can extend the extra payments over the course of a year or two.

If you cannot afford to make your own mortgage payment without the rent payments coming in, you should look in to your bank and see what offers they have for a deferral in mortgage payments without penalty. Many Freddie Mac and Frannie Mae loans have the option to defer mortgage payments for up to one year without penalty.

Read more here: https://www.forbes.com/sites/andrewdepietro/2020/03/31/banks-deferment-mortgage-coronavirus/#11747f3656d7

Do you have any more ideas? Please share them below.