As the best property management Logan, Utah, offers, we know that recovering from COVID-19 is only the current crisis—but any time the economy suffers, your tenants could have trouble paying the rent. While enforcing rental payments is the right thing to do if you want to keep your properties afloat, the way property owners go about collecting the rent in a crisis can make a big difference between getting paid and keeping tenants or losing money and reliable renters.
When one tenant misses a rental payment (or two), it begins to add up. When property investors have multiple tenants foregoing rental payments, they quickly find themselves in a bad financial situation, too. As property investors ourselves, we know from experience just how many landlords rely on consistent payments coming in from their rentals to keep a roof over everyone's head!
How can landlords help their struggling renters pay the rent? We have plenty of experience dealing with many different challenging tenant situations. As one of the most experienced providers of property management, Logan, Utah, landlords, we can recommend payment plans as an excellent option to help your renters pay their dues.
In fact, as part of our current property management services, we are offering such plans to our residents who are struggling to help everyone affected by this crisis find a sense of structure. Here's how you can craft your own!
Please note: This article is not intended as a substitute for the great legal advice of a skilled attorney. It's designed just to help property owners get a little footing during these troubling times for our community. If you need direct legal counsel, reach out to your allies at Reeder Asset Management.
Even in a Crisis, the Rent Is Due
Despite any discussion you might see or hear in the media, rental payments are always due every month—even during a crisis.
As a property investor, you depend on monthly rental payments to cover the expenses of your rental properties. Though we might now be providing expert services in property management, Logan, Utah, landlords, we've been in your shoes before. We know it's difficult for the majority of property owners to pause payments when they have their own overhead.
Your renters sign a lease agreement committing to on-time rental payments each month throughout the lease term. The lease doesn't change even if a financial situation changes. While an economic crisis can make a terrible impact on their income, tenants must still find a way to pay the rent.
That said, we also know it's a considerable challenge right now for many property owners to encourage their struggling tenants to pay the rent. A financial crisis requires a compassionate response, even while enforcing the rules.
Offering a payment plan helps keep some income flowing for property owners while helping tenants pay toward their rental balance. It's also an excellent way to build good relationships with your renters in a time of great uncertainty. A positive experience with an excellent landlord during a crisis can encourage tenants to renew their lease at the end of the current term.
Start With How Much They Can Afford
An effective rental payment plan starts with compromise. Even with a crisis, if your renters don't pay even something small towards what they owe, it can put their home in jeopardy too. Banks have been notoriously unforgiving during this time when it comes to mortgage payments.
If a tenant misses a payment or communicates that they're struggling financially as a result of the COVID-19 crisis (or a future widespread economic situation), reach out and ask them what they can afford to pay right now.
Starting with this offer sets an empathetic tone and paves the way toward working out a payment plan. Keep in mind: it's a short-term adjustment to a tenant's full rental payment. Allowing a tenant to pay an affordable amount now can help them through the crisis—but it's not a permanent rate adjustment.
Be Comfortable With What You Can Afford to Lose
Make sure what your renter thinks they can pay isn't more than you can afford to lose for a month (or two). Property owners shouldn't put themselves into a worse financial situation to accommodate a lower rental payment. If you start to slide, each of your properties is put at risk.
If you can't afford to maintain your properties due to lack of rental income, your Logan renters won't have a place to live—and you'll default on your mortgage.
As property investors and the experts in property management, Logan, Utah, landlords, we always recommend you bolster your investments with enough reserve cash to shelter your properties in the event of lost rental income. Evaluate your cash flow and make sure you can offset the lower rental amount your tenants say they can pay before getting the plan into writing.
Increase Rental Payments Over Time
Again, a rental payment plan is a short-term solution. Starting with a lower payment can help defer some of your tenant's rent costs, but the plan doesn't eliminate what they owe. Building up to larger payments helps your renters to become current on their account and compliant with the lease agreement.
Pay Less Now, Pay More Later
Property investors should arrange the plan to recover the full amount of missing rental income from a tenant before the end of the lease term.
- Tenants pay less now to help them through a financial crisis.
- As they regain income and find ways to adjust their cash flow, rental payments increase again.
- To get current, add the deferred rental amount to full rental payments until your renters catch up with what they owe.
We touched on this before, but you should always put the payment plan in writing. Just like the lease agreement, make sure your renter doesn't just agree to the terms; they should genuinely understand what the plan entails.
Not every tenant will need the same kind of help to deliver their rental payments during a crisis. Only offer a payment plan on a case-by-case basis. Consider the circumstances, consult a property manager you trust, and offer help where it's needed most.
Work With Professional Property Management to Apply Payment Plans
We know these are challenging times for property owners and renters! When your tenants struggle, hiring a partner who has been where you are and has solutions to address it can help you navigate the situation and retain your excellent residents. Let Reeder Asset Management work with your renters on how to pay the rent while protecting the income you need.
We have a proven process for collecting rent during difficult economic times! If you're a DIY property investor looking to learn more, a great place to get started is with our Collecting Rent in a Crisis Handbook. We're happy to offer this for free to investors and landlords in need during this time so you can keep your properties afloat!