As property investors who got into Salt Lake property management to help other landlords, we know that being a property investor can be challenging enough when economic conditions are business-as-usual.
Passive income from real estate is one of the most stable ways to build your long-term wealth—but what happens when a financial crisis makes it difficult for your renters to pay the rent? Suddenly, property owners struggle to get the most out of their investment properties—without rental income from tenants, and with all of the same overhead.
We get it! As property owners ourselves, we are right there alongside investors dealing with the sudden financial hardships that stem from renters who are struggling to pay the rent because of job loss or an income reduction due to the COVID-19 crisis. However, investors don't need to give up and forego the income you need to maintain your properties during an economic crisis.
If you're familiar with our approach to property management here at Reeder Asset Management, you know that we are all about educating our fellow property owners to help build long-lasting success. Here's what landlords can do to stay proactive if tenants don't—or can't—pay rent during a crisis.
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.
Document Like Your Long-Term Wealth Depends on It
As a professional provider of Salt Lake property management, we know that your investment property income and long-term wealth can depend on your documentation practices throughout your tenure as a landlord. Owning and operating rental properties in Salt Lake City requires careful management of details, paperwork, and documentation. During a crisis, your record-keeping habits become even more critical.
When your renters miss a rental payment, keep track of your communications with them, including:
- Text, phone call, and email reminders to pay the rent
- Efforts to reach out and talk with your tenants
- Your residents' responses (or lack of response).
We hope you won't need to refer back to records showing that your tenant didn't respond to your reminders, but if they continue to neglect a rental payment, you'll need this information after the crisis ends.
Choose Compassion—but Not Resignation
Some of your tenants might find themselves in a terrible financial situation without work or other assistance to get through a crisis. While property owners must show compassion in times like these, it's also essential not to resign yourself to foregoing the rent you need to maintain your Salt Lake rentals.
With years of Salt Lake property management experience under our belt, we can advise you that even in a crisis, the rent is still due. Your renters sign a lease to pay the rent on time every month. Whether they experience a personal financial crisis or multiple tenants struggle to pay the rent due to a widespread economic meltdown, property owners can (and should) continue to collect.
However, property investors can build lasting landlord-tenant relationships when reaching out with kindness while encouraging tenants to catch up on rental payments. Soften your reminder language, check in on the well-being of your tenants, and offer to work with them on solutions. Sometimes, offering options can be the difference between determination and disaster.
Be Flexible Without Financial Endangerment
When one tenant struggles to pay the rent, a property owner experiences a financial challenge. If you have multiple properties and tenants who aren't paying rent at the same time, property owners will quickly fall into dire straits unless they have an alternative means of paying the mortgage and covering overhead costs.
Short of giving away free rent (unless you feel comfortable with this option), work with your tenants on a payment plan or alternative means of covering what they owe as part of their lease agreement.
While canceling the rent for your renters may be possible if you are extremely secure financially, we know from experience that most property owners depend on the income they receive from their properties to care for their own families. This makes developing payment plans crucial for keeping a roof over everyone's head.
- When developing a payment plan, ask your renters how much they can afford to pay now. Having a better understanding of their financial situation without being invasive is vital.
- Research how much income you can afford to delay now, and roll this additional sum into future payments to break up the amount renters have to pay at one time.
- By developing a payment plan that helps tenants pay less rent now, you give them time to catch up on what they owe until their balance is at zero.
This type of payment plan helps build great working relationships with tenants. It also helps them avoid late fees or the prospect of eviction when the crisis ends.
As property owners who got into Salt Lake property management to bring integrity to the industry, we know that no landlord in Salt Lake City, Utah, or on the face of the Earth wants to have to evict an otherwise excellent renter. Evictions should always be a last resort for any problem you are facing—so, if you can get a payment plan up and running first, this is your best option.
If You Have to Evict, Wait Until the Crisis Is Over
Evicting a tenant during a crisis might feel necessary, but this is only something you should consider pursuing if you have exhausted your other options. It can also set the wrong tone for your reputation as a compassionate property owner to evict a renter due to an uncontrollable, public-health disaster.
However, if a tenant is unresponsive, refuses to pay the rent, and won't work with you on a payment plan, be patient.
- Keep documenting the events, communications, and lack of cooperation from your tenant.
- Consult your legal counsel or Salt Lake property management partner about how and when to proceed with an eviction.
As of this writing, the eviction restrictions put in place by Gov. Herbert have expired. During this time, it's crucial that property owners follow the advice of your attorney and work with your property manager to resolve any looming issues with your renters.
We Know How to Work With Tenants in a Crisis
As a Salt Lake property management company built by investors for investors, we know that dealing with nonpayment of rent when you rely on such payments to get by as a landlord can be excruciatingly stressful. We've been where you are now: you need an expert to find the right balance of empathy and enforcement when managing your tenants through a crisis.
Reeder Asset Management has been serving our fellow landlords for over a decade. We've seen just about every curveball that can be thrown at a property owner—and we know how to work with struggling tenants while protecting your investments. If you haven't experienced The Reeder Difference when it comes to the care of your properties, there's never been a better time.
Here at Reeder Asset Management, we're also big supporters of landlord education and enrichment. If you're worried about that June rental payment right around the corner, this is the perfect time to download your free copy of our Collecting Rent in a Crisis Handbook. It has the tips you need to start successfully working with your renters on recovering lost income.