The magnitude of relief bills, programs, and legislation that have passed as a result COVID-19 is unprecedented, and there will likely be more legislative bills forthcoming at both the federal and local levels as this situation continues to unfold. While there are bills to aid property owners, small businesses, and corporate entities, one group is stuck in no man’s land: renters.
The CARES Act is a temporary Band-Aid, providing increased unemployment benefits only through July. While local governments have tried to aid renters by implementing eviction moratoriums and rent freezes—to the detriment of landlords—the industry is already showing a decline in fundamentals. If renters fall too far behind in payments, the impact on landlords could be devastating. As such, landlords cannot simply rely on the government to get them and their tenants through this situation. Instead, they should work together to ensure the best possible outcome for all parties.
Here is a our guide to navigating through this crisis:
Tip #1: Communicate with empathy
Tenants and landlords alike are understandably experiencing varying degrees of stress relative to rent payment and rent collection. Landlords and property managers have been inundated over the past several weeks with calls and emails from tenants seeking guidance. In order to ensure consistency, it is prudent to develop a centralized place for frequently asked questions and a dedicated email and phone number for COVID-related emergencies. More importantly, however, be proactive with your tenants and understand their current economic situation. Moving from a compliance model to a model of empathy will help all parties establish trust through this period.
Tip #2: Stay on top of new local and federal legislation
Laws are changing at a breakneck pace with each passing day. Staying in touch with the resources that are available to landlords on a local, state and federal level is of high importance. For example, the Federal Housing Finance Agency (FHFA) has announced that Fannie Mae and Freddie Mac will offer multifamily property owners mortgage forbearance on the condition that all eviction proceedings are suspended for renters unable to pay rent due to COVID-19. Additionally, there are opportunities for landlords to apply for the Payment Protection Plan (PPP) loan program.
Cities are also stepping up to provide local support. The Dallas City Council approved $13.7 million through the CARES Act for rent and mortgage assistance, for example, and 16,862 residents applied within the first two weeks. Los Angeles County and the City of Santa Monica launched similar programs in mid-May.
Tip #3: Offer payment plans
Amid financial hardships, millions of renters are forced to decide between paying for food and bills or their rent. Under the CARES Act, expanded unemployment benefits will expire on July 31, and without extended relief, there could be a surge in tenants seeking assistance. Offering payment plans to tenants that are experiencing hardship can help ease their burden and maintain some form of cash flow. The California Apartment Association has a resource bank that includes sample letters to tenants and tenant payment plan agreements.
Tip #4: Provide incentives to retain tenants
With the majority of the workforce either unemployed or working from home, many renters are considering a move to more affordable locations or planning to stay with family. Offering a lease extension with no rent increase for six months to a year in advance of the lease expiring could shore up cash flow for the coming months.
Tip #5: Start a pay it forward campaign
People across the country are coming together to help each other through this pandemic, especially throughout their local community. Several large landlords have implemented a pay-it-forward campaign where a portion of on-time and full rent payments are placed into a pool to help other tenants pay their rent. Implementing a pay-it-forward campaign can be an effective tool that boosts morale and incentivizes those who can afford their rent to keep paying while simultaneously assisting struggling tenants to make their payments.
Tip #6: Turn to new technology
Adopting new technologies can help tremendously. Various technology companies, like Rhino, Till, and Hello Landlord offer financial security products that can help retain and attract new residents. Adopting these technologies can protect landlords against tenant default by covering lost rent.
Tip #7: Incentivizing on-time payments.
Acknowledging that residents may be cash strapped in this economic environment, some landlords are offering residents either a flat discount or a percentage reduction for paying their rent on time.
Tip #8: Waive credit card fees
While using credit cards to pay rent is a short-term solution, it may be the only way residents can continue to make rental payments. As such, landlords should consider waiving all credit card processing fees on a temporary basis so that residents can pay using credit cards without the additional fee attached.
Tip #9: Implement a loan program
Distressed tenants are turning to high interest loan providers for relief despite steep fees and unfavorable rates. As an alternative, a landlord in Charlotte, NC, launched a loan program for tenants in need. Approved tenants are granted a loan equivalent to one month’s rent. The interest incurred on a $1,200 loan is about $47, and tenants have six months to repay the loan incrementally.
Tip #10: Call your lender as soon as you see trouble
Lenders are not yet overloaded with distressed loans, and they want it to stay that way. They are incentivized to work with you to ensure that your situation does not devolve. As soon as you know there may be trouble on the horizon and your ability to pay your mortgage payments is in jeopardy, call them.
Tip #11: A small act of kindness
Not every landlord is in the position to implement big changes for their tenants. Profit margins may be too thin, you may still be awaiting forbearance from your lender, or perhaps property rentals are your sole source of income. There are still small things that can be done as an act of kindness such as gifting grocery gift cards or a basket of toiletries and cleaning products.
There is no one-size-fits-all solution to navigating this crisis, but if we all work together with empathy, everything will go much more smoothly.
At Awning, we feel passionate about using technology to streamline, virtualize, and automate previously rigorous and time-consuming processes. Before COVID, the need to adopt new technologies was pressing, but now in the time of COVID, it has become mandatory.
Let us know how we can help you find your next investment property.