Collecting Rent During COVID-19: Options for Property Managers
Collecting rent during COVID-19 is a complex situation. More than 30 million Americans have filed for unemployment benefits in the past month, driving the unemployment rate passed 10%. Many Americans are struggling right now, and it can make collecting rent complicated.
Many residents may not have the steady income needed to keep up with their expenses, including their rent. This situation can lead Property Managers to difficult business, legal, and moral decisions regarding resident management and evictions.
Here are a few options that can help guide your decision-making as you work through this difficult process.
Know and Follow the Guidelines of Your Region
Regardless of which state you are in, there is a guideline in place to protect residents from eviction. Some states and municipalities have stepped in to prevent evictions, but there are also protections in place for Property Managers. It is important to understand your rights as a Property Manager as well as the protection your residents have.
The Department of Housing and Urban Development suspended all evictions and foreclosures in April 2020 while the CARES Act put a 120-day eviction moratorium in place for properties that are part of government programs. Along with the federal government, various states and cities have implemented their own processes. Some simply offer rent forgiveness grants, while other states stopped eviction hearings entirely.
Stay up-to-date on what's going on in your area. Just because a deadline has been set doesn’t mean it won’t get extended. Furthermore, new rules and guidelines can come into place every week. Staying informed is the best thing for you right now.
Consider Pausing Evictions On Your Own
You don’t have to rely on the laws of your state or local government to suspend evictions during the pandemic. Your team may decide to suspend evictions to protect your staff members and future cash flow.
If you evict your current residents, you may have a difficult time filling empty units. Many people are waiting to move until after the pandemic, decreasing the demand for rental properties in the short run. As a result, you could lose income if your residents are evicted and there is no one to replace them.
Evicting your residents will also put a significant financial burden on them. Not only do they need to find a new place to live in the midst of a pandemic, but they might lack the income for security deposits and other fees that come with renting a place.
Ask for Proof of Hardship, if Allowed by Your State
In some states, landlords can ask for verification from a resident that proves they can't pay rent due to a hardship caused by COVID-19. For example, if a resident says they'd like an extension because their work hours were cut, you could ask for documentation to prove it.
Bear in mind that you need to treat all residents equally. This means you can't demand verification from one resident if you don’t require the same documents from the others.
Encourage Partial Payment Now
While collecting rent during COVID-19, consider working with residents in need so they can make partial payments until they can pay in full each month.
For example, a resident who lost his job might only be able to pay $500 in rent and still have enough for basic needs. Paying $500 of $1,000 rent is better than $0. If their unemployment lasts three months, then they will only owe $1,500 instead of $3,000.
These partial payments will improve your cash flow and put your residents in less debt than they otherwise would be, helping both parties post-pandemic.
Develop a Payment Plan for the Back Due Rent
Some Property Managers may only think in the short term with COVID-19. While they are okay with residents missing rent payments when they are laid off or furloughed, they may expect payment in full once the state opens up again. Unfortunately, that won’t be possible for many of your residents. If unemployed workers are getting by on savings, then they won’t have the funds to pay rent until at least a few weeks after they are back at work.
Instead of requesting three months of back rent on the spot, develop a payment plan with your residents to help them get back on track. This could mean an increase in rent by a few hundred dollars over the course of the year to help them pay back what they owe over time.
Remember, your residents likely also have other overdue bills for internet, electricity, and other expenses. They will be working their way out of debt for several months or even years.
Approach Collecting Rent During COVID-19 with Compassion
It is understandable that your rental properties need a steady cash flow to stay in operation. You need to pay maintenance professionals and other employees to make the residence a safe, clean, and well-maintained place to live. Collecting rent during COVID-19 is essential to these operations.
However, keep in mind the struggles of your residents and approach rent payments with proactive plans for after the pandemic is over.
In the meantime, keep a close track of your expenses and maintenance costs so you can be financially secure during these uncertain times. Learn more about how HOMEE’s property maintenance software can help you set up systems for closely monitoring your maintenance costs. Request a free demo today.
- 8 Different Types of Handyman Services You Need to Know
- 5 KPIs You Need to Track for Multifamily Property Management
- Don't Hire a Property Maintenance Company Until You Read This
- Do You Need an EV Charging Station for Your Rental Property
- What You Should Know about Different Types of Property Maintenance