HELP! I Am A Landlord
At Karis Properties, we understand your current dilemma as a landlord trying to function effectively and survive financially during the current coronavirus crisis. Although real estate investments have generated a steady income with good returns up until now, the current pandemic has changed the traditional “business-as-usual” thinking, which is having a significant impact on the business economy at large.
The impact the various lockdown levels had on the economy, have filtered down through all aspects of business to most households – possibly even your tenant/s and your own. Managing your tenants’ payments through this pandemic is a weighty challenge, and how you prepare for and handle it now will have long-lasting effects on your pocket.
As a leader in the real estate market, Karis Properties is always on the lookout for new approaches to best serve our clients and to ensure your financial viability. You will no doubt have witnessed how some of your tenants’ are battling to make their monthly rental payments as the COVID-19 crisis takes hold. Even if you are lucky enough not to have experienced a decline in your rental income, we have some prudent advice which we believe will benefit all landlords during these challenging times.
Thinking ahead to the future, you will need to handle your tenants somewhat differently from before the virus hit our shores. The strategic decisions that you make and the actions that you take from now on should all be aimed at strengthening your relationships with your tenants to minimise the risk of a drastically reduced rental income.
Many tenants are asking for a discount or leeway on their monthly rentals, something inconceivable in the past. Bearing in mind that decent tenants are hard to find, as are tenants with good payment history, it may well be worth asking yourself whether or not these types of tenants should be treated with more leniency.
By embracing transformative changes early on, you will be able to take immediate action to minimise risks and stabilise your rental income as far as possible in these turbulent times. You will also place yourself in a more favourable position once the pandemic dies down.
While it may be tempting, and possibly easier, to take a “one size fits all” approach with your tenants, who are battling to keep up with the monthly rentals, each situation will warrant a unique approach. Your ability to weather the storm will depend on how you respond to the challenges presented to you.
5 Steps to Dealing with Tenants in Arrears During COVID-19
These are some options which you can use to aid your tenants over this period:
- In our experience, we have found that establishing an open channel of communication between yourself and your tenant will build a good relationship. This improved relationship will lend itself to a better understanding of the circumstances so that you can make the right decision.
- Establish if your bank or insurance company can assist you and pass this saving onto your tenants to make things a bit easier.
- Use the initial deposit as a month’s rent, and allow them to pay the deposit back over 3 – 6 monthly instalments.
- Decrease the monthly rental for a period until your tenant is back on their feet. You can then increase it again once the pandemic is over. The tenants can also make up the difference with additional payments over a few months after that.
- Hire a rental agent who understands and reflects your values, to secure your rental income as far as possible under these conditions.
Before making any alternative arrangements, you must ensure that the tenant will be able to financially recover so that you can recoup your losses over the short-term. You will need to ask the tenant if they are simply receiving a decreased income for a transitionary period, or whether they have lost their job and are now unemployed. This will give you a better idea of what decision you need to make when it comes to offering amended rental terms. Also remember, if you provide your tenant with terms that are different from the original agreement, that the tenant thoroughly understands the repayment terms and period. This should all be written down and signed by both parties to avoid any misunderstandings or unpleasant confrontations.
Screening Tenants in an Unsure Future
If the above fails and you cannot reach a compromise, you will need to start the eviction process by issuing a notice of breach of contract. Once this is complete, you will need to start searching for a suitable tenant, and so begins a new screening process.
In this case, you will want to be more careful with your screening. Payslips are not an indication of job security anymore, since the outbreak of COVID-19.
You will also need to establish which company the potential tenant works for, and it would be helpful to know in which industry they work as well. This will give you a good idea of how the company will perform at different levels of lockdown.
While so many people are losing their jobs or having their income reduced, adverse credit records are inevitable. In the future, when you take a potential tenant’s credit record into account, it would be advisable to investigate the dates of the defaults. You may find that they happened during COVID-19, which will unfairly put the tenant in a negative light and not necessarily reveal the true nature of the situation – especially if the tenant has been trying to reduce their overhead costs.
While it helps to take every precaution possible to protect yourself against rent defaulters, you will need to allow for some leniency in these extraordinary times. If you are unsure about the intricacies involved in screening tenants or renegotiating their rentals, rather seek the advice from an experienced real estate agent such as Karis Properties.
We might have to do things differently, but we still get them done!