Economic uncertainty affects everyone across every industry, including rental investments. Whether it’s the COVID-19 pandemic or just a financial downturn, landlords and tenants alike look for ways to make ends meet when uncertainty hits. So, part of responsible business is planning for emergencies and unexpected circumstances that may arise. Below we take a look at tips for how to protect rental property investments during troubled times.
How to Protect Rental Property Investments
When the going gets tough, the tough get going – but the wise also prepared ahead of time just in case. While economic struggles can lead landlords to look for ways to cut costs, some things need to remain more vigilant than ever. That said, persuasive tenants may get landlords to offer them a break. However, rental property is still a business, whether in good or bad times. At the end of the day, rent is still due, repairs are necessary, calls come in, and you must fill vacancies. Follow along with the tips below for how to protect rental property and keep your business running in times of financial instability.
- Keep Rental Rates Reasonable
- Business is Business, Not Personal
- Protect Your Landlord-Tenant Relationship
- Maintain Respectful Boundaries
- Perform Tenant Screening
- Use a Legal Lease Agreement
- Offer Added Conveniences
- Always Require Renters Insurance
- Do Not Hang onto Bad Tenants
- Seek Only Legal Evictions
Keep Rental Rates Reasonable
Economically uncertain times are not when landlords will want to raise rents beyond what the market can bear. If you do think your property warrants an increase, give your tenants ample notice. That said, many states dictate rules for notice periods and max increases per year, so check with your local jurisdiction. Another way to soften the blow of an increase is to explain why. Tenants are more likely to accept an increase if it is reasonable inflation or related to improvements that add some value.
Business is Business, Not Personal
A great landlord knows that how to protect a rental property starts with tenant satisfaction for many reasons. Landlords should always maintain a healthy, professional, and courteous relationship with tenants. That said, during economic hardship, tenants may try to get you to deviate from the lease expectations. That does not mean a landlord cannot or should not consider a payment plan or possible reduced rent for a great tenant who has fallen on sudden hardship. However, this is not to the detriment of the owner as landlords also have bills to pay. If you do entertain the idea of side negotiations, remember the following:
- Get it in Writing – Tenants and landlord must sign a contract for any specially negotiated rent decrease, late payment forgiveness, deferred payment, or terms that deviate from the original lease. This protects both parties by eliminating confusion and potential liability of miscommunication claims.
- Treat Everyone the Same – For landlords with multiple properties, remember Fair Housing Laws. This dictates that all tenants must receive equal treatment. So, if you decide to give one tenant a lower rate, it must be an option open to everyone. Thus, it is better to hold everyone to their original terms. While circumstances will always vary, and you may want to help, remember this is a business.
Protect Your Landlord-Tenant Relationship
Great tenants are hard to find, and finding replacements, especially during a pandemic, is even harder. Therefore, let tenants know that you appreciate them. When renewal time comes, remember the expenses associated with marketing, turnover, and screening. If you can offer any incentives, discounted rent, or even a free month to tenants as a way to entice them to stay, you will be better off in the long run. Additionally, ensure that maintenance requests get addressed promptly with added safety and cleanliness measures in mind. This will help your tenant remain confident in your management and comfortable in your rental property.
Maintain Respectful Boundaries
It is frustrating for landlords when a tenant is residing in your property and not paying rent. However, that does not mean the tenant does not have basic rights under both the lease and the law. At the same time, your first instinct might include removing them as soon as possible; never attempt to evict someone yourself. Instead, give the tenants proper notice as required by law and the lease. If they do not comply with correcting the lease violation or paying rent, move to a legal eviction through court proceedings. Notice is also required to enter for any inspection or non-emergency maintenance. Generally, 24 to 48 hours notice is acceptable.
Perform Tenant Screening
Vetting potential tenants are not the area where landlords should look to cut costs. The steps taken to screen applicants serves as your best defense against potential non-payers or trouble tenants in the future. Therefore, require the application fee and use it to run a background history, credit check, and income verification. Additionally, do not forget to take time to contact tenant references. This can provide a wealth of information on how they treated previous landlords and properties.
Use a Legal Lease Agreement
It seems basic, but it is worth repeating; a legally binding lease is essential to any rental property. This contract outlines expectations, obligations, and provisions that define essential roles for both the tenant and the owner. Additionally, if the tenant violates terms, and a landlord seeks to evict, the lease is critical to winning your case in court. Whenever a new tenant signs their lease, ensure you review key clauses and answer any questions they may have before signing.
Offer Added Conveniences
In good times and in bad, keeping processes as streamlined as possible is beneficial. When it comes to rent payments, tenants overwhelmingly prefer to pay online. Accepting online rent payments is also incredibly convenient for landlords. Many apps and software options offer bonus features, including financial reporting and automatic late fees. Additionally, online payments keep tenants at home and safe during a pandemic while eliminating the old “check is in the mail” excuse. Are you considering software for rent collection? Check out RentRedi, which offers landlords a variety of helpful services in a convenient app.
Always Require Renters Insurance
Any emergency such as fire, flood, burst pipe, or break-in can damage a tenant’s personal belongings. This is where renters insurance becomes essential. These policies serve two purposes; to protect against liability and to help tenants replace damaged or stolen property. Additionally, certain policies may help with temporary housing if needed depending on the particular coverage they choose. Landlords should ask for proof of an active policy before turning over keys at move in. A widely accepted industry standard is a minimum of $100,000 in liability coverage, with some luxury properties requiring up to $500,000.
Do Not Hang onto Bad Tenants
When a tenant was not paying or was causing issues before a financial hardship, chances are they cannot use that as an excuse. If history repeats itself, landlords can expect the tenant to still be troublesome long after the economic downturn has ended. Therefore, cut your losses while you can. It might seem scary to face a vacancy but consider this – you are losing some money either way, but the tenant continues to cause wear and tear or even damage while you collect nothing. Sure, finding a new tenant may take a bit longer, but the promise of finding a compliant and paying tenant is worth it.
Seek Only Legal Evictions
As we mentioned above, an eviction is a legal process carried out by the courts. This is where a landlord’s record-keeping skills are on full display and open to scrutiny. An important part of how to protect a rental property is through detailed accountability. That said, if you have a signed legally binding lease and all of the relevant payment history records, the court should rule in your favor. Each state and even some local jurisdictions have their own forms and processes to file, so research carefully to ensure compliance. Once you have an eviction order, the tenant must vacate, or a marshal will remove them.
Changes to Landlord-Tenant Rights During COVID-19
The coronavirus pandemic has brought unprecedented changes in regulations to the rental property industry. So, with so many changes and uncertainty, let’s review some key points below.
Evictions
Currently, many state eviction moratoriums have expired. However, there remains a federal eviction moratorium in effect until December 31, 2020. This means that landlords still face an uphill battle to get non-paying tenants out. Keep in mind that the moratorium only covers evictions for non-payment due to the pandemic. If a tenant is violating the lease, engaging in criminal activity, or poses a significant risk of damaging the property, they still face eviction. Below are some key points to consider –
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Does the federal order protect every tenant and every property?
That depends. In order to qualify, a tenant must certify they have experienced a “substantial” loss of income and are making “best efforts” to pay as much rent as possible. They must also show that they have tried to get help from government assistance programs. Additionally, if evicted, tenants must declare that they would be homeless, forced to live in a shelter, or in cramped conditions.
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If my tenants do not pay, are they still responsible for back rent after the pandemic?
All renters must pay all back rent and additional fees accumulated during the moratorium.
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Are landlords responsible for notifying tenants of their rights under the moratorium?
Not at this time. However, that could easily change as federal agencies are pushing for landlords to issue written notice of the tenant’s rights. As of now, the moratorium is only effective if renters are aware of the protection it affords them.
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What if a tenant probably could pay but doesn’t?
The moratorium covers tenants facing hardship due to the pandemic. Examples of hardship include lost wages, medical bills, or even a lost job. However, some individuals will take advantage of and use this not to pay even if they can. Is there anything a landlord can do to challenge them? No, not really. Tenants may view any act of challenge as a form of intimidation, which is not allowed. Therefore, any disputes must go through the court, and landlords should not approach tenants themselves.
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Can a landlord get in trouble for violating the moratorium?
You bet! According to the CDC issued guidelines, landlords in violation of the moratorium may be subject to a fine of up to $100,000, one year in jail, or both.
Payment Plans and Rent Relief
Those who could get a portion of the CARES rent relief assistance in Pennsylvania might not realize that benefits max out at $750 per month. Most rental properties likely have a rate that exceeds the state maximum benefit. So, what is a landlord to do? Landlords were once expected to forgive the difference but are now allowed to seek payment plans to recoup costs. Though the key is settling on terms the tenant can fulfill under their current financial strain. This has proven complicated and difficult for many to navigate. As the requirements are consistently evolving, we recommend checking your local jurisdiction on payment plan applications and landlords’ guidelines. Let’s review a few key questions below?
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Can I charge late fees if rent goes unpaid? – Yes, under the federal order, late fees and miscellaneous charges can accrue.
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Do I have to accept an offer of a rent payment plan? – Most likely, yes. The pandemic has created an ever-evolving standard on what is required. For the most up to date information for landlords, check with your local jurisdiction or a qualified legal professional. If you enter into a payment plan, ensure it is reviewed by a lawyer, legally enforceable, and signed by all parties. A lawyer can assist with determining how to protect rental property investments legally and in line with state guidelines.
How to Prepare for Unexpected Emergencies in a Rental Property
Whether dealing with a broken HVAC system or a global pandemic, preparation helps. Landlords face many challenges, including unexpected expenses of all kinds such as repairs or extended vacancy. The best way to set yourself up for success is through an emergency fund. This is a special savings account attached to your rental property in which a set percentage of the rent gets deposited each month. These funds can then help in times of need to cover expenses.
Dealing with rental properties at any time is a time consuming and often stressful task. That said, adding on economic hardship, a health crisis, and ever-changing regulations can quickly overwhelm landlords. Deciding how to protect rental property investments is essential to success.
So, why not consider handling the day to day struggle over to the professionals? At Bay Property Management Group, our business is property management and only property management. Our experienced team can negotiate with tenants, prepare court filings, and maintain a landlord’s compliance with local, state, and federal regulations. If you find yourself with a vacancy, our team has the tools to market and find a qualified tenant while maintaining a strict standard of social distancing and cleanliness. Give us a call today to find out more!
