This article was posted on Tuesday, Jun 01, 2021

Here is this month’s article by veteran real estate investor and property manager, David Pickron.

Will you be ready when the eviction moratorium ends and as a landlord, do you have a plan?

Recently, I was at a birthday party where young children were participating in some old-fashioned games.  One that struck me particularly was musical chairs.  As an adult, I now realize the anxiety that was generated by that game; will I be left out or will I be the last one standing?   As each round progressed and more players and chairs were removed, I could see that unique mixture of fear and fun fill the faces of these children as they competed to be the last person with a chair to call home.

Over the past year in meeting with landlords across the country, I have come to know that look all too well as we have tried to navigate the eviction moratorium that has affected our industry.  You may have even seen that face in your mirror this morning.

As March 2021 ended, once again the eviction moratorium was continued to June 30.  For most of us, I don’t think this came as any great surprise.  Even though the legislature approved rental relief for affected landlords, there just wasn’t enough time to get that money out to landlords (these are the same people who were able to get PPP business loans out and funded within weeks).  I predict that this will be the last extension and I’m already prepared for many of you to let me have it if I am wrong.  I hope and pray I am right.   Let’s assume that I am right, and that the eviction moratorium completes its run at the end of June.  The rental-housing market will immediately be thrust into an unforgiving version of adult musical chairs.

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Whether you have been paid every month, getting partial payments here and there, or absolutely have no communication with your tenant, there are things you should plan for now to protect your investments.  I believe it is easiest to break down the grouping of landlords into three buckets as follows.  Which of the three buckets are you in?

Bucket 1: Retain

You are in bucket 1 if you have received all your rent and the pandemic did not hurt you personally. Congratulations, many of us are jealous. Your tenants weathered the storm and made you a priority.  I would caution you to not take them for granted.  A lot of things can change over the course of a year (new job, new child, new pet) and those changes may prompt a move by this valuable tenant.  These tenants know their value and will have the power to move wherever they want because their credit and residential history is perfect.  Whether looking for a bigger home or a shorter commute, when this game of musical chairs starts, they may be tempted to vacate your property.  These are “dream” renters, and you cannot afford to let them go.  I suggest a couple of ideas to help them recommit and sign a new lease with you:

  1. Give them a discount in rent this year. $100 a month is cheaper than a turn. Do you really want to play “renter roulette” with an up-and-coming rental pool filled with bucket-3 type applicants after the eviction moratorium ends?
  2. Offer to upgrade your home. I am putting new flooring in one of my homes.  It’s a win-win, as my property value will increase and the tenants will love it.  Consider new countertops, appliances, or landscaping as an incentive for them to stay.
  3. Giving them a monthly gift card or buying them an annual pass to the local zoo or theme park might be a better option depending on the renter.

By helping this group, you only help yourself.  They helped keep you afloat for a year…it’s time to say thank you!

Bucket 2: Manage

If you have been working with your tenants and have gotten partial payments here and there, then you are in bucket 2, the “manage” bucket.  I don’t need to tell you, but you have been working hard, performing a high level of management just trying to get paid.  The only reason you are managing like this is because the government forced you into it.  If this moratorium ends in June, I suggest these as your next steps:

  1. Sit down (face-to-face if possible) with your tenants and lay out your future expectations.
  2. Let them know that the behaviors they have shown in the last year will not be acceptable in the future.
  3. Contact your local government to see if there is any stimulus money to offset past-due rent.
  4. Negotiate any past-due rent and then renew the lease with a new mindset. Get creative and say you will waive the past due if they sign a new lease with a small increase in rent.  This will allow you to recoup your past-due rent over time and take the burden off your tenant.

Bucket 3: Replace

If your tenant ignores you, won’t take your calls and refuses to pay rent because of a COVID-related reason, you, my friend, are drowning in bucket 3.  We feel for you, as covering someone’s rent when they are not cooperating or communicating is not fun or easy.  Cutting the cord and cutting it quickly may be your best decision.  If you are in bucket 3, please consider these suggestions:

  1. If you fail to receive any rental-assistance money, you should contact an attorney immediately. Some states have lengthy eviction processes and by starting the process today, you might be in a better situation come the end of June.  Establishing and maintaining that relationship with legal counsel is well worth the money.
  2. You could offer the tenant money to move if your property is given back to you in great shape. Once they are out and the property is inspected and meets your standards, you can send them their money

As the world prepares to get back to normal, let’s make a commitment and not just return to our normal way of managing.  This pandemic has afforded us the perfect opportunity to review and update our policies, criteria, applications, and onboarding process.  The key to your success in this world is finding and retaining the right tenants.  In a time where it will only be harder and harder to find the right tenants, it is paramount to be ready to hold on to or grab the best of the best when the music finally stops.


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