If all of your tenants always pay their rent on time and in full, then count yourself lucky – for now – because it’s not going to last. At some point, every single property owner will deal with rent issues. For many, those fears came abruptly and what seemed to be out of the blue when the COVID-19 crisis halted the world. For those unlucky rental property owners, rent payments stopped coming in completely. The eviction moratoriums were immediately enacted and property owners were left looking for any relief for landlords. 

Today, as we step into a new year and the world begins to normalize, landlords dealing with unpaid rent may start seeing the light at the end of their tunnel. As it stands most property owners now have options for those tenants not making their rental payment. So what are your options if a tenant is facing financial hardships or loss of income? Landlords, you have three roads to choose from.

Disclosure – Because we have such a powerful marketing system, we rarely consider anything other than eviction proceedings. However, for those who may not have the ability to quickly remove then replace a qualified tenant, it is possible a more understanding approach could be beneficial.

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Choice #1: The Hard Road

Eviction Proceedings

  As a landlord or property manager, you will inevitably come across those less than desirable tenants. The tenants that consistently feed sad stories one after the next for their nonpayment of rent. As a private landlord, it can be difficult to make the decision to proceed with eviction for nonpayment; especially when those stories tug at the heart. Unfortunately, if your tenant cannot pay the rent, eviction procedures are the easiest route to deal with a perpetual problem. However, as it currently stands in January 2022, only landlords with non-government-backed home loans can begin the eviction process. 

The rental agreement states that if the rental payment is not received within so many days then a landlord can proceed with legal action and file for eviction. You can legally stick to the letter of the law and show no tolerance.

Landlords with Government-Backed Home Loans

Unfortunately, as it currently stands in January 2022, only landlords with non-government-backed home loans can begin the eviction process immediately. For those who finance their mortgage with any type of home loan with government-backing, there will be an additional 30 day notice period to your tenant. This means that if you intend on filing for eviction for late rent payments, landlords much first give their tenants a 30 day notice period to either pay or move out. If after that 30 day period your tenants have not paid or vacated, landlords with government-backed loans can now file against their tenants for nonpayment. 

Dont stress about the details – we’ve got you covered.

Choice #2: The Soft Road

The Loss

Another option if your tenant cannot pay is to take the soft road and offer a grace period. Maybe you find out that something tragic has happened in the home resulting in a reduction in household income.
Your heart goes out to them and their situation. You decide to waive one month’s rent to help them get on their feet. It is a considerate thing to do. If you evict, it would only add to their stress and you would lose at least a month of rental income anyway. In some instances, it may even be possible to use this as an advantage when it comes to taxes. Consult a tax professional to see if lost rental income can benefit you.

 

While some situations can call for a soft approach, travel this road carefully and infrequently. If you are perceived as a softy by your tenants, then you must prepare yourself to become a doormat. You will always have sob stories, excuses, and overdue rent.

Assistance Programs

Until the COVID-19 pandemic and in normal circumstances, many landlords didn’t even know there were many outside sources of assistance for tenants’ current and future rent payments. Additional resources can be found through local organizations like churches and non-profits and even local governments have emergency rental assistance programs that tenants can apply to. With more recent funding, many of the emergency rent assistance programs are able to provide more tenant’s and landlord’s financial relief. The application for rent assistance is easily found online and usually processed within a few days. As a landlord, consider accepting funds from organizations like these. While it may take a little time for the final transaction to happen, many of these organizations will pay past and future rent payments depending on tenant need – including late fees. 

Release Them of Their Rental Agreement

Its entirely possible for a landlord to offer the release of obligation to the rental agreement. While it may not seem ideal at first, it can offer a lot of benefits to those landlords able to afford the turnover and finding of a new qualified tenant. Save the stress of eviction action for both parties and offer tenants the option to exit the property. Landlords can still charge back the tenants’ security deposit for damages and rental debt but will need to understand that they’re likely not going to see more funds than what the security deposit amount holds. However, this a great opportunity for those landlords than can afford the lapse of tenancy to find new qualified tenants that are capable of making future rent payments. As with anything, make sure this agreement’s in writing. 

View a Sample Victory Property Management Lease Agreement

Our relatively standard and common lease is written by the Bar Association and does a good job of protecting both tenants and rental owners given the laws in our area

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Choice #3: The Middle Road 

Compromise

The third choice, and perhaps the most common, is the middle ground. Eviction is not the first and only choice and neither is giving up the income. There is a lot of middle ground here for some sort of payment arrangement if your tenant can’t pay the rent on the due date. Here are a few options to choose from:

Pay Late:

Some tenants will have the monthly rent money by the end of the month, but not on the first. For example, many public school teachers get paid once a month and usually at an odd time. If you as the landlord are comfortable accepting late payment, feel free to! However, it is standard practice that a late fee is charged to that tenant. Be sure to include the late fee amount into the lease agreement that you and your tenant will sign. 

Change the Lease:

If your tenant gets paid on a day other than the first of every month, consider changing the due date of the lease. Suppose they receive their pension on the 15th, then why not make the rent due then. You will have a better chance of getting paid in full and on time. Just make sure to pro-rate the rent for the month the due date changes.

Pay Half:

It is possible that the tenant just ran into a temporary snag like so many did during the COVID-19 pandemic. Why not consider having them make partial rent payments during the month. For those who get paid bi-weekly make an agreement in writing that during each pay period your tenant makes half of the payment of rent. 

Make an Exchange

In most states, a tenant’s security deposit can be used to cover any rental debt after the lease has been fulfilled. While not always the best decision, cash-strapped landlords can offer to waive a month of tenant rent in exchange for their full security deposit. This can give your tenant the wiggle room needed to get back on their feet and catch up with bills. Unfortunately, landlords will not have access to that money until the lease agreement is fulfilled and any damages done to the rental unit will have to later be billed back to their tenant. This type of arrangement should be completed in writing and signed by both parties.  

We would recommend that the landlord or their property management company meet with the tenant at their home. Keep an eye out for new and expensive purchases. If they cannot pay the $650 in rent but you see a new $800 flat-screen TV, you will undoubtedly handle things differently. Hear them out but don’t be afraid to wait a day or so before giving them the answer. Make them sweat a little so you don’t look like a pushover, but instead the understanding landlord.

Property Management Frequently Asked Questions (FAQ)


1) Know the latest landlord-tenant laws [renter/tenant rights, landlord rights, and Fair Housing]

2) Decide if you will be renting yourself or hiring a property management company

3) Using real data, determine a sound rental rate for your market

4) Research how you will list your rental property online

5) Inspect the property and perform required maintenance

6) Take premier property photos and list the home

7) Schedule appointments and show the property

8) Secure a legally compliant & fair lease

9) Collect initial move-in payments

10) Oversee pre-move repair requests

11) Oversee move-in day, utility transfer, inevitable new user issues

Or, you could just hire us…

Renting out your home can be a very smart and lucrative decision when done properly. Determining up-front what costs and benefits to renting your home can be expected is crucial. Accurate pricing, knowing state and federal landlord laws, and understanding the future market trends are all pivotal in the success of your rental home.

The exact requirements can vary by state or municipality. Most areas do require a real estate license if you collect rent and deposits on someone else’s behalf. Simply put, your friend that used to work for an apartment complex cannot market your home, lease, or collect rental funds on your behalf unless licensed.

Without being partial, that’s really a preference question. However, here is our list of things to be on the lookout for in a great property manager:

Communication: Are your questions answer quickly, clearly, and kindly?

What do their property manager reviews have to say?

Has the rental process been explained clearly and do you agree with it?

Are their rental home listings clear and descriptive or rushed?

Property management company fees vary widely based on the type of service, season, and property management company you choose. Average monthly fees can be around 10% while some companies may charge a flat monthly rate

Being a landlord can be both fun and easy. With free property, management software available (Apartments.com) do-it-yourself landlords have never had it easier! However, the largest sacrifice to be a landlord is time, and stress. Advertising your rental home, processing applications, emergency maintenance calls, and the unfortunate eviction can quickly wipe out a huge amount of what you might save by passing on hiring tax-deductible superior property management services. That said, a poor rental management company can cause headaches of their own, so it’s a matter of finding a great one. If you do, they’re worth their weight in gold

According to RocketHomes.Com,“When you sell a home, that’s the extent of the money you will make on the property. But if you hold it as a rental, you could continue to earn money every month, realize tax advantages and, ideally, see appreciation.” We couldn’t have said it better ourselves! With the expanding real estate market, now is the perfect time to invest in rental property. The US government has built a system where the easiest and most consistent path to wealth is owning exceptionally managed rental homes

Yes! Property management fees, and even most maintenance items, are tax-deductible as they pertain to your rental property


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