It’s pretty unusual times is an understatement.
More accurately it’s times like we’ve never seen before and it’s introducing us to a world that no one really imagined. Like who expected a toilet paper rush?
During a recent trip to the grocery store we discovered they were almost entirely out of meat, friends have posted photos of empty store shelves in other locations and people are actually hoarding wipes. It’s crazy!!
All of this, in my opinion at least, is enforcing the me first attitude we’ve created in this world.
COVID – 19 is not going to be a short term problem and people need to realize this. Supply lines will catch up to the overwhelm and stores will be stocked as everything rebalances itself, but that’s short term.
It is going to have very long term implications as tens of thousands of jobs will be lost as thousands of businesses will close and likely never re-open and most importantly, people will die.
So yes, we need to take care of ourselves, but at the same time we have to look at the bigger picture, like how this will affect the economy, how it will affect our properties, our tenants and our landlord business moving forward.
The Reality
The reality is many tenants will not be able to pay rent. Many will barely be able to afford food or medicine as the jobs many tenants work at are either reducing hours or completely shutting down.
So they have no income. Yes the government is stepping in to provide some support, but we’re never sure how quickly it will happen, how soon people will have funds in hand and how much will come back to us to help us cover our mortgages, taxes etc.
Sure we can evict them, or at least start the process, but when we start looking bigger picture this will likely be a horrible mistake.
You’ve already put time and effort into screening your tenants and filling your property with the best potential tenants available at the time (at least I hope you did), so why would you think about tossing them out now when they could be most vulnerable?
Why not provide them with resources to get temporary funding, resources to access food or even provide a rent deferral, rent reduction or in some cases just put it on hold?
Now if these are problem tenants that are damaging your property are cheating you and/or are simply bad people ignore that last paragraph (which then brings up the question is how did these tenants become yours to begin with?).
Before you get all bent out of shape telling me it’s not your problem if they can’t pay rent and you need it to cover your payments think about it.
Really think about it, because it has become your problem!
In a perfect world we’d all have three to six months of savings bankrolled to cover missed payments for our properties, but the world isn’t perfect.
Personally I have a few months bankrolled, but how long will this last? I’ve talked with all my tenants and currently they are good for rent for the foreseeable future, so right now I’m ok.
So I’m also making plans to defer some mortgage payments, defer my personal mortgage and I’m trying to have as much cash set aside as possible in case this drags on for months and months, which it may.
Bigger picture I like my tenants and I want to help them.
For the landlords wanting to evict a tenant who is struggling, you need to step back and realize it will take you minimum six weeks to get a hearing right now. If you pull that eviction trigger I can almost guarantee you will see zero payments from that tenant again as they too start saving up for their next place.
With six weeks for a hearing (as of right now, and if a ton of landlords start filing evictions I can guarantee the provincial government will step in and halt all evictions going forward like they have done in Ontario and BC), plus likely minimum two weeks before they have to be out, that will be two full months plus the current months of zero income from your rental.
Can you absorb that?
And if you can, what about the next two, three or even six months after that when you struggle to find tenants to fill the property? Because if this crisis carries on, do you really want to meet dozens of new people and have them wander around touching everything in your property?
Can you absorb no income for five months or longer then?
I’m still not saying some tenants shouldn’t be evicted, I’m jut saying don’t panic evict right now and try and work with your good tenants.
Mortgage Deferrals
Start looking into mortgage deferral options. Not all the lenders are allowing this for rental properties or in all situations but the landscape is changing daily.
A mortgage deferral will end up costing you several thousands more long term in additional interest charges and likely a bit more monthly once the payments restart, but it beats losing a property.
It’s a viable option to give you more time.
If it’s not something you need right now and your tenants are able to pay, prepare to potentially use it but don’t necessarily panic and use it.
I’m hearing of landlords and homeowners facing four to six hours on hold just to talk to someone. This will decrease as backlogs are dealt with, but if waiting a few more days, or a week won’t hurt you why not wait just a bit longer?
Just because you can, doesn’t mean you should! That’s why stores ran out of toilet paper.
Thinking Longer Term
If we look down the road to six months maybe even twelve months out from now, many people will be losing their homes and many landlords will potentially have to walk away from their rental properties.
We do need to prepare for some major shocks in the market and I believe everything we’ve seen so far is just a taste of what’s coming.
Unless government steps in to essentially put a moratorium on payments for a couple months this crisis will drag out for many many months. This isn’t time for them to drag their feet.
Normally I’d be drastically apposed to Martial Law or anything similar, but we’re already showing we have to many individuals who are more worried about themselves than the virus.
Maybe a hard shut down of everything non-essential can help us get ahead of everything?
Of course they may also come up with some form of cure or treatment that is much more effective any day which could change everything as well.
In the meantime we have to prepare ourselves either way.
That involves working with our tenants as we deal with COVID – 19 as a landlord.
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