The coronavirus pandemic has hit Houston landlords hard. Millions of people are unemployed, and while some are receiving unemployment, many aren’t. This situation has caused tenants to stop paying rent and now landlords are left scrambling to pay their mortgages.
If your tenants receive social security or any other form of reliable income, consider yourself lucky. If you’re struggling financially because your tenants are out of work, here are some tips to avoid undesirable outcomes like foreclosure and bankruptcy.
1. Take out a loan
If you’re struggling because your tenants can’t pay the rent, the last thing you need is more debt. However, the pandemic won’t last forever and the market will eventually bounce back.
If your properties are a significant source of income for you, then it makes sense to take out a loan to carry you through these hard times. If you can get approved for a loan that will cover your mortgage for at least a year, you’ll have a better chance at avoiding foreclosure if things don’t bounce back immediately.
2. Consider selling your property
You probably won’t like the idea of selling your rental property, but it might be the best solution. If you have a tenant who can’t (or won’t) pay their rent, and you can’t go through the eviction process, you’ll have to pay the mortgage out of your own pocket. If that happens, you’ll continue to lose money every month.
If you can’t cover the mortgage long enough to get a new tenant into your property, selling will prevent you from going into debt and/or bankruptcy. The problem is that even though Houston’s eviction moratorium has ended, the courts are backed up; it could be months before your eviction case is heard. Some eviction cases are being pushed back indefinitely.
If you can’t cover the mortgage without depleting your savings account, and you can’t get another renter into the property quickly, consider selling your property to someone who has the funds to carry them through this pandemic. Nobody knows how long the pandemic will last – it could be months or years.
3. Work with your tenants
Many landlords across the U.S. are reducing rent and working out repayment plans with their tenants. So far, this strategy seems to be working. However, be aware that some tenants won’t even pay a little bit here and there. Houston landlords Alberto and Ericka Hernandez found this out the hard way.
If your tenant(s) can’t pay the rent on time or in full, try to work with them on making payments whenever they can. If their rent is set at $1,500/month, you may not be able to get the full amount from your tenant, but they might be able to pay you a smaller amount.
If you depend on a tenant’s rent payments to pay the mortgage, be willing to accept payments in whatever amount they can afford. For instance, even if it’s just $300-$500 per month, that’s more money than you’d get if you evicted them and had no rental income.
4. Contact your mortgage lender immediately
If you’re struggling to pay your mortgage and you can’t count on rental income anymore, contact your lender and let them know what’s happening. Your lender might be willing to work with you if you make the effort to communicate.
Don’t wait until you’ve missed a payment. Make the call as soon as you know you’re going to have a problem making your payments. Your lender might be willing to suspend your payments for a period of time or reduce your payments. However, if your payments are suspended or reduced, you can expect to pay the difference later.
5. Take all advice with a grain of salt
There’s plenty of advice out there regarding how to handle the current crisis. However, not all advice is sound and some advice may not apply to you.
For instance, there was a rumor that mortgage lenders were suspending payments for three months and extending the length of the loan by placing those payments at the end. Many homeowners found out the hard way that lenders actually expected to be paid a lump sum as soon as those three months were up.
Don’t take anyone’s word at face value without performing your own investigation. Don’t rely on government-mandated moratoriums or news reports of what your lender is doing for their customers. Contact your lender directly to find out what you should do if you can’t make your payments.
Carefully consider each piece of advice you find – including the tips in this article – before you take action.
6. Contact special services for advice and help
If you need help and you’re not getting anywhere with your current strategies, call the Homeowners Help Hotline. This organization has been helping homeowners avoid foreclosure for years.
If you can’t make your mortgage payments, call the hotline and speak to a foreclosure prevention specialist to find out what you can do about your situation. After reviewing your situation, they’ll help you create a plan to meet your payment obligations and avoid the worst case scenario.
Hire a property management company
If you’re not struggling too much financially, hiring a property management company will be the best investment you’ll make during these times. If you can afford to hang onto your property, you’ll benefit from having experts find your next tenants with reliable income. Property management experts can also handle the eviction process so you can get new tenants as quickly as possible.
At Green Residential, we have decades of experience helping landlords regain their free time, increase their income, and improve the quality of their tenants. We are a full-service property management company providing services like tenant screening, background checks, marketing, rent collection, and more.
If you’re a Houston landlord who needs help managing your properties during this chaotic time, contact Green Residential to see how we can help.