Millions of landlords across the U.S. are dealing with a surge of late and unpaid rent. An estimated 1.3 million Texans have lost their jobs since mid-March, leaving many without any source of income.
If you own a property with a federally-backed mortgage or get a federal subsidy, the CARES act establishes a moratorium on evictions through part of the summer. That means your tenants are still required to pay rent and will accumulate a rental debt, but you’re not allowed to begin the eviction process until the moratorium ends.
If your property isn’t affected by the CARES act, you’ll still need to handle late and unpaid rent. However, since emotions are running high and people are worried and stressed about money, approaching the situation requires extra care.
Whether your property is governed by the rules of the CARES act or not, here are some powerful tips for handling late and unpaid rent during these unprecedented times.
- Be understanding, not demanding
Approaching tenants with unpaid or late rent requires understanding during these tumultuous times. Demanding tenants pay their rent or face eviction won’t get you paid any faster. However, as a landlord, it’s your duty to request payment of rent and inform tenants of the consequences for non-payment. You just need to do it in a way that makes tenants feel understood.
Nobody asked to be laid off from work for this extended period of time. Approach your tenants with understanding and compassion for their situation. If you must send a letter demanding payment of rent, word it in a way that communicates your understanding and sympathy for their situation. For example, say something like, “we understand that times are tough and you may not have a source of income right now. We’re all in the same boat until the economy reopens.”
Be firm in your request for payment of rent due, but don’t be overly callous and robotic with your letters. Remember that every letter you send to your tenants could one day be used in court during the eviction process. Request rent payments as usual according to Texas and federal landlord-tenant laws, but add a pinch of compassion.
- Give good tenants a break if you can afford it
From the 5,000-foot view, no Round Rock, Texas property investor can truly afford to forgive rent for months on end and remain profitable. However, these are unprecedented times and everyone is suffering financially. If you can waive rent for your tenants without hurting your ability to put food on the table for your family, do it.
You don’t have to give huge breaks to everyone, but whatever you give, make sure it’s even across the board. For example, some landlords have waived one month’s rent, while others have forgiven up to three months.
Do whatever you can for your tenants. If you own just one small apartment building in Round Rock with only a few units, give your tenants any break you can afford.
- Stay up-to-date on changes in the law
The way you handle late and unpaid rent could get you in trouble if you’re not careful. One minute the law could change and you could make some costly mistakes. Familiarize yourself with the current federal and state protections for tenants before taking any action for unpaid rent.
The official Round Rock government website is another great source of information pertaining to city and state orders.
Staying up-to-date with all proposed changes and even pending lawsuits is the best way to protect yourself during this crisis. For example, a rental company in Fort Worth filed a lawsuit to end the moratorium on rent. The company is arguing that the moratorium prevents access to due process in the Texas court system.
Since federal law is higher than state law, if the state of Texas ends the moratorium, it may not be legal since the CARES act comes from a federal mandate. Be vigilant with the information you receive, especially from other Round Rock landlords.
- Work out a repayment plan with your tenants
Most tenants will be happy to agree to a repayment plan for missed rent. You can work out a plan with tenants even before they find a replacement source of income. For tenants who don’t yet have a new source of income, negotiate a tentative agreement for repayment based on the job they expect to get when the economy reopens.
Call your tenants personally to let them know you’d like to work with them rather than evict them. Many landlords aren’t making personal calls and are taping letters to doors and sending emails instead. Calling your tenants will tell them you care about them enough to take time from your day to communicate. This simple act can make tenants automatically more cooperative and amenable to your offer.
- Claim your rental income losses on your income tax return
If you don’t already have rental loss insurance, it’s probably too late to pick up a policy for a reasonable amount of money. The next best thing you can do is report lost income on your tax return.
There are already existing deductions for real estate losses that should apply to losses caused by the coronavirus situation. If you’re not 100% sure whether you can deduct your rental income losses, talk to a CPA or tax professional.
- Encourage tenants to apply for relief
Your tenants may not know they have options for getting financial relief from the government and non-profit organizations. Send your tenants a list of available COVID-19 financial assistance options in Texas that includes information on:
- Tax relief for businesses and nonprofits
- Stimulus check payments
- How to avoid scams
- Details about the CARES Act that put a moratorium on some evictions
- CARES Act assistance for small businesses
- Provide tenants with a list of food banks and programs
Some of your tenants would greatly appreciate a list of all food banks in Round Rock and adjacent areas like Austin. Most of your tenants have probably never needed to use a food bank before this crisis.
Along with a list of local food banks, provide a list of programs your tenants might qualify for like food stamps and unemployment. These are obvious programs, but sometimes people forget about the obvious when they’re stressed.
Need help managing your Round Rock, Texas property?
If you’re struggling with your landlord duties and want someone to handle everything for you, Green Residential can help. Our team of professional property management experts will handle all your landlord duties from tenant screening to rent collection and evictions.
Contact us today for more information about how Green Residential can help you and your tenants during this worldwide crisis.