In this episode of Coffee with Carl, attorney Carl Zoellner goes over some suggestions for real estate investors on working with tenants during the COVID-19 (coronavirus) pandemic.
If you’ve seen the news or social media recently, you’ve probably heard that evictions and mortgage foreclosures are suspended during this COVID-19 pandemic. This is mostly true in terms of federally-backed loans. So, what does that mean for real estate investors with tenants?
This is a difficult time for all of us, some more than others. One thing that I want to emphasize to real estate investors and landlords is to remember how much it costs (in terms of time spent) to get a good tenant in place. By this, I mean a tenant who pays on time and doesn’t create lots of issues. If you have a good tenant in place who’s paid on time but has been affected by the COVID-19 situation, my recommendation is to work with them.
Of course, if your tenant is defaulting on rent payments and there’s not much they can do about it because they’ve lost their job due to the coronavirus, that’s a tough situation for everyone involved. I suggest looking at this from two standpoints: 1. Do I want to keep this tenant? and 2. Most of the courts aren’t open right now, so securing an eviction (if you don’t want to keep the tenant) will be very difficult. Even after the COVID-19 lockdown passes, I still anticipate the courts being backed up and evictions being difficult to acquire expeditiously.
So, what are the options available to real estate investors and landlords to make sure that you’re hurt the least amount possible during this unprecedented time?
First, keep in mind that, if you do need to evict a tenant, it’s going to be down the road, after the moratorium on evictions and foreclosures is lifted. Second, remember the time value of having good tenants in place. If your tenants were good tenants before the coronavirus disrupted the US economy, you may consider reaching out to work with them. One option would be to say, “Hey, I’m willing to work with you. The original terms of the lease will stand, but if you can provide verification that you’ve lost your job during this and you’re not able to pay rent, we can work out a payment schedule to make sure you can catch back up and we’ll be back on good terms when all this is over.”
And if you’re a Platinum client, we’ve actually already provided a letter you can use with your tenants in your Platinum portal. If you’re not a Platinum client, I invite you to schedule a complimentary Strategy Session over the phone with a Senior Advisor to discuss the best strategies for your individual situation to lower your taxes and increase profitability.
Of course, this isn’t a perfect solution. It’s a moderate approach hovering between two more extreme responses: some investors are looking for ways around the moratorium to evict now, and others are telling tenants not to worry about rent at all until this is over. For me, I’d suggest the more moderate approach of working out a payment plan with tenants. If they’re unwilling or unable, then you may have to evict eventually. Just realize that’s at least a few months out.
Watch as Carl covers ways to work with tenants who have lost their jobs due to the COVID-19 (coronavirus) pandemic.
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