At the beginning of August, roughly one-third of American households owed money for missed rent or mortgage payments from previous months, reported CNBC. When rent payments are missed, property owners feel the pinch. Many count on that income to make their own mortgage payments.
What are your options when tenants can’t pay rent during COVID-19?
Here are five to consider:
1. Have an open conversation with your tenant.
Your renter missed their last payment. They know it. You know it. Start by addressing the elephant in the room, but from a place of concern: “Your rent from last month is overdue. Is everything OK?” Maybe they worked less shifts because a family member was ill. If they’ve been a long-time tenant who has historically paid on time, you might brainstorm options instead of turning to eviction.
2. Ask if they’d consider a roommate.
Maybe the place is spacious enough for two. Ask if they have a friend who is gainfully employed that might move in. Of course, let them know that the roommate would need to pass a background check, as well as show recent paystubs. The combined income of the two tenants’ paychecks should be at least three times the monthly rent.
3. Work out a payment plan.
If the tenant has displayed trustworthiness in the past, consider a payment plan. For example, they might pay half the rent for three months and then back pay the outstanding rent at the quarter’s end. Write down your agreement and have both parties sign it. This option is ideal for homeowners who have paid off their mortgage and have the flexibility to accept a lesser rent payment for a few months.
4. Talk to your mortgage lender.
Those who still have a mortgage payment might rely on their rental income to cover bills. If that’s the case, when your tenants can’t pay rent, you can’t pay your mortgage. In that case, forbearance might be an option. It allows you to pause or reduce your mortgage payments for a period of time. That debt is not erased, however. You’ll have to repay any missed or reduced payments in the future. The type of forbearance available to you will depend on your loan type. For example, if you have a government-backed mortgage, such as a FHA, VA, USDA, Fannie Mae, or Freddie Mac loans, the recent CARES Act (Coronavirus Aid, Relief, and Economic Security Act) allows you to temporarily suspend payments if you are experiencing financial difficulty due to COVID-19. This helps borrowers (landlords and homeowners alike) by waiving late fees on mortgage payments and suspending foreclosures. Loan servicers may have forbearance or deferment for private loans, but the options may differ. Contact your loan servicer to learn more.
5. Eviction options.
Your tenant issues might extend far beyond their inability to make payments right now. Maybe they’ve trashed the property, repeatedly get noise complaints due to out-of-control parties, or have people living there who aren’t on the lease. Look into your state’s landlord-tenant laws before serving an eviction notice. For example, in Florida, a landlord must notify a tenant in writing of any perceived noncompliance, except for the failure to pay rent. The tenant has one week to make the change, if the issue can be corrected. If it’s not addressed within that window, the landlord can begin the eviction process based on noncompliance. Find a lawyer who can walk you through the process and draft an eviction notice.
During COVID-19, The Centers for Disease Control and Prevention issued an order to temporarily halt certain residential evictions for nonpayment of rent. These tenants are still required to pay rent and follow the other terms on their lease and rules where they live. They may still be evicted, however, for reasons other than not paying rent or making a housing payment, according to the Federal Register (The Daily Journal of the United States Government).
If your tenants can’t pay rent after the order is lifted, you may decide to move forward with the eviction, depending on your state laws. At that time, you could find another tenant or even sell the house for cash, offloading the burden of property management and putting money back in your pocket.
The Buy Guys pay cash for single- and multi-family houses, townhouses, or apartment properties “as is” in Florida, Georgia and Texas. In as few as five minutes, we can make you a cash offer using our advanced buying tools.
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