Local rental markets are sensitive to local economies, and while we’re currently in a period of low unemployment, we’re also working through a period of high inflation. This has created difficulties for everyone, as the prices of groceries, fuel, services, and housing continue to trend higher and higher.
If you count on collecting rent on time, you may have noticed that those on-time payments are not as consistent as they once were. You know your tenants are struggling, but you don’t want to hurt yourself financially, either. It can be difficult to know how to handle rent collection, especially if your tenants are struggling to make their payments.
As property managers in Golden, CO, we have helped owners and investors navigate all types of market factors. We have some thoughts on how to handle rent collection during economic downturns.
Customer Service Includes Compassionate for Golden Tenants
It’s important that landlords remain understanding and empathetic with their tenants during particularly difficult times. When you have a tenant who is facing financial difficulties and feeling anxious about paying rent, they may be nervous about even approaching you. But, you want to make it possible for them to open the dialogue. It’s much easier to work with a tenant than chase them down when rent is late.
When your Golden tenant is unable to pay in full, try offering them a payment plan or deferred payment option where they can pay in installments over time. That way, both of you will feel secure knowing there is a plan in place for making up missed payments later.
You don’t want to forgive late or missing rent; allowing a missed payment is not something we’d recommend. However, when you have tenants who are willing to work with you, be compassionate and see what can be done to bring them up to date. This will do a lot for your relationship and continue to tenant retention, which is especially important in avoiding vacancy and turnover costs.
If it’s a temporary financial issue, you can easily work it out and move on. If it’s a major life change, and your tenant has lost their job or will be unable to pay going forward, figure out a way to get them moved out and a new tenant moved in.
Keep Communication Open and Honest
Consistent communication between you and your tenant is key during an economic downturn, especially when you’re trying to collect rent. Check-in regularly with your tenants and let them know that you’re available. Ask if they need any help or advice on local and government resources that may be available, depending on their circumstances.
Communication shows your tenants that you’re willing to listen and provide solutions. It also encourages them to reach out if something changes or if they need help coming up with a payment plan. Keeping lines of communication open will help foster trust between both parties and ensure that everyone is kept in the loop about changes or updates regarding rent payments.
This is always better than being surprised.
Review Your Lease and Rent Collection Policies
As the economy begins to shift and you start worrying about how you’ll get the rent paid, it’s a good time to review your rental policies and procedures. This will help you prepare better for the current situation and any similar situations that may arise again in the future.
Start with your lease agreement. You want to maintain a consistent rent collection policy that’s non-negotiable during normal economic times, but consider updating those lease terms with new policies that allow for monthly payment plans or delayed payment options so tenants have more flexibility when it comes to paying rent. This could potentially save you a lot of headaches down the line should another economic crisis occur in the future.
During the worst of the COVID-19 pandemic, an eviction moratorium prevented landlords from evicting their residents. You never know when a similar situation might occur again, and instead of feeling helpless, you may be able to work something out that helps you and your residents. You’ll need to have the right lease language.
We are proud to say that we had three tenants on payment plans and all of our tenants in our 230+ doors paid rent during COVID. We were compassionate and found resources for them.
Consider Your Rental Value
No one wants to lower their rent.
However, if you’re renting out a property in the midst of an economic downturn, rental values are likely to slip anyway. You’ll need to respond to market demands and think about what your tenants are able to pay.
Every landlord wants to keep their tenants happy and, in times of economic downturns, that means finding ways to lower rent. As a landlord, it’s important to understand that the cost of living is on the rise for many people, and you want to be sure your tenants don’t feel like they’re paying too much. Otherwise, you’ll have a hard time keeping your property occupied.
To continue collecting rent, you’ll need a rental amount that your tenants are able to pay.
Study the market.
Here are some strategies to help keep your rents reasonable (and collectible) during an economic downturn:
- Offer a Long-Term Lease
One way to help lower rent during stressful economic times is by offering long-term leases. This gives your tenants the security of knowing they won’t have to move anytime soon, which can be especially helpful if they need stability during a time of financial turmoil. And, long-term leases allow you to offer discounted rates as an incentive for signing a longer lease agreement. This can be beneficial both for you and your tenants as it helps them save money while also helping you make sure your rental property remains occupied.
- Provide Incentives to Golden Tenants
Referrals can help tenants lower their rental payments without impacting their bottom line too much. Here’s an example: you can offer your tenants a discount on their monthly rent if they refer a friend or family member for another property that you’re renting out. If you own a multi-family rental property, consider offering discounts on rent for the entire building if someone refers a friend or family member who ends up signing a lease agreement with you. You could also provide discounts for paying rent early or on time each month or offer free amenities such as Wi-Fi access or gym memberships. These small perks can go a long way in making your tenants feel appreciated without breaking the bank. They’ll be getting more with their rental payments, and that will make them more likely to continue paying.
- Discount or Include Utilities and Landscaping
Another way to lower rent without actually lowering your rental value is to discount the services that you provide to your tenants. You could include utilities as well. If tenants have their own utility accounts set up, you could also include discounted utility fees in each tenant’s monthly rent so they don’t have to worry about budgeting extra money for gas or electric bills each month.
Lowering rent during an economic downturn does not have to be complicated or expensive; there are plenty of simple strategies that you can use to provide some relief to tenants while still collecting what is owed to you.
Work with Your Tenants on Getting Rent Paid
Most rental property owners will have an idea of which tenants are trying to take advantage of a situation and which tenants are really struggling and looking for help.
Hopefully, you are checking in with your tenants from time to time during an economic downturn. For those who remain fully employed and financially stable, they should be paying their rent on time like they always did. Make sure you express your gratitude and let them know you value their sense of responsibility. These are the tenants you want to retain for the long term.
For the tenants who are suffering from job losses or a reduction in salary, you will have to talk about how much they can pay. It may be unreasonable to think that you’ll get the full rental amount on time every month. But, if you can work out a payment arrangement or collect at least a portion of the rent on time, you’ll have a better chance of keeping those tenants in place once they’re on their feet again.
Collecting rent during an economic downturn can be tricky. You have to balance your need for getting the rent paid against the tenant’s ability to pay. If the economy is really suffering, keeping your property occupied is also a priority.
By staying communicative, being understanding, and reviewing policies and procedures accordingly, both you and your tenants can successfully navigate a difficult situation.
There’s no need to manage this on your own. Please contact us at Laurel Property Services, Inc. In addition to providing property management in Golden, we also serve Wheatridge, Morrison, Lakewood, Arvada, and Genesee, CO.