Landlords: Collecting Rent and paying mortgages during the Pandemic

MarlboroughMan

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Basically the same approach as Peterk mentioned above... My company manages approximately 3,000 residential units and a few hundred K of commercial space throughout New England. On our commercial are allowing partial rent deferral and tacking on the portion of rent withheld for the next 12 months (assuming a 2-3 month deferral). We expect that our tenants have at least some capital to be able to make a partial payment as they were solvent when they signed their leases (which is something we confirmed). Much of our residential is elderly/subsidized, so those rents should continue to flow, and on our market properties we're dealing with delinquency on a case by case basis (not sending out blanket notices by any means). Our counsel advised that we continue to "notice" delinquent residents as we normally would to preserve our rights and the expectation will be that we'll enter payment agreements with delinquent residents once this thing blows over and/or they get relief. Our goal is to keep all of our staff employed (we're not entering any apartments unless it's an emergency) and to do everything we can to keep employees and residents safe.
 

blindfire

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I happen to be a commercial landlord, but very little difference now between that and residential. Being stuck in the middle between people that may not be able to pay and the bank with it's hand out.
I've been thinking a lot how this is going to work in the short term. Luckily I'm not spend-thrifty, live within my means, and I'm relatively prepared for a long drought....but it makes me less than thrilled to have to take a hit for those who are not.
Anyways, I spoke to my commercial banker guy the other day who is a lender at a large regional bank, within a lot of compassionate words he said this
"We are working to implement a program that will defer principal and interest payments for 3 months."
Good to hear. But in the end if I give my tenants a break I'm out that money forever, and I still have to pay my mortgage.
IF they can't pay for 3 months (as an example), can you modify their lease and extend them for 3 months?
 
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If your bank defers payments but your tenants dont pay, I dont see how you are out money. You will be out money when the businesses you rent to go tits up and theres nobody to fill the vacancy. Then you (and all of us) are in trouble.
Deferred payment deals often leave the interest meter running - it's not like everything is put on hold. "...that will defer principal and interest payments for 3 months. " Note that this does NOT state "stop accumulating interest". The net effect will either be make-up payments for the interest during the deferral time or an extension of the loan.
 
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I work in a housing authority and it’s a nightmare right now. Also manage a family rental property. One thing to remember is a lot of people are going to go for unemployment. The other thing is IF these stimulus checks ever materialize that’s another potential. Sure wish I had the safety net for my mortgage these section 8 voucher holders have.
 
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I was in the travel industry around 9/11. People still took vacations but just stayed closer to home and in the states. I think you will be OK.
We saw the same sort of thing at the ski area in 2008-2009. Some of the people who usually skied close and cheap fell off, but were replaced by folks who usually went further North, out West, and to Europe. Business really didn't fall off at all.
 

GaryO

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I rent to an elderly lady that was just recently treated for cancer. She has been my tenant for 16 years and never missed a payment. I don’t want her leaving the house as she has always paid me in cash. It can wait. If she ends up with the virus I am sure the place will end up vacant. Her health is way more important then the rent. Luckily I own the property outright
Good tenants are worth their weight in gold. I would work with a good tenant if they fell on hard times. I had a carpenter renting from me and when things were slow I would barter rent for him doing projects that I didn't have time for. Win/Win.
 

drgrant

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Don't assume. The maintenance and upkeep on the 200 year old building is a profit decimator.

I'm just saying the other expenses mentioned above are more annually than the mortgage payment. Property taxes are full retard in MA
Plus property management is a pain in the ballsack. One of the guys i smoke cigars with owns two multis in the cup region. Without fail at random times theres the "bweah i lost my key" "bweah my toylet doesn't work" etc, etc, ad nauseam.

ETA: yes, they make him good retirement money, but its not without bullshit
 

one-eyed Jack

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Plus property management is a pain in the ballsack. One of the guys i smoke cigars with owns two multis in the cup region. Without fail at random times theres the "bweah i lost my key" "bweah my toylet doesn't work" etc, etc, ad nauseam.

ETA: yes, they make him good retirement money, but its not without bullshit
That's residential. You couldn't pay me enough to go near that. Jack.
 

drgrant

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That's residential. You couldn't pay me enough to go near that. Jack.
Thankfully he has family in like 50% of the units, and they never call, its the one offs here and there... well that and town stupidity with the town fining him for trash cans being in the wrong place or some bullshit that they like to do in cup towns
 

ISOTOX

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You are screwed either way...you can work with them or they just stop paying....it will be months before the courts are up and running and there will be a huge back log...and the first cases to be sorted out wont be for non-payment of rent....
 

mwalsh9152

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Rent to my sister and she works for a mental health faculty that's about a mile from here so no self quarantine for her.
My only problem is remembering to pay the mortgage missed this month distraction and stupidity on my part.
And that is why my mortgage is on auto pay. I'd probably forget multiple times otherwise.
 

Cowgirlup

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9/11 didn’t impact the potential health of someone renting a home. Yes we have a cleaning company that comes in between renters but that doesn’t change people’s perception and worries.

9/11 also didn’t have anywhere near the economic impact that it looks like this thing is gonna have. If people lose their jobs or have to close their business, they ain’t takin vacations.
People will think a vacation home is cleaner than a motel. A huge perk is the option to cook meals rather than eat out all the time. If a large/extended family or group of friends go in together it's an economical break.

Some people will lose jobs. Some businesses will close. Unless this thing drags on past August or there is a natural disaster or some other wild card I think it will bounce back sooner than later.
 

GaryO

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People will think a vacation home is cleaner than a motel. A huge perk is the option to cook meals rather than eat out all the time. If a large/extended family or group of friends go in together it's an economical break.

Some people will lose jobs. Some businesses will close. Unless this thing drags on past August or there is a natural disaster or some other wild card I think it will bounce back sooner than later.
I hope it's sooner than later, school is canceled until May 4th, I think it's going to be a short summer vacation.
 

JJ4

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Smalltime landlord- going to assume my tenants will pay. If they can't I will first offer to use last month rent for April.

I don't know how commericial real estate works- do the tenants or owners pay the property taxes? IMO the Gov't owes an abatement on property taxes for the time they forced business to close. What is the fair market rent for a restaurant space when no restaurants are allowed to operate? I don't even know what is fair but I feel very bad for small business tenants forced to close. Is there any insurance that would cover this situation? I'd have to imagine a Gov't closure might be an exclusion.
 

JJ4

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caboose84

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Must be nice to flat out tell your landlords "we won't be paying anything in april".

I'd be looking at my options as a landlord to put liens on the FFE. Most restaurants lease the space, but build out the kitchen and spaces to their needs and plans. One of the few areas you can get any value out if a restaurant goes away- if the equipment isn't already on lease from a supplier.

I really think Cheesecake factory are betting the landlords can't do sh!t to them- as the demand for large restaurant spaces was kind of flat before, and is tanked now.
 
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You are screwed either way...you can work with them or they just stop paying....it will be months before the courts are up and running and there will be a huge back log...and the first cases to be sorted out wont be for non-payment of rent....
It's kind of like filing a case to force your local PD to process an LTC application which they have stopped because of the virus. By the time the courts would even hear such a case, it would be moot and the courts would have no interest in hearing it for the purpose of establishing future public policy.

And try enforcing a lien on physical property that does not have a title if you show up some day and the uses restaurant supply company is trucking it away.

I really think Cheesecake factory are betting the landlords can't do sh!t to them- as the demand for large restaurant spaces was kind of flat before, and is tanked now.
Anchor tenants, and Cheescake Calorie Factory comes close to that status as a large external protruberance, leaving a mall increase the chances of the entire property going "dead" and make the mall less attractive to other tenants.
 
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I'm not a landlord or a business owner and can't imagine being one in this climate. In my town there is a commercial property that has had several good restaurants open in the 15 years I've been living here. They all failed in less than a year. Don't know why, the location is good and the food at all of them has been good. The location is within walking distance and a few weeks ago the wife and I noticed another restauranteur trying to make a run at it. He's going to be dead int he water before he even opens his doors. I feel really bad for him.

On the flip side of the coin, one town over, there is a successful restaurant that has been in business for years. At the end of last summer, they closed up to renovate the place. I thought at the time they would be open again by beginning of the year. But apparently they are doing significant renovations and from the looks of the property they are still several months from re-opening. This guy who I assumed has been budgeting for this is gonig to come out smelling like a rose. Talk about good timing....
 

drgrant

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Anchor tenants, and Cheescake Calorie Factory comes close to that status as a large external protruberance, leaving a mall increase the chances of the entire property going "dead" and make the mall less attractive to other tenants.
One upshot is maybe this bullshit will make the malls reinvent themselves or self destruct and make room for something else.... talk about a tipping point
 

one-eyed Jack

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You are screwed either way...you can work with them or they just stop paying....it will be months before the courts are up and running and there will be a huge back log...and the first cases to be sorted out wont be for non-payment of rent....
You can throw their shit out, lock them out and find another tenant. "It will be months before the courts are up and running". It's a two way street. Jack.
 
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One upshot is maybe this bullshit will make the malls reinvent themselves or self destruct and make room for something else.... talk about a tipping point
I agree. I think a lot of malls were already on life support. There are so many empty spaces in the malls local to me as more and more business is done online. This could be the final nail in the coffin.
 

drgrant

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I'm not a landlord or a business owner and can't imagine being one in this climate. In my town there is a commercial property that has had several good restaurants open in the 15 years I've been living here. They all failed in less than a year. Don't know why, the location is good and the food at all of them has been good.
IMHO most of this with restaurants is burnout. I'm going to guess they only had one guy running them. You need a bare minimum of 2 people if not more, unless we're talking a hot dog stand, food truck or something... The usual deal is someone gets into it, knows how to make food that isnt shit, but doesn't understand that they need to share the work with someone, they run most of it themselves and don't trust anyone else, then two things happen, either they dont know how to run a business and it dies that way, or they SORTA know how to run it, and they stay in the black, but by the end of the year or so they're like "I need to sell this albatross or I am going to blow my brains out" etc.

-Mike
 
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When a commercial tenant asks if you will "work with them", what they really mean is that they want to F++K you out of the rent forever. To me, "work with tenants" means that I bill them for the rent and they pay it. It's me or them. Jack.
Note that the Cheesecake factory has announced it hopes to "resume rent payments" later, but makes no reference to actually coughing up the rent they have not paid. Many in the game is coming up with phrases that translate to FU - like "deferring interest", not "putting a moratorium on interest accumulation".
 

Wickedcoolname

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You can throw their shit out, lock them out and find another tenant. "It will be months before the courts are up and running". It's a two way street. Jack.
Yup. That's exactly how I dealt with my first deadbeat tenant when I bought my first income property. I was 25 when I bought a 2 family. The profit margin was very thin. Essentially, both rents took care of all the expenses with a very small positive cash flow. The second floor tenant was late on his first two rent payments. I told him there can not be a third time. I explained that if doesn't pay his rent I can't pay the mortgage. Next month he's late again and said he would pay when and if he got around to it. The next day when he left me and four friends moved his junk out to the sidewalk and changed the locks.
I waited around for him to come home and I listened to him scream about court and suing me and blah blah...
Then I showed him the Polaroids I took (years before cell phones) of the back bedroom where his cocaine operation was set up. Between that and his ankle bracelet I wasn't too worried about who was going to court.
Years later when I owned several rental properties I always collected the rent in person from each tenant. Never over the phone, always face to face. Never had an issue with nonpay. Plenty of other issues, but I always got paid.
 
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