How to handle tenant asking for rent reduction during Pandemic?

[CowboyAndIndian]

I have a tenant who has been in my rental for the past 9 months. Other than some issues at the beginning, he has been a good tenant. Rent has been paid 5 days before the due date.

He sent me email today asking for a reduction in rent since he was furloughed last week and his wife is going to be laid off maybe next week. Both the tenant and his wife are medical professionals.

What do I do? I do not want to be an A**Hole, but I also do not want to ripped off since rent is about 10% of their earnings.

As far as I can see it, there are several options for me.

• Do Nothing, keep the same rent. This would mean that he ends his lease at the end of June.  I expect getting a tenant during this time will be very hard.
• Give them a break on the rent for the next couple of months if they resign a lease for the next year (new rent to be negotiated)
• What to do if they do not want to re-sign a lease?
• Ask them what they are expecting. I can probably find out if he will renew the lease. As I write this, this is my preferred solution. Hopefully, the tenant's response will let me pick between #1 and #2.

These are some assumptions I am making, what do you think?

• Most people are going to hunker down and will not move or make changes in residence at least until the pandemic is over
• Finding a tenant in July is going to be very hard. I usually lose a month's rent between tenants and have to pay a realtor fee for finding a tenant. So, if I might break even if the tenant continues the lease with a 10-12% reduction in rent.

Any ideas? Did I miss something?

[Luz]

Rental Assistance through the Department of Housing and Urban Development (HUD) is available via funding through the CARES Act. In my apartment complex, management originally sent us tenants an email saying they'd be willing to work out an arrangement should our ability to pay rent be impacted by COVID-19. Now they are just directing us to the HUD website.

[CowboyAndIndian]

Thanks Luz. The pointer to the CAREs act was good.

For those who want to read about the rental eviction moratorium, here is a link https://www.nhlp.org/wp-content/uploads/2020.03.27-NHLP-CARES-Act-Eviction-Moratorium-Summary.pdf

[ingrownstudentloans]

Most commercial landlords are deferring portions of the rent for a later time.  Their response is one that makes sense in the residential space too. 

If they re-sign, I would consider giving them the option to reduce rent for a couple of months but then adding it to the end of the lease period, perhaps by spreading it over more months.

[YttriumNitrate]

I wouldn't be surprised if I'm in the same situation in a few weeks (rent is due on the 15th). My general plan is to give the tenants some flexibility as to the payment date so that it aligns with when they get their stimulus checks (supposedly within three weeks).

https://www.nbcnews.com/politics/congress/irs-releases-more-info-how-get-coronavirus-stimulus-checks-asap-n1172676

[waltworks]

Sit down and figure out what you need to keep afloat/not lose the property. That's step 1.

Next call the tenant and work out a plan. If they are actually getting furloughed/laid off, you should be planning for an extended period with much less rental income - but that's better than none, because if they leave, good luck finding new tenants for a while.

IMO you should not be expecting to necessarily get back rent reductions in the form increased payments later. I see lots of people talking about that and I'm guessing it's a pipe dream. If/when the tenant's job comes back, they're probably not suddenly going to be rolling in so much dough that they can pay 50% more than the original rent for a while.

You are going to take some losses here. C'est la vie. Real estate is risky! Your goal is to come out of this having not lost the property and set to make money again down the road.

-W

[CowboyAndIndian]

Sit down and figure out what you need to keep afloat/not lose the property. That's step 1.

Next call the tenant and work out a plan. If they are actually getting furloughed/laid off, you should be planning for an extended period with much less rental income - but that's better than none, because if they leave, good luck finding new tenants for a while.

IMO you should not be expecting to necessarily get back rent reductions in the form increased payments later. I see lots of people talking about that and I'm guessing it's a pipe dream. If/when the tenant's job comes back, they're probably not suddenly going to be rolling in so much dough that they can pay 50% more than the original rent for a while.

You are going to take some losses here. C'est la vie. Real estate is risky! Your goal is to come out of this having not lost the property and set to make money again down the road.

-W

Thanks @waltworks. Lots of good advice. You make some great points.

I would rather have a tenant who pays less than the regular rent than to try and find a tenant. No one will want to move on July 1st when this rental is available.

So, I am planning to offer the tenant a discounted rent for the next two months of the lease and the same terms for the renewal. The actual amount needs to be negotiated. It will be some amount between what I spend for the taxes/HOA/insurance and the present rent.

[Luz]

Thanks Luz. The pointer to the CAREs act was good.

For those who want to read about the rental eviction moratorium, here is a link https://www.nhlp.org/wp-content/uploads/2020.03.27-NHLP-CARES-Act-Eviction-Moratorium-Summary.pdf

From what I understand, the eviction moratorium is one part. Rental assistance is the subsequent part. I'm in AZ. Does your state have a program for rental assistance at this point? Here's our website: https://housing.az.gov/general-public/eviction-prevention-assistance

[kenmoremmm]

we have a single rental (condo). both occupants lost their jobs. we're forgoing april's rent and are giving them 1/2 off may and will reevaluate in june. we have no mortgage, so that helps. and, i know what it's like to lose a job in recession.