Don’t Turn Into a Post-Pandemic Slumlord

There’s a reason why the slumlord is a common archetype in real estate. The guy who cares little for his tenants, and cares more for easy profit. He owns a string of houses that see little upkeep. Good luck trying to ask him for maintenance because he’s never around. He charges more than the property is worth, and bends whatever rules are in place to protect his tenants.

The slumlord is at the extreme end of the real estate investment spectrum. He’s what happens when you’re more focused on getting something out than putting something in.

But real estate isn’t just a financial investment. In a way, you’re taking responsibility for the people who live in your properties – which is why at REI Nation, we don’t call them tenants. To us, they’re residents.

Here’s what it looks like on the other end of the spectrum. You as an investor want to guarantee three things:

• Your property is well-kept and cared for
•  Residents renew their lease and stay beyond the 3-5 year average
•  Rent is paid on time and in full

The Scope of the Rent Crisis

You want to do right by yourself as an investor, but you’re empathetic to the humanity of the moment. During the COVID-19 pandemic, a high percentage rental residents were thrown into financial strain. Rest assured, there are ethical ways to collect rent during the pandemic.

The statistics coming out of 2020 were certainly alarming for investors, landlords, and property managers whose income and investment success depended on rent payments.

Stout prepared a report for the National Council of State Housing Agencies, which highlighted the following findings as of September 2020:

• Between 9.7 and 14.2 million renter households (or between 23.3 million and 34 million individual residents) were estimated to be unable to pay rent and risked eviction.
• Combined, these households represented between $12.2 billion and $16.7 billion of shortfall in owed rent.

Additional sources, like Avail, reveal:

• 54% of rental residents lost their jobs in 2020. 
• 32% of rental residents say that if they could not afford their rent, they would simply stop paying altogether.

Take, for example, REI Nation rent collection in 2020

In 2020, we saw 96% of rent collected. That represents a full $63 million delivered to our investors. 

Choosing our markets has been a significant factor when navigating unforeseen challenge and risk. Single-family rental properties, particularly those in suburban areas, saw a surge in demand. Multifamily housing in metro areas, on the other hand, contended with far more vacancies and defaults. Overall, single-family rentals attract more stable, long-term residents over apartment units. 

 Part of this has to do with the comparatively higher price point of renting a single-family home. This means that, naturally, these residents were more likely to be financially stable or otherwise less burdened by the pandemic’s vast economic complications.

We know the data. Do you know yours?

Let’s break it down: When quality is your concern from the very beginning, your residents will feel like they’re getting their money’s worth, which will make them more inclined to pay you.

Resident satisfaction is at the heart of investor success. Be proactive. Survey residents about their experience: what have they enjoyed about their experience? What’s holding them back from renewing their lease? What’s their financial situation?

By building relationships with residents that are based on shared communication and value of your property, it’s more likely that that resident will stay with you. This way you can also anticipate potential gaps in cash flow and prepare accordingly. 

You’re more likely to hear bad news directly from your resident if there’s already a shared understanding of their circumstances, and from there you can make an arrangement that makes sense for everyone involved, like:

• Payment plans
• Temporarily reduced rental rates or partial payments
• Lease amendments
• Online payment access

Don’t be afraid to explore alternatives. Many rental residents do not realize that there is room for negotiation and alternative payment structures to ensure that they can make consistent rent payments. If residents are willing to keep in close communication and work with you, there is no reason not to find a mutually beneficial solution.   

Residents pay as much attention – or more – than you do to your property. They’re also paying attention to how you treat them, and how much you value their business. Invest where it matters.

Big financial decisions are difficult to make. Even seasoned investors still feel that rush of uncertainty, that feeling of standing on the edge of something big. Deciding to step off the edge on faith is scary. After all, no investment is a sure thing. There’s always risk. What if you make a “wrong” move? This common feeling can hold back investors of all kinds but beginner investors in particular.