empty wallet | renters with money problems

How To Deal With Renters With Money Problems

Property managers make it a point to choose tenants who are responsible and pay rent on time. But what happens if they fall on hard times? Medical emergencies, family issues, and unemployment can make it difficult for a once dutiful tenant to make monthly rent payments. As a property manager, it’s important to find a balance between being compassionate and realistic. Here’s how to deal with renters with money problems.

 

7 Strategies for Dealing with Renters with Money Problems

Property managers know to be firm when it comes to monthly rent payments. They should always follow the rent collection process outlined in the lease agreement. Otherwise, tenants might take advantage of your kindness and treat due dates as flexible. However, what happens if you suddenly have tenants with money problems? Here’s what you can do:

 

1. Talk to Your Tenants

While it is important to preserve the landlord-tenant relationship, you should still be a person that tenants can come and talk to. You shouldn’t be the last to know if a tenant has lost their job. Try to keep communication lines open for your tenants — be it through calls, emails, or face-to-face meetings.

Property managers should also start communicating the moment a first payment is missed. Did they just forget, or are they struggling financially? Knowing the reason for missed rent payments can determine which steps you will take next. For instance, if a tenant did not pay rent but is not willing to communicate, you might decide to take a sterner approach. On the other hand, if you have responsible renters that struggle financially, you might be more inclined to work with them to find a solution.

 

2. Extend the Due Date

calendar | tenants with money problemsExtending the due date should not be standard practice for property managers. However, in some cases, it can be enough time for a tenant who struggle financially to come up with the money for rent. Depending on your agreement, you might even decide to waive the late fee to encourage a tenant to settle their account. Make it clear that you are allowing tenants to pay rent on a later, agreed-upon date. But if they once again miss payment, let them know that you will start the formal eviction process.

 

3. Give Them Payment Options

Property managers can arrange payment options for tenants with money problems. It could be in the form of reduced rent or installments. Both options can make rent payments more manageable for tenants who are strapped for cash. When taking this option, though, set firm guidelines. This is to prevent renters from abusing your kindness. Document the new payment terms, late fees incurred, and the total rent amount to be paid. If these guidelines are not met, the property manager can begin eviction.

 

4. Break the Lease Early

Unemployment or reduced income can make it hard for tenants to pay their current rent. If a tenant has missed payments consecutively, it may mean that they can no longer afford to live in your property. In that case, provide them with the option to break their lease early — without incurring any penalty fees. Rather than incur debt, tenants can just settle their accounts and move out. In order to maintain profitability, property managers can then find new tenants who are able to pay rent on time.

 

5. Pay Tenants to Move Out

Paying tenants to move out may seem like a controversial move. But from a business standpoint, it can be a more economical option for property managers. Eviction is a long process and usually requires time and money. Instead of spending a large amount on legal expenses, you can pay a fraction of the cost to have a tenant move out.

If you decide to take the “cash for keys” approach, make sure to get everything in writing. Make it clear that the tenant has broken the lease by failing to pay rent. Since an eviction can affect their credit score, some tenants may choose this option. If they are struggling financially, the money can also help them get back on their feet.

 

6. Contact Their Guarantor

Some tenants list a financial guarantor in their references when they move in. If a tenant is uncooperative or unresponsive to your calls, get in touch with their guarantor and have them settle your tenant’s unpaid dues. Since finances are a sensitive topic, make sure to tread carefully. Avoid divulging personal information unless warranted or absolutely necessary.

 

7. Begin the Eviction Process

eviction | tenants with money problemsIf all other options fail, property managers should begin the eviction process. It might be difficult to do this to once responsible tenants, but property managers have to be realistic as well. You also have financial responsibilities that you need to take care of each month. Some financially-strapped tenants, when faced with the reality of having to move and all the additional costs that come with that, will make more effort to find ways to pay rent. However, for those that cannot, you may start the eviction process.

 

What You Cannot Do to Renters with Money Problems

Even if a tenant is not paying rent, there are some actions that you cannot do as a property manager. Here are some examples:

  • You cannot enter their property without permission
  • Property managers cannot forcibly remove tenants from the property
  • You cannot change the locks and prohibit tenants from entering the property
  • Property managers cannot sign up new tenants until the eviction process is completed
  • You cannot kick out tenants when there is a moratorium on evictions (such as in the case of the coronavirus pandemic)

Taking part in the abovementioned actions will result in legal trouble for the property manager.

 

Understanding the Reality of Property Managers and Renters with Money Problems

It is one thing to deal with bad tenants who purposefully refuse to pay rent. It’s a different matter altogether if you have responsible and loyal tenants who are suddenly faced with financial hardship. As a property manager, you can show compassion to renters with money problems by following these seven strategies. However, you still have a business to run and financial responsibilities to settle. If it is not working out, property managers must be realistic and file for eviction. You can recoup some of the losses from the security deposit and by finding new, financially-capable tenants.

If you are a landlord looking for professional assistance, feel free to browse our online directory for property management companies, HOA management companies, and real estate agents.

 

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