COVID-19 Tenant Payment Performance Update through December 2021

2022-01-11

COVID-19 Tenant Payment Performance Update through December 2021

 

 

Tenant Payment Performance Report
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Our last writeup for 2021! 

We truly hope you appreciate our extra efforts to keep you informed about the COVID & Eviction Moratorium impacts on tenant rent payment performance. There are a lot of issues outside of our control, but we want to communicate to keep you informed. Please send us any suggestions for what additional information you’d like to see.

Please be sure to share this with anyone you know interested in real estate investing or looking for a better property manager, so they can see what they are missing!

EVICTIONS UPDATE

As expected, many courts were effectively closed for evictions over the Christmas and New Year’s Eve holidays.

As we stated last month, while we understand the empathy of not forcing tenants out during the holidays, what about the impact of this on the holidays of landlords? We’re seeing so many online articles about the hardship evictions cause tenants, but very little about the hardships nonpaying tenants cause smaller landlords. 

Evictions are starting to actually happen in January. We already have 3 signed Writs and are waiting on several more to be signed by judges.

In Detroit, there are still issues with judges refusing to sign Writs of Eviction if the landlord doesn’t have the Certificate of Compliance from the city. Our Inspections & Maintenance Departments are working hard to get Detroit properties through Detroit’s Certificate of the Compliance process.

We’re hoping that the eviction process returns to normal in the next month or so, but we’ll still have to deal with a backlog for the next 3-4 months.

GOVERNMENT AID FOR PAST DUE TENANTS

In 2021 we obtained over $300,000 in COVID Emergency Rental Assistance (CERA) funds for our clients! 

It wasn’t always easy and still isn’t, but our success is due to creating a well-thought-out process, constantly improving it, and having a great staff to make it happen. We also made it standard practice to pursue CERA funds while still pursuing an eviction. Turned out to be a smart strategy on our part because CERA caseworkers prioritize applications for tenants facing eviction. It’s also worked out as we planned, that many of our clients aren’t dealing with a vacancy during the worst months of the year – November, December & January. 

Currently, due to the backlog of eviction cases, we’re recommending continuing to pursue CERA funds and getting the three months of rent paid in advance by CERA, instead of waiting weeks/months for an eviction case to finalize. If we were to get CERA funds today for a client, the three months paid in advance would cover rent for February, March & April. Hopefully, by April the courts will not be as far behind on processing eviction cases. So, if the tenant doesn’t pay after the CERA funds are used up, it will be faster to get rid of them.

We’ve now had three tenants approved for the 2nd round of CERA funds and are pursuing more. Surprisingly, some tenants still will not cooperate to have their rent paid by the government.

DETROIT NOTE: Most CERA caseworkers are only paying 80% of eligible funds if a property doesn’t have its Certificate of Compliance from the city – some only 50%. Please keep in mind that we are having major labor shortage issues here, which may delay maintenance work.

FINDING NEW TENANTS

Not surprisingly, we’re dealing with an increasing amount of application fraud, specifically regarding rental occupancy. 

Logically, it should be expected! All the tenants that haven’t been paying their rent and refused to apply for CERA funds are starting to figure out they’ll be evicted soon. So, how can they apply for a new rental and get around the issue of their current landlord giving a bad referral? 

Well, more and more applicants are claiming they live with relatives and/or are giving fake names/numbers for current landlords – all to hide the fact they haven’t been paying their rent. Due to the Eviction Moratorium, an eviction hasn’t occurred that would show up on their background check, but their current landlord may not have anything nice to say about them.

Fortunately, we’ve always checked applicant background checks for other addresses they’ve claimed and public records to confirm ownership. We’re also now requiring a copy of a lease if they claim they live with a relative and public records don’t show the relative as the property owner. Currently, we’re also experimenting with WhitePages.com to look up the phone numbers of property owners per public records, instead of relying on the phone numbers tenants give us that could be a family member or friend posing as their landlord. 

One issue we haven’t been able to figure out a solution for – a landlord willing to give a nonpaying tenant a good referral just to get rid of them quicker! This usually isn’t a concern when we’re dealing with another property management company or an apartment complex because we can often get a rent ledger from them (those would be difficult to fake). Do-It-Yourself landlords though, rarely use software to track tenant payments, so a rent ledger doesn’t exist. We can only go by what they tell us. Any ideas on what we can do about this?

We continue to try to improve our screening process and avoid renting to tenants giving fraudulent application information.

WARNING: due to all these fraudulent applications and the coming displacement of nonpaying tenants, we expect some challenges this year in how long It will take to find new tenants for Class B and C vacant properties. We’ll probably get a LOT of applications, but most will be denied. So, please understand and be a bit more patient this year!

RENT PAYMENT TRENDS 30-60-90+ Days Behind

Every year we see a decent increase in the number of tenants that fall behind on their rent in November, December, and January. It’s mostly Class C and some Class B tenants that live paycheck-to-paycheck yet want to spend for the Holidays. Those holiday spending dollars usually come from their rent budget Then they try to catch up in January a bit and often get fully caught up when they get their income tax refund in February.

The numbers below all reflect this annual occurrence.

Macomb County: Overall, all the metrics stayed the same or improved. Interestingly, we had a few problem tenants make an effort to get their past due balances caught up when they got a notice they had an eviction court date scheduled.

Oakland County:  We saw increasing negative results with the number of tenants paying their rent in full and those paying no rent at all, but this was due to us bringing on a decent number of Pontiac (Class C area) properties with tenants already behind on their rents. 

The numbers for tenants paying partial rents actually improved.

Wayne County: There was a nice little positive bump in the number of tenants paying their rent in full and the exact same change in those paying partial rent. This was due to our persistent follow-ups resulting in getting some payment plans to conclude. 

The number of tenants paying zero rent didn’t change. Can’t tell you how much we look forward to eventually (soon hopefully) evicting these problem tenants!

Regarding tenants that expect to use their income tax returns to catch up on their past due to rents – we’re anticipating problems with that “routine” this year due to unemployment benefits. Payroll taxes are not deducted from unemployment income but must be accounted for when an income tax return is filed. Many tenants planning on their annual tax refund, may be in for an ugly surprise this year. 

FAVOR: If you have a property that has seen an improvement in rent delinquencies, please take a moment to give our Delinquencies & Evictions Department a compliment for all their hard work. They spend their days dealing with a lot of negativity from tenants (and some owners), so a bit of positive appreciation from you would go a long way to make their day!

CASH-FOR-KEYS:  If you’d like to explore getting rid of a tenant NOW versus waiting for the end of the Eviction Moratorium, contact us about paying delinquent tenants to move. Yes, it’s frustrating to have to do, but we’ll analyze the business case for you to determine if it makes sense. 

For those of you that have contacted us to explore Cash-for-Keys offers to nonpaying tenants, we hope you appreciate our well-thought-out procedure. We have had some outrageous requests from tenants, but our procedure is designed to account for that and protect you legally.

Again, please refer us to others you know interested in real estate investing or that are looking for a better property manager!

 

 

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