Tenant Payment Performance Update through February 2022

2022-03-09

Tenant Payment Performance Update through February 2022

 

We’re not aware of any other local management company sending their clients these types of updates.

So, 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

Timelines for court dates are slowly improving as the courts work their way through the backlog of cases. We hope Detroit’s 36th District Court is caught up by the end of April. The suburban courts should be caught up by the end of March.

Again, we haven’t yet seen a spike in 36th District Court judges refusing to sign Writs of Eviction if the landlord doesn’t have the Certificate of Compliance from the city. Our Inspection & Maintenance Departments are working hard to get Detroit properties through Detroit’s Certificate of Compliance process. Most of our clients have now approved us to get their properties into compliance with Detroit’s BSEED requirements, but now we’re having challenges with the sheer volume of properties that need repairs. Labor & material shortages are adding to the challenge. Please don’t try to blame us if you get tickets because you chose to delay the process and we won’t put your property ahead of others.

GOVERNMENT AID FOR PAST DUE TENANTS

Unless the federal government issues an update, we’ve been warned COVID Emergency Rental Assistance (CERA) funds are not supposed to be used for past due rents accrued in 2022.  This also applies to the 3 months of future rent the program allows.

This makes it critical to evict nonpaying and noncooperative tenants ASAP, which we are trying to do.  

We’ll be monitoring CERA applications to see what gets approved going forward.

DETROIT NOTE: Most CERA caseworkers continue to only pay 80% of eligible funds if a property doesn’t have its Certificate of Compliance from the city – some only 50%. 

TENANT APPLICANT SCREENING CHALLENGES

We just caught a very creative couple that misrepresented their residency history to hide their pending eviction case. They claimed they had moved in with relatives after leaving their previous address. As always, we looked up the actual owner in public records. When we contacted the previous landlord the applicant gave us, the person answering the phone gave a name matching the taxpayer name showing in the city records, instead of the deed owner showing in the county records. We then used other means to acquire the deed owner’s phone number and contacted them. They confirmed they were the actual property owner and told us the applicants were still living in the property and hadn’t paid rent in over a year! When we requested an explanation from the applicants, they disappeared, more or less confirming their guilt.

We also had an applicant try to cut & paste someone else’s paystub with their information. It was a very poor editing job and they also disappeared when we asked for an explanation.

So, as we’ve been warning, numerous tenants that took advantage of, and often abused, the Eviction Moratorium, are getting desperate to find new homes.  They are finally starting to realize the courts are processing evictions again and their current landlords won’t give them a good reference. So, they are misrepresenting their residence history and/or landlords on their rental applications. 

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 many Class 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

Our data below is at the 23-month mark, so you can see some recurring trends. Both 2020 and 2021 show a dip in tenant payments in the months approaching the end of the year Holidays, with 2020 being much worse than 2021. 

Both years also show improvement in January, after those Holidays. 

This past February shows a performance dip, but that’s due to 20+ properties we’ve recently taken on with tenants that have past due balances. We’re becoming the local “go-to” property management company to solve management problems for property owners.

Macomb County: Talk about “ups & downs”! The Macomb Paid-In-Full numbers are bouncing up and down between 82% and 95% for the last 12 or so months. 

With the Macomb eviction courts almost caught up, we look forward to these numbers continuing to improve this spring & summer and staying there – as long as there’s no major financial crisis.

Oakland County:  We saw the anticipated improvement in payment performance in January. The February drop was due to bringing on additional Pontiac properties with past due tenants. The City of Pontiac is mostly Class C properties/tenants like the majority of Detroit. Fortunately, the courts are more landlord-friendly in Pontiac, making it easier to evict tenants.

Wayne County: Again, we saw some improvement in January, followed by a drop in February due to new managed properties with past due tenant being added. Since the Detroit eviction courts are still a couple of months behind, we anticipate these numbers continuing to get worse until we can replace these tenants with better ones.

 

SLUM TENANTS & RENTAL BANKRUPTCY

We’ve had a number of property owners ask us to try to work out payment plans with tenants, some of which haven’t paid rent in 12+ months, so have large past due balances. Most of these tenants will not cooperate with the CERA funds application process. So, we suspect most of them can actually afford to pay their rent, but deliberately abused the Eviction Moratorium and chose not to pay. 

We’ve had zero success pursuing these tenants.

The reason is that it’s going to be cheaper for them to move and skip out on their past due balances! Why? Because the U.S. court systems, politicians and advocacy groups allow it. Tenants can, in effect, file “Rental Bankruptcy” and walk away from their rent balances with little or no repercussions. 

Yes, they will have challenges finding new landlords to accept them, but there always seems to be a slumlord that will. 

Of course, the politicians and media only focus on slumlords, never slum tenants.

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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