Tenant Payment Performance Update through January 2022

2022-02-05

Tenant Payment Performance Update through January 2022

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Image by Anna Nekrashevich

 

Welcome to 2022, we look forward to a better year than 2021!

We’re not aware of any other local management company sending their clients these type 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

After the unofficial Holiday Eviction Moratorium the courts all seem to follow, courts are back to normal hours. The challenge now is the ridiculous, but expected, length of queues to get court dates. 

The suburban courts are “only” weeks behind, while Detroit’s 36th District Court is months behind.

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

We’re very pleased that we obtained over $300,000 in COVID Emergency Rental Assistance (CERA) funds for our clients in 2021. 

Noncooperative tenants and overwhelmed processing agencies didn’t make it easy. Our success is due to creating a well-thought-out process, constantly improving it, and having a great staff to make it happen. 

We’re at the point now that if a tenant hasn’t cooperated with applying for CERA funds, our only option is to pursue eviction and hope the court-assigned attorney can convince them to cooperate. 

Currently, due to the backlog of eviction cases, we’re recommending to continue pursuing CERA funds and get 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 thought we discovered a little secret when we got three tenants approved for a 2nd round of CERA funds. Unfortunately, we’ve had two other tenants denied. We’re still moving forward with additional tenants to see if we can get more of them approved.

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.

NEW TENANT CHALLENGES

As we wrote last month, we’re seeing an increasing amount of application fraud, mostly regarding the last two years of residence occupancy. 

We anticipated this! Numerous tenants took advantage of the Eviction Moratorium, many even though they could pay their rent. Now, their current landlords are evicting them and they know they have to move. So, they are doing their best to hide their current landlord by having family & friends pose as their landlord or even claiming they’ve been living with family or friends. We’ve figured out how to catch most of this, but it is slowing down our processing of applications. 

Sometime in the next 3 to 6 months, eviction filings will catch up and we’ll see the evictions on their background checks – saving us valuable application processing time!

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

Due to Holiday spending by tenants living paycheck-to-paycheck, we see an increase in the number of tenants that fall behind on their rent in November, December, and into January. Unfortunately, they choose to spend their rent money on the Holidays.  This is mostly Class C tenants and some Class B. 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. We see that January shows a slight improvement from December, but it’s still below September-October performance.

Macomb County: In January we saw a dip in full-payment performance and a corresponding increase in partial payments. Those paying nothing were about the same.

Oakland County:  For Class A & B tenants, we saw a decent improvement in those paying full rent, with corresponding decreases in partial and no payments.  

Most of our problem tenants in Oakland County are in the City of Pontiac, which is mostly Class C like Detroit. Fortunately, the courts are more landlord-friendly in Pontiac, making it easier to evict tenants.

Wayne County: January brought a slight performance improvement in all categories. The mostly Class C tenant population is probably planning on catching up on their rent using their annual income tax refund. 

We do have a 2-3% of the tenants that are so far behind on their rent that eviction is the only option with them. It will take them years to pay back their past due balances, so their eviction will be akin to filing bankruptcy and moving for a fresh start. Their problem will be finding a new landlord to take them.

TENANT INCOME TAX REFUNDS

Many tenants may be in for an unpleasant surprise that will also negatively affect their landlords. We’re anticipating problems for them this year counting on their income tax refund to pay their past due rent -due to their employee benefits. Payroll taxes are not deducted from unemployment income and must be accounted for when an income tax return is filed. 

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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