Widespread financial uncertainties and a decreased pool of qualified renters forced roughly one in ten landlords nationally to sell a property as a result of COVID-19. If you’re still in this business, chances are you’ve had to do a little thinking on your feet, especially in the past year. Below are some ways that landlords have coped with the pressures of the pandemic—and found a few silver linings.
According to the Census Bureau, 15% of households fell behind on rent, leaving landlords short on cash. To stay afloat, many landlords made rent concessions, feeling that something is better than nothing.
A rent concession is any deviation from the terms of the lease. You can use them to get what rent you can from an existing tenant, to encourage a renewal at a time when vacancies are more numerous and harder to fill, or to entice a new tenant in order to fill a vacancy faster. Some examples are partial payments, repayment plans, waived late fees, or allowing renters to dip into security deposits to cover rent.
The total value of rent concessions peaked in January 2021 at 220% of the 2019 baseline, according to MRI’s April Market Insights Report. They now stand around 180%. Entrata, meanwhile, reports a year-over-year 79% increase in waived late fees per unit and a 19% drop in late fees posted. Repayment plans are up 420% in their system.
These kinds of adjustments have helped struggling landlords and tenants find a common ground. Maintaining open communication and letting your tenants know their options can go a long way toward surviving a crisis and alleviating despair.
Rent concessions aren’t as obvious to your tenants as they are to you. Our survey of Innago users (sampling 440 landlords and 1300 tenants) shows a difference in the way landlords and tenants see rent concessions. 40.5% of landlords we surveyed report granting a rent concession since the pandemic started, but only 16.4% of tenants report receiving one.
This perceptual disparity could be semantic—a tenant may not see waived late fees as a concession in the face of an overwhelming amount of back rent. But it could also be procedural. If a tenant is used to a grace period, then late payments typically go without a fee up to some length of time (say, three days). That tenant may not notice a concession such as an extended due date because they are used to the grace period—they may not realize they were paying late the whole time, but no longer are thanks to your concession.
It’s no surprise that the cash shortage has choked the ability of landlords to fund improvements and maintenance. This is doubly frustrating, given that maintenance was already the biggest stressor for landlords, with 42.7% listing it as a source of stress even before the pandemic, according to Buildium. 2020 has seen this number climb to 56%, making maintenance not only the biggest stressor but the fastest growing too.
The early months of COVID-19 disrupted supply chains and communication between landlords, tenants, and maintenance staff. Social distancing requirements sometimes called for improvements like plexiglass barriers. Elevators made more trips, carrying only one or two people. And cleaning procedures became more important than ever.
Landlords have been forced to prioritize their maintenance requests, putting off what they can under the financial strain. To do so effectively, you’ll have to work closely with both tenants and maintenance staff. You’ll also need to know what utilities are under warranty, and how these warranties work—some warranties (usually large appliances like furnaces) are contingent on regular service and could be void if you skip that check-up.
It takes longer to fill a vacancy now than it did before the pandemic, according to 45% of landlords we surveyed. Before the pandemic, about 75% of units were filled within a month, compared to about 50% now. Financial instability and the eviction moratorium make it especially important to fill units with reliable renters.
A Buildium survey reports that 45% of landlords have named screening a top priority in 2020 (compared to just 16% in 2019). The National Rental Home Council reports that 33% of landlords have tightened screening practices during the pandemic.
Yet Entrata’s internal data doesn’t show any noticeable increase in screenings per unit, and neither does ours here at Innago. We think landlords are becoming more rigorous in ways not captured by software. Landlords may be advertising screening requirements as part of the listing itself, which will deter unsuitable applicants. They could also be following up more closely with the landlord and employer references on the rental application.
However you’ve gone about it, screening practices work. TransUnion has reported a 1.7% increased renter score and a 10% decreased debt load for new tenants under this more rigorous screening.
Landlords and tenants initially gravitated toward online business out of necessity. Social distancing requirements mandated a change in the way people show property, sign leases, and pay rent. These online practices were solid even before the pandemic, but now that people have moved their business online, many want to keep it there.
By showing a property online, landlords and tenants never have to meet face to face. That may seem obvious, but—pandemic aside—getting two people into the same place at the same time presents logistical challenges, especially when both are working adults.
Virtual showings and online tours not only save time and effort, but also rival the conversion rates of in-person showings. Entrata reports a 26.6% tour-to-application rate for virtual showings, compared to a 27.7% for in-person, guided tours. The respective tour-to-lease rates are an impressive 18.47% and 19.86%. Of the landlords that now offer virtual showings, 74% offered them for the first time in 2020.
To show a property online, all you need is a smartphone or laptop. You can record a walkthrough where you highlight the features of the property, or (with a conferencing application like Zoom) you can perform a live online tour and answer questions. If you want to delve deeper, you can even create 3D pictures of each room and reconstruct the property virtually, so that prospective tenants can explore at their own pace.
Leases and document signings also moved online out of necessity. Our internal data, from more than 10,000 Innago users, shows a 360% increase in online document signings since the start of the pandemic.
This is another silver lining for landlords, because online documents offer several benefits over paper. Cloud-secured and available at any time to both parties, online documents never get lost, nor will there be any disputes about what’s actually in them, since either party can access them at any time. Documents signed online are easier to validate in court than those signed by hand. Not to mention that sending a new copy of the lease online can make renewal seamless for tenants.
And 77% of the tenants we surveyed prefer to pay rent online. Whether by card or ACH, online payments are faster than paper checks, money orders, and cash. They facilitate effortless and secure record-keeping for both parties. Here at Innago, we’ve seen a 105% increase in tenants paying online. There’s good reason to believe online transactions are here to stay in the rental housing business.
Although these changes may have been forced by the pandemic, there’s no denying the benefits for both landlords and tenants. If you find yourself facing some of these challenges, it’s important to act quickly and adopt some of these measures before you find yourself in a financial bind.
If you need to move your documentation, rent collection, and tenant screening online, our free property management software can help. Visit innago.com or contact us today.