So, after 2.5 years of searching and scrimping every penny, I think I’m FINALLY going to be closing on my first park at the end of April.
However, the guy from the bank called me and asked, “What would you do if no one paid the rent due to the coronovirus?” I was logically thinking about this, and all of the people in this park are over 40 years old. Most are older, but all seem to have stable incomes. I guess in my excitement that I hadn’t really pondered this out all the way. The guy at the bank is going to the loan committee tomorrow and he said he doesn’t foresee any problem with the loan being approved, but this does raise a serious question: I’m kind of all freaked out now.
I’m a saver with money, so I have an idea of having a “stockpile” of cash in the bank account (from my own pocket), where I would cover all the rent for six months just to make sure there were no problems in covering the mortgage. Anyone have any experience with this?
The only thing that concerns me is you said scrimping every penny. But then you reference a 6 month cushion, Is this for you, or for the park?
I think if you can cover the park mortgage for 6 months you are golden. If you think you have 1 month of reserves, maybe a trip to the blood bank for some plasma donations.
Is it a skinny deal upside, turnaround plan requiring capital investment, contingent on bill backs, rent raises.
Do you have access to the apps to get better insight into tenant immediate exposure for non payment?
Id be hard pressed to pass on a deal if its a deal but understand the risk, you can always explore renegotiating price if you think they will work with you and its merited.
It seems generally speaking most people have seemed to collect most of April , maybe non pay of 10 %. Maybe May gets worse, 20% , then 35 % for June. And you just have to watch the situation and how it plays out. Then knowing do you have homes that will go vacant, are they junkers, or if they are POH , capital to turn them in a market with potentially fewer qualified applicants and looming uncertainty?
Try and balance facts , I dont think we hit any scenario where you aren’t getting paid for 6 months, I think the more you can find out, info will hedge your uncertainty.
Ask the residents for proof they are being affect by the outbreak, and then ask how much they can pay this month and then create a payment plan for them. Point them in the direction of the Cares Act and relief they can apply for - but it may take a while for them to receive that money.
Normally we don’t accept partial payments, but this month we are, and we are not charging late fees.
Most states aren’t allowing evictions right now, so you can send your notice to cure, but can’t evict.
It is very unrealistic that nobody will pay. If you look are other messages on this forum, you will see feedback that other owners collections are not that much worse than usual.
You question in the header about what to do with non-paying renters is very simple. Evict them per the laws of your state. Some states have issued temporary moratoriums, so you may have to wait some time.
Consider telling the guy from the bank that you don’t anticipate a huge drop in collections however it could be possible - and ask him what the bank is doing for their customers that have mortgages with them who can’t make their payments due to tenants not paying their rent. Every bank in the nation has probably met internally on this and has a plan… they may forgive the mortgage payment for a period of time, reduce it, etc…
I think its a different situation when you are acquiring with known variables place. And probably not a great way to go into a relationship with a new lender. “Hey, by the way, what are you going to do for me , if my tenants cant pay and therefore I cant pay” .
Can you close mid month and get a credit from the seller at claimed collected rent in you dd. Just a thought to get full payment for 1/2 of your 1st month. Plus closing on the 1st will lead to the seller getting your payments. No time to send out a new owner letter instructing where and how payments are to be paid.
Good luck.