On today’s show we’re trying to get inside the mind of your tenants and figure out if they want to pay rent in a little more than a week on the first of May.
The messages from politicians have been confusing to say the least. Whatever your taste, you’re sure to find a politician who is saying something you resonate with.
There’s Senator Mike Gianaris, deputy leader of the Senate in NY state calling for tenants to undertake a rental payment boycott. Governments have created moratoriums on evictions on foreclosures. In that environment, tenants may be genuinely unable to pay their rent. Others may simply choose not to pay their rent.
There are federal programs designed to help families that have lost their employment.
For landlords, April 1 saw a drop in rent collections across the US. But still rent collections were fairly strong, having experienced a 12% drop compared with the previous month.
The real test will be the months of May and June.
Even when you have a long term lease, tenants are making a buying decision every month to pay their rent. If the property is being well maintained, cleaned, and most importantly they feel like the staff really care, they will feel an emotional connection to the property, and the landlord.
But if the mail room hasn’t been cleaned in days and there is trash on the laundry room floor, tenants will start to feel like the landlord doesn’t care.
If the landlord doesn’t care about the tenant, then why should the tenant care about the landlord.
Let’s be clear, there is no real causal connection between trash on the laundry room floor and tenants paying their rent. It’s not like the landlord put the trash on the laundry room floor.
But you have to remember that your tenants are people, they’re human. Humans live their life in stories.
I remember the CEO of a major airline telling their employees that if the tray table is dirty, then passengers assume that the engine maintenance isn’t being done. Here too, there is no connection between the tray table being clean and the aircraft engine maintenance.
So if you want your tenants to behave normally, then they need to believe that things are as normal as they can be. The property needs to be well kept. There needs to be extra care taken to sanitize the railings in the stairways twice a day, to make sure the door handles are sanitized, to unexpectedly deliver a handful of face masks for free to your tenants, to make sure they know you care about their well-being. It’s not enough to be cleaning. Even better would be to communicate the extra steps you’re taking to help keep their families safe. You want the tenants to say “Boy I’m glad I’m living here. I doubt other landlords are taking steps like this to protect their tenants.” These are things that people remember.
When tenants experience that the landlord cares, they will reciprocate to the extent that they can. Sure, some will have lost their income, some will have fallen through the cracks in the social safety net programs that are showering the population with cash. These folks may be genuinely unable to pay.
But the vast majority who can pay will still face a choice. The choice will be, should they hold on to cash to deal with the unknown? Will government assistance programs be extended if the timeframe of the pandemic gets extended? Would it be better to hoard cash just in case? The landlord can’t evict, so why not?
I’m not here to tell you how to run your business. I’m merely putting forward a hypothesis. The word hypothesis means a hypothetical argument, a conjecture. The thesis is that if your tenants will care about paying rent, they first need to feel that the landlord cares about them.
