Financial Stress

A tenant of ours is currently experiencing financial stress. They have dropped from 2 incomes to 1 through injury. The they have told me they are actively looking for a new cheaper place. This will be difficult for them as they have two dogs.

We have had them for two years and they are great. Report problems, nothing trivial and have always paid on time, look after the place like it's their own.

We would love to keep them!

Has anyone offered a reduced rent scenario? What are the pros and cons? Are there any other ideas people have?

 

I had a tenant lose his job and was waiting to access his super/get another job to catch up I offered him a few weeks free rent if he painted another one of my units and fixed a few things around the place. He did it in between job interviews and caught back up eventually

 

A good news story. I don't think they would be up for that. Achilles heel!

 

It depends on how long they will be down to one income. What price bracket are they looking at for 'cheaper'. Certainly I would explore options for 3mths reduced rent or something like.
To make it easier I'd write up a new lease with 3mths reduced rent then 9mths increased rent to make up the reduced rent.
Or simply 3mths reduced rent then back to normal. 3mths reduced rent may equal what you'd spend on reletting it - vacant time, lease fees, advertising etc

 

Great idea, will crunch some numbers!

 

You don't need to do a new lease to do this. You can do a temporary reduction / increase by mutual agreement then document it.

 

youve got to look at it from 2 angles

1. losing your job is tough, great tenants keep you happy, moving for them is costly. you feel bad having them to move. yes you could reduce the rent

2. you are not a charity plus you have a mortgage to pay, if your mortgage is not paid, then you might have to look for a cheaper place.

my advice, look for the ideal balance of the two that makes you happy and sleep at night, but dont ignore either of them

 

@TMNT, thanks for your comments. That's along our line of thought. We are waiting to hear some more info from our PM before we make a decision. We certainly don't want to turf them out but by no means are we charity.

 

Agreed. If it works out the finding new tenants costs around 3 weeks rent (2 weeks vacancy + one weeks letting fee) then it may be a comfortable decision to consider reducing the rent by that amount over 3mths.

 

Depends if they are frictional unemployed or structural unemployed. If structural unemployed they might need to re-skill in another industry or might move to a different location so they will never be able to catch up, you are just prolonging their suffering.

 

I guess that's why we have property managers to deal with the emotional side of things. If I was put into that situation as a landlord I would do some numbers and see if reducing rent for a few weeks would make sense. You see, it's probably close to 50% of their total income (obviously depends) that they have lost so there would most likely be some catching up on their part even if you reduced rent.
If they don't end up paying then you would have to go through the trouble of claiming it back on insurance. Not ideal but at least you get your money back either way.

 

Dear Raydar,
there are quite a few charities in Newcastle area who will 'sit down ' with a family and help with calculating how much it costs to live.. in various scenarios.
Apart from the ones who may be able to help with the electricity bill etc.
Keeping in mind that anything over 30% of income paid on housing ( mortgage or rent) leads to financial stress.
The Salvos run one that I know about, and they are fabulous at 'picking up the pieces' and looking at things, sensitively.

I hope this helps

 

This is a great way to do it as they are actually paying rent through service.
As a PM I would always issue breach notices no matter what the situation is.
I have had way too many private landlords come to us after trying to help out a tenant with hardship and it has turned into a huge mess unclaimable arrears - even insurance claims will be effected without a date for eviction order.

Offer then a job or let them go. Keep business as business.

 

We are waiting to hear back from our PM regarding their situation. With more info available, we can make an informed decision.
@Xenia hopefully it doesn't come to this, but thanks for the invaluable tip. We certainly don't want to take on their financial burden and not be able to claim it if we need to.

 

I have suggest centrelink rent assistance. The tenants themselves are educated and know what's going on. They are just unlucky. From what I understand they are exploring their options for support. I won't stick my head into their business and make further suggestions, they might think it's being rude. I'll just give them space to think. But thanks for your suggestion all the same.

 

If it ever happens again might get them to do some washing for me. That'll keep them busy @Raydar have they looked at accessing their super that is what my tenant did. It can used in emergencies.

 

They have made enquires from an income protection point of view though. It's worth passing on that info though. Cheers.

 

Is it a possibility they just want to leave though?

 

It's possible they where lying through a smile, they have been there 2 years and have been quite happy. If they wanted to move, I think they would have just just given their notice.