As a real estate broker buying and selling rental property in the Minnesota market, along with managing rentals for my clients, my ears perk up when I hear the word ‘rent.’ So image what I do when I hear about people not paying rent, or talk of rent forgiveness or even ‘cancel rent.’ Cancel rent? How can a governor, or mayor tell tenants they don’t have to worry about rent, when they live in one of my buildings? How can the government interfere with a contract I have with a tenant? A legal, binding, contract known as a lease? A contract whereby the tenant agrees to pay a certain amount of money on a monthly basis to cover the cost of a place they live in that I or my clients own? Well I’m not an attorney, so I can’t tell you the legal answer, but I can tell you the obvious answer – they can’t and they shouldn’t. As long as my contract (aka lease) is valid and legal, it’s shouldn’t be messed with. But then there is CoVid.
In Minnesota right now, our Supreme Leader says you don’t have to pay rent. It can take a back seat until he relinquishes his Supreme power. No need to worry about paperwork, or proof that CoVid impacted you, you can just not pay rent. Worry about getting caught up later. No evictions either. Those are also out the window during CoVid. You can’t be worried about a place to live later right now, worry about that later. You have a place, take it for granted during CoVid, then after CoVid, worry about keeping it.
After all, those rich landlords will easily survive. It’s about time we took some of the millions out of their pockets. What do they need all that wealth for?
Here’s a little bit of news for the powers that be and the folks that think all those rich landlords are really rich wealthy people or corporations – according to data from the 2015 American Housing Survey, individual investors, (that’s mom & pop investors) own about 22.7 million of the roughly 48.5 million rental units in the US – that’s about 47% of the rental units in this country! They also tend to own the majority of single family, duplex & triplex type buildings. You know, those buildings that tend to be larger, that offer yards to play in, and extra bedrooms, storage, garages, and less neighbors to share those CoVid germs with. The ones families are always hoping to find, so they have more room than the large multi-family buildings offer. Those same properties that are also harder to manage and more expensive to keep up.
That’s a lot of small mom & pop landlords. It’s a lot of landlords that invested because they want the cash flow or appreciation. They want to build some passive income for the future, they want to retire and not worry about stock markets taking a dive, or if they have enough to do what they really want. They are willing to sacrifice now, take money from their families now, to invest in something that will hopefully pay off later.
With 25+ years in the real estate investment world, I can tell you without a doubt, the number one reason people don’t invest in rental properties is because of tenants. They don’t want the ‘headaches.’ They don’t want the tenants calling them at 10 at night to tell them the toilet is overflowing or the heat is out. They don’t want the hardship of coming up with $2200 to make a repair or put in a new water heater. Life is too short.
Yet, with all those objections, we still have 47% of the rental units owned by folks who are willing to put all these same objections aside, and buy rental property. Just to try to get ahead.
Companies like mine, Investors Realty MN, offers them the help they need to find profitable property, and we manage them along the way – partly to combat their objections (see above) and partly because most people who don’t spend every day managing real estate (like we do) aren’t very good at it. We simply want to see our investors have success.
So who are these rich landlords? Who are these titans of industry that are buying up 47% if the rental market?
Here’s a list of just some of the occupations my landlords really make their money at:
Middle school teachers – both spouses
Stay at home mom & Sales Rep
Part time contractor
Electrician & PT
Software support specialist
Unemployed for 9+ months
Warehouse forklift driver
These are people that struggled and saved and sacrificed from their own families to buy their rentals and offer them for rent to other families. They are people who were upside down on their properties in the mid 2000’s and rather than walk away and let the bank take them back and the taxpayers bail them out, they kept them, rented them out, many for little to no profit at first, and made it work. Because it was the right thing to do.
Most landlords, once they pay their mortgages and bills take home a few hundred dollars extra a month, if they are lucky. Which is great. Hopefully their home is appreciating and their tenants are taking good care of the place and rents will go up when they make those updates. Someday the place will be paid off, and rent will become extra income. It’s a process.
They are not people who have unlimited money to spend, they are watching each monthly statement I send them. Believe me, I field calls every month from my clients wanting clarification on repair expenses or bills I paid. They watch the money, we watch the money.
When you talk about not paying rent, or cancelling rent, are you doing the right thing? Does it make sense to screw the 47% of rental owners in this country? What do you think the next logical step is? Probably to raise rents in the coming year to make up for losses? Or sell that house they’ve been holding since 2007 because they just don’t want to put any more money into it.
So pay your rent if you can, and if you can’t, talk to your landlord, pay what you can, and get caught up as soon as you can. How many tenants will lose their homes because landlords go into foreclosure? How much tighter do you want to see the housing market get? How many future investors will we lose?
Maureen McGarry is a Minnesota licensed Real Estate Broker and Co-Owner of Investors Realty MN. With almost 30 years in the business of buying, selling, investing, rehabbing and managing rentals, she’s seen a lot. Investors Realty MN focuses on helping investors buy and build a successful residential real estate portfolio. Call her if you want help!