With Good Reason
As we adapt in a changing world, approach every situation—rent or otherwise—with reason and, when necessary, consultation.
My family has circled the wagons. We’re hunkered down in Sonoma with my parents to keep family close, share resources and one another’s company. I’ve been commuting back and forth to San Francisco, which has been a dream. Traffic has picked up some in the last few weeks, but nothing like the last few years. I come and go to check on properties, collect mail and do banking. I’ve got some real estate transactions pending, but not much coming up. Several sales got caught up in the current crisis and those are slowly closing. Fortunately, we don’t have any current vacancies, at least for now.
A friend, Irving, is in assisted living in San Francisco. He has been on lockdown about a week longer than the rest of us. The complex he lives in has been very proactive in protecting the residents and we are very grateful for their efforts. I’ve taken on the task of managing Irving’s properties. There have been some challenges; his management style was unique. Paperwork and keys were never his forte. So far, most of the tenants have paid rent. We will see what happens next month. I have made an effort to communicate with all the tenants and let them know we’re available. Simultaneous to the lockdown, we had a refrigerator break. Because it was an emergency, we were able to get it replaced, but it took a few days. So far that’s been the only emergency situation we’ve had. We did get a second warning notice from the PUC, which turned out to be a broken toilet flapper. The tenant did not want anyone in his flat, so he diagnosed the problem and repaired the toilet himself.
To date, we have had one residential tenant who was only able to pay half her rent. We are regrouping next week with her. The resident has requested to sign a new lease at a lowered rent. We are not going to agree to a new lease, but we may come to an agreement on a short-term rent reduction or forbearance. I’m looking for a balance, even though indicators are that rents are maintaining and nationwide actually up. I’ve done a massive amount of research on Rent Café, Zumper and other sites seeking information. Rents are varying. In the resident’s zip code, data shows a 4% decrease in rent. We like her, she gets along with the other residents, and we don’t want a vacancy right now. We would need to find contractors to facilitate a turn and then we have the current challenge of showing the property. A short-term adjustment in rent would net more income than the unknown down time. We may or may not capture the same rent. You have to look at each situation differently and determine the best approach.
A commercial tenant contacted us about his rent going forward. He runs a green cleaning business. As of SIP, he is only doing move-in and move-out cleans for the safety of his employees. He has a client base for regular cleaning. Some of his clients have continued to pay him even though he’s not currently cleaning for them. His employees take public transportation to get to work and that is also a huge concern. This month we’ve asked him to pay half his rent. We’re not decided on what we’ll do going forward. We discussed trading some of the rent forbearance for cleaning services. He is concerned that if we choose forbearance, he will never be able to catch up on back rent. This is a tenant who has been with us for six years. We just renegotiated his initial lease term in the fall. He’s conscientious and has been a model tenant. We don’t want to lose him. I’m not rushing into any rent forbearance or forgiveness decisions without thoroughly thinking things through. I may consult a local landlord attorney to make sure the decisions I make won’t come back to haunt us later. There are a number of good landlord-tenant attorneys out there who can offer advice. You know your situation and tenants better than anyone. Each situation is unique, make reasonable and well thought out decisions that are best for you and your property.
We had one request for a dog due to shelter-in-place. I can’t reasonably deny the request as there are other dogs in the building. The tenant pays market rent, always on time. As long as it’s not a puppy and we get a signed pet addendum, we’re okay with it. I’m not thrilled with the idea of another dog in the building, but all things considered, we’re going to work with her.
Another tenant requested that we override the coin function of the washer/dryer. He said it has become difficult to find quarters and they are unsanitary. Many local bank branches are closed. We have been looking at blue tooth technology for the past year, and it may be time to switch over. Frankly, it’s a pain to collect quarters once or twice a month. Although, it does force me to visit the properties. We own one set of machines; the others are leased. Unfortunately, Irving signed leases with automatic renewals. It’s taken a year to get the leasing company to agree to swap out the coin machines with blue tooth technology. The dilemma is they want new three-year leases with commission-based options and a bank fee. Do we wait out the current leases and get our own machines or do we switch over with new leases and a commission structure?
There are a few petty issues, too. A couple sneaked in a washer and dryer. There’s a garage that’s a fire hazard and a carport that’s become storage for unwanted items during SIP. The only thing we can do right now is document and correspond with tenants.
My colleagues are using cell phones to record virtual property tours. It’s not hard to create good quality videos, but there is a learning curve. Get the basics down on your phone. High quality sound and light are key. A stick can be very helpful; you should also look into different apps available for virtual tours. Try to film in natural daylight and when outside noise is minimal. Plan your video in advance. Think about starting in the same place as you would in-person. You should highlight or focus on key features or upgrades that potential renters want to see, like views and remodeled kitchens and baths. As for audio, start with inducing yourself, and end with clear next steps on how to apply. Keep the video short, maybe three to five minutes long. SFAA has great classes and continues to offer excellent support. And there are services who will put together the tour for you.
There are so many variables that could impact the rental market as a whole, including the ability to show occupied property. Year over year, the first quarter shows an upwardly moving market. The first quarter numbers reflect properties that went into contract pre shelter-in-place. If you look at numbers starting April 1, 2020, there is clearly a downward trend. Most of these properties went into contract in March and pre shelter-in-place. In April 2019, there were 31 sales that sold at 105.20% of the asking price. The median sales price was $2,175,000. In April 2020, there were 12 sales that sold at 99.21% of the asking price. The median sales price was $2,160,000. It will be interesting to track sales over the next few months. There are definitely investors out there looking for deals and rates are still historically low.
It’s hugely important to approach any situation that comes up, rent or otherwise, in a reasonable fashion. Take time to think things through and contact a landlord attorney when necessary.
Kilby Stenkamp is a realtor at Vanguard Properties. She can be reached at email@example.com or 415-370-7582.