What do you do when your tenant doesn’t pay rent for reasons beyond their control, reasons which are heartbreaking?
This is a difficult problem for many landlords who feel they must choose between what appears to be conflicting interests: compassion and sound business practices.
For landlords who wish to make a difference in their communities, it can be challenging to find ways to be socially responsible without compromising business interests. After all, as an investor I have a fiduciary duty to my joint venture partners. They and their families depend on the returns I generate so I cannot stop efforts to maximize profits.
While it is necessary as a landlord to protect business interests, as a human being I find it difficult evicting someone who is going through tough times, further compounding their hardship. The only other option it seems is to lose income by letting the tenant stay despite non payment of the full rent.
In the distant past, a landlord who wanted to help their tenants through a financial hardship (ie. a job loss or illness) was forced to take the burden of the financial shortfall on their own shoulders. This option was not good for anyone as it would create financial dependency for the tenant (the landlord is a nice guy, so I don’t have to try and improve my situation), and would negatively impact cash flow and drive down ROI.
I have found two programs that may solve this heart vs head problem, and they were not well-known to me before today. You may find them interesting as well:
- The BC Rental Assistance Program
This was established in 2006, and provides low income working families and seniors a rental subsidy. Landlords can encourage tenants to apply, and are able to provide quality housing to low income people while still maintaining market rents.
- The Rent Bank
Here is yet another way that I as a landlord can ensure win-win situations with tenants, even when tenants cannot fulfill their fiscal responsibility through no fault of their own. Tenants can obtain funds for rent in the event of an emergency. The funds are provided on the basis of a low interest loan that is repayable. This Kamloops program is perfect for those good tenants who get in financial trouble, but who if given some time, will recover.
If you think that by keeping rents low or ignoring a missed rent payment that you’re helping the community, think again. You’re in fact only “helping” one person. You may in fact be enabling ongoing financial mistakes!
It is more prudent and effective to keep rents paid in full and on time at market rates. This creates higher returns, and funds the maintenance required to keep properties and neighborhoods vibrant. Profits can also be donated to worthy causes such as the United Way or Habitat for Humanity.
When funding is funneled to worthy programs such as these, there is a much larger positive impact than subsidizing only one tenant. Plus you get a tax receipt!
This is a true win-win scenario!
Real estate appeals to me as an ethical wealth creating business, and the Rent Bank and Rental Assistance programs are yet another example of how landlords can be socially responsible business owners.
If you have any comments or questions I would love to hear them, so please post below 🙂
Until next time, stay S.A.F.E.