Why can’t my tenant pay the rent?

Low priced housing investments can be a great deal.  The upfront costs are lower, maintenance costs are lower and houses in this price range move quickly as most low-income families are forced to rent.

The downside of low priced housing is that you generally deal with tenants who live from paycheck to paycheck and any unexpected costs can knock their budgets completely out of whack.  When living on a tight budget, families barely cover monthly costs leaving little ability to save for extras or emergencies.

The budget killers:

Christmas:  When Christmas rolls around, families struggle to buy the special foods our society requires, let alone the new bicycle that little Johnny has been hinting about for months.  All families want to provide for their children.  When there is little extra money and the Walmart layaway plan is costing more than a person thought it would the first crisis to address is getting the Santa haul out of layaway.  Rent can be dealt with later.  Of course, it makes sense to handle your housing needs first.  But when income is limited, and you want to make your child feel special, sometimes a person pushes aside the necessities for a little sunshine.

School:  Another budget cruncher is getting children ready for school.  This involves buying clothes to replace the ones Johnny grew out of over the summer, providing every day and sports shoes, and making sure Johnny has a coat to protect him through the winter months.  And after all these costs, the parent must also buy all the items on the teacher’s list for each child.  A real budget buster.

Birthdays:  Low income parents, like all parents, want to see their child smile on their birthday.  While rent should always be paid first, sometimes buying for your child’s special day is the immediate need.

Crises:  All through the year things happen that create a financial crisis.  Johnny cracks a tooth during football practice, requiring an unexpected visit to the dentist.  This may involve a co-pay.  But if the tenant is uninsured it will cost much more.   In addition, a parent must take off work to take the child to the dentist.  Most lower income families don’t have medical insurance, so in addition to the medical costs, they have also lost a day of pay.  This situation is repeated whenever a medical emergency happens.  And even when there isn’t an overt crisis, the family budget can be strained when a child is sick and no one else can take care of them while the parent works.  There goes a day or two of pay.

In the property management field, the first order of business when rent is not paid is often to file for an eviction and try to scare a tenant into paying the rent.  Sometimes this works.  Sometimes the tenant can seek assistance from churches or other agencies.  But if you are dealing with a long-term tenant who rarely gets behind, this may not be the best option for you or the tenant.  Even if you work out a payment agreement at court, the tenant now has the additional charges of the eviction costs, which can ruin their budget for months.  To avoid turnover and marketing costs it may make more sense to work out a payment plan with the tenant and avoid the court costs.  Your budget will be happier, and your tenant will feel an affinity with you that may carry you through years of uninterrupted tenancy.