Times are tough for everyone right now, but they’re especially difficult for those who struggle to pay for housing. In April, on-time rent payments slipped for landlords on a colossal scale, with only 69% of tenants being able to make their payments on time nationwide. This compares to 82% of tenants making payments on time in the same period of 2019.
While some might leap to the conclusion that this indicates that more than half of Americans can’t afford rent (or that the rent is too damn high, which in some cases it may be), there’s also a more simple logistical problem: More than half of Americans have income that comes in on a schedule that doesn’t align with when rent is due. If landlords offered them flexibility on how and when payments are made, the problem might be fixed for the majority.
Some larger property management firms managing hundreds or thousands of units already offer different payment terms to their occupants. But for independent landlords—such as the 12 million Americans who own rental properties as investments—such an option may seem impossible. After all, for many landlords, the timing of when rent is due from occupants and when the mortgage and other property-related expenses are due from the landlord may coincide, so offering terms on rent may seem like an automatic no-go.
But look at it this way: It’s a massive financial hit for landlords when a tenant is unable to stay in their home. The average eviction costs $3,500, making the unit “rent ready” costs between $1,000 to $5,000, and finding a new tenant usually costs at least one month’s rent—not to mention several months of rent they’ll miss out on along the way. It’s so much better to keep good renters in place; long-term tenants that stick around tend to contribute to the community and take better care of the property.
When you consider those cold hard numbers, it’s pretty tough to reconcile the age-old argument for a set monthly “rent due” date, or lack of flexibility in how payment is received. Landlords, and their tenants, should be working together for mutual benefit. The costs of turning over a rental property are simply too high not to work together.
COVID-19 has shown us nothing if not that we need to rethink many old ways of doing things.
In April and May, we tested this thesis on our own users, which consist of landlords using our product, NestEgg, to receive rent and manage their properties:
We paid landlords their full rent on the first of the month—whether we had received it in our system or not—using our technology-based platform. For tenants who needed flexibility, we allowed them to pay us in installments throughout the month that aligned with their ability to pay. We also waived credit and debit card fees, maximizing tenants’ ability to pay in the way that best suited them, without penalties.
The result? Of the 66% of landlords on our platform who participated in the test, 100% were paid their full rent on time in April and May, which was up to 45% higher than the national average. Also, zero tenants defaulted, creating a win-win scenario for both parties. That’s not surprising when you consider that an estimated 57 million people—a whopping 36% of the workforce—are (or were) making at least part of their income through the gig economy. The income uncertainty right now for many cannot be overstated.
Decoupling when the landlord’s mortgage is due and when rent is paid is a win-win for both landlords and tenants. Tenants are able to stay in their homes, and landlords can avoid costly turnovers.
Jeff Slipko is cofounder and CMO of NestEgg. He previously worked in growth roles at Hilton, Expedia, and Capital One.