The Centers for Disease Control (CDC) has issued a moratorium on residential evictions from September 4, 2020 to December 31, 2020. During these months, landlords around the country cannot legally evict residential tenants for nonpayment, and there is speculation that the moratorium may continue into 2021.

Designed to protect tenants and reduce the spread of COVID-19, the eviction moratorium has the potential to hurt landlords. If your tenants aren’t paying, how can you cover your own expenses? Well there are no easy answers, these tips can help.

1. Be Aware of Income Guidelines

Not every tenant qualifies for the moratorium. If your tenants are going to earn more than $99,000 this year as an individual or over $198,000 as a couple filing jointly, they can be evicted for nonpayment. If you suspect a tenant is just taking advantage of the situation to withhold payment, let them know the moratorium doesn’t protect them.

Additionally, tenants must prove that they have made an effort to obtain government assistance for housing. Make sure your tenants know about this requirement, and if possible, share information with them on rent assistance programs.

2. Look Into Mortgage Relief

If you have a federally backed mortgage on a multi-family home with five or more units, you may qualify for mortgage relief. Typically, this means you don’t have to make a mortgage payment for up to 12 months, and the amount gets added as a balloon payment when you pay off the mortgage, sell the property, or refinance.

Note that if you have a HUD or FHFA loan, you must inform your tenants you’re taking advantage of the deferral, and even without the moratorium in place, you cannot legally evict tenants for nonpayment once you defer your federally backed mortgage.

Additionally, you cannot charge late fees, but you can require your tenants to repay all missing payments in a lump sum in the future.

3. Take Advantage of Tax Deferrals

To free up extra cash, take advantage of tax deferrals. Unfortunately, the coronavirus has not spurred many property tax deferrals, but you should still reach out to your local government to see if deferrals are available in your area.

If you have employees, you can preserve a little cash by deferring payroll taxes. As part of the CARES ACT, you can defer depositing and paying employment tax until the end of the year, but keep in mind those payments will be due eventually.

Your tenants also have the right to defer payroll tax. If they are working and struggling, let them know about this option and encourage them to talk with their employers. Again, however, remember this is just a deferral. They have to pay back these taxes next year.

4. Remember to Track Interest

If you resort to using a loan or a credit card to cover expenses, remember to track your interest. You can write off the interest as a business expense on your tax return.

5. Work With Your Tenants on a Repayment Plan

Even with the eviction moratorium in place, your tenants are still legally bound to cover the rent at some point.  Make sure your tenants understand that these bills are not just disappearing. If necessary, you could take them to court to demand the funds in the future. Note that this is not legal advice, and you may want to consult with an attorney.

Ideally, to minimize losses, you should work with your tenants on a payment plan. Consider letting them make small payments now with an agreement to pay the balance when times get easier. For instance, encourage them to pay when they receive their tax refund in the spring.

Keep in mind that you can evict tenants for reasons other than nonpayment and if you have to go through this process, remember that eviction costs are also tax-deductible.

Owning rental properties is often a low margin business where every dime counts. Missed rent payments can hurt your bottom line but so too can overlooking tax deductions or keeping messy books. Optimize your efforts by working with an accountant.

At My Online Accountant, we focus specifically on providing accounting and bookkeeping services for landlords, and our services can save you money in the long run. To learn more, contact us today.

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