POSTED ON Jun 11, 2020 6:25:51 AM / by Real Property Associates

Creating Crisis Plans | Tips From Property Management in Seattle

No one wants to have to plan for, acknowledge, and live through a crisis—but being unprepared when hard times strike can make it difficult to recover. Your investment properties are one of the most stable ways to generate passive long-term wealth. However, they aren't entirely "recession-proof" if you're not prepared to navigate a struggling economy as a property owner. 

It never hurts to plan for the worst while hoping the worst never happens! Having a crisis plan helps property owners manage cash flow when their residents can't pay the rent. Knowing how to respond when the economy makes it challenging to maintain income helps investors show compassion while enforcing the rules. 

How can investors create an effective crisis plan? Follow these tips from local, experienced property management in Seattle.

Please note: This article is not a substitute for legal advice, and was current at the time of its publishing. However, this situation is rapidly evolving. For up-to-date information and guidance, reach out to your attorney or the Seattle property managers at Real Property Associates!

You Need a Plan

Every landlord should have a crisis plan, whether you're a new property owner or a seasoned investor. Protecting your income means playing the long-gameand that includes periods of economic uncertainty that can derail your long-term financial goals. We've been serving property owners in Seattle since 1991, so we're well aware of the ups and downs of the market.

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Without a plan, property investors can quickly lose money—and valuable propertyif a resident can't pay the rent for a month or two. Whether you find yourself in a crisis due to a public health issue like COVID-19 or any other issue that causes a recession or job loss, make sure your hard work and investments don't disappear. 

What Should You Include? 

The details of your crisis plan will be specific to your properties and your long-term goals. However, expert property management in Seattle can recommend a few basics that every landlord should consider. 

What to Do If You Need to Evict a Resident 

Even in a crisis, unfortunate situations can play out poorly. While property investors should be compassionate and flexible when enforcing rental payment rules, a crisis is not the time to let illegal activity or other rule-breaking slide. Eviction is still a tool in play, even if it's delayed.

When developing a crisis plan, landlords should:

  • Know how to adjust rental payment reminders to address a crisis
  • Have a method for documenting communications and compliance (or non-compliance) from residents
  • Be aware of government resources to stay informed about changes to rules about evictions.

If you can't evict a resident during a crisis, property owners need a plan for managing a non-cooperative renter until conditions allow evictions to take place again. 

What to Do When a Recession Causes Job Loss

When residents lose income, they often focus on the bills they can manage with less money in the bank. In many cases, rental payments are some of the last bills paid during a recession. 

However, your residents committed to a lease agreement when they moved into your property. That lease requires rental payments every month—even during a crisis. What will you do to encourage your residents to pay the rent when they lose their jobs due to a recession? 

Make sure your plan tells you what to do when a recession creates income loss, including:

Knowing how you'll respond before residents experience income loss can help you minimize your losses and help them navigate a difficult time.

How Much to Have in Savings

When offering payment plans for residents, property owners will experience a decline in income for a short time. Being flexible is the right thing to do, but landlords must make sure they're prepared to deal with a short-term loss of rental income until residents can make up the balance due. 

In an ideal scenario, property owners should estimate about six months of mortgage payments to keep in savings. However, if you're just starting, that number could be out of reach. You can focus on building a reasonable amount of savings before a crisis hits by: 

  • Starting small to maintain a savings of one month's worth of property mortgage payments
  • Putting a percentage of your profits into savings every month.

Maintaining enough cash flow helps investors navigate unexpected expenses or a recession. As you build up to several months of mortgage payments in savings, you'll be prepared for a reduction in rental income when residents experience income loss during a crisis. 

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Property Management in Seattle Is the Best Crisis Plan

Working with professional property management in Seattle is the best way to prepare for a crisis. At Real Property Associates, we already have built-in plans to help residents pay the rent when dealing with job loss or a recession. While we prioritize compassion for your residents, we also protect your income by minimizing losses during a crisis, helping you recover betterand faster. 

Real Property Associates has the crisis management experience investors need to maintain stability in your real estate portfolio. We help you get the most from your portfolio in good times and while working through a crisis. Learn more about how we help residents pay the rent with our free resource, the Collecting Rent in a Crisis Handbook!

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