Stimulation Within Reason

Being stimulted can mean a lot of things to a lot of people. Books can stimulate, music can stimulate, caffeine can stimulate and money can be a stimulant. The big question these days is can a goverment stimulate?

We’ve seen hundreds of billions of dollars go to banks and Wall Street and so far not much stimulation has occured. We hear that much more money is need to be a proper stimulant and maybe thats true.  In fact most of America is staking their financial future on the premise that the government’s Stimulus Package will work.

In the meantime property owners are often being put in a position of having to offer their own Stimulus Plan in the form of rent concessions.  Many times tenants feel that the property owner has no cost of doing business and what ever money comes in goes to the bottom line.  That is borne out but the size of the rent concession tenants often request or even demand.

As a property manager and owner we are getting more and more requests from tenants to reduce the rent. However, many seem to think that the property owner is going to have to cave in to these requests or will lose the tenant.  The request can be a 50% rent reduction as though there is no hardship attached to the landlord taking such a cut in income.

There is little thought given to the fact that if income is reduced so drastically the landlord may be in jeopardy of losing the property to the lender.  There is also little thought often given by tenants that perhaps they should speak to their own bank to see if they can get a break on their loan payments or do a total loan modification, perhaps in combination with some sort of rent concession so that everyone can get by these tough time.

I advise business people to prepare a thoughtful business plan that may include a reasonable rent concession.  This plan should show the businesses ability to survive during hard time with all creditors involved in keeping it afloat.  If the tenant waits until they are already in serious default on the rent it becomes problematic to solve their problem either with the landlord or their banker.  Waiting until hope is gone is not a good way to keep one’s business functioning. 

Lets hope that the government Stimulus Plan will achieve it’s purpose and bail America out of its financial doldrums.  In the meantime business and professional people in need of rent relief will hopefully look at the entire picture for relief and not put all their eggs in the landlord’s basket. 

Tags: Add new tag, default, landlords, rent concessions, rent property management, tenants