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Property owners face a dilemma when deciding how to deal with overdue rent. Current unemployment levels and the extension of the eviction moratorium have allowed tenants to accumulate overdue rent with little to no legal recourse available to property owners to recoup their losses. According to a recent Census Bureau Survey, 8.9 million renters are behind on their rent and approximately 15.9 million renters have slight or no confidence that they will be able to make their next rent payment.

Current options include eviction/litigation against tenants with large amounts of rent in arears, forfeiting rent owed, trying to attract new tenants by reinvesting in the property, or exploring opportunities with innovative solutions made possible by new technology. Traditional methods of debt collection are expensive and the cost to evict a tenant under these conditions typically outweighs any benefit.

Therefore, negotiating and settling overdue rent is becoming an increasingly attractive option. A new tool from Fintech startup Debtle makes this easier and more secure than ever before.

Here is a summary of how each of those scenarios may play out:

1. Eviction/Litigation

  • Current policy environment makes it extremely difficult to evict a tenant in certain areas. A successful eviction will involve some sort of legal action by one or both parties and the accrual of legal fees
  • In order to recoup the overdue rent from an evicted tenant, property owners may need to rely on the services of a debt collector.
  • After evicting a tenant and incurring all of the associated fees property owners are still left with a vacant property and no source of income until it is filled.
  • Debt collectors are only successful 17% of the time according to the American Collectors Association
  • Legal fees and court costs start at approximately $550 and can quickly increase

2. Forfeiting Rent Owed

  • Forfeiting any rent owed will guarantee that property owners will never see that overdue rent
  • The traditional means of recovery is associated with relatively high costs (debt collectors)
  • Based on median rent and the average 3-month eviction process the average vacancy costs $2,540

3. Reinvesting to Attract New Tenants

  • After an eviction, many property owners will have to make some sort of repair or renovation to fix any damages or improve the property
  • Taking time to make repairs or renovations will extend the period of vacancy
  • Finding new tenants in the current housing market can be quite difficult and may lead to an extended amount of time the property stays vacant
  • The total cost of property turnover is $1,750 in addition to the cost to repair any damages to the property

4. Negotiating Overdue Rent

  • Debtle’s new software enables landlords and tenants to easily and securely negotiate overdue rent and settle bad debts. The proprietary process ensures that both parties are protected throughout the negotiation, collection, and settlement of the overdue amount.
  • As opposed to forfeiting rent owed, negotiating through Debtle allows property owners to recoup a portion of the overdue rent without bearing the cost of debt collectors
  • Negotiating debt using Debtle allows property owners to maintain a positive relationship with their tenants
  • Negotiating eliminates the costs associated with reinvesting in the property and searching for a new tenant
  • Debtle allows property owners to wipe the slate clean with their tenants and move forward under a new agreement
  • Compared to the other options mentioned above Debtle provides a more affordable and more efficient means of eliminating large amounts of rent in arrears

Overdue rent is going to remain an issue for property owners as the country continues to battle the pandemic. Traditional means of collecting or settling overdue rents are expensive. Instead, to cut down on costs and limit vacancies, property owners should strongly consider
negotiating overdue rent with their tenants. Negotiating overdue rent typically leads to more positive outcomes for tenants and property owners.

For Tenants:

  • Opportunity to settle their outstanding debt without fear of eviction
  • Won’t have to deal with third party debt collectors

For Property Owners:

  • Recoup a portion of the overdue rent
  • Avoid potential bad debt obligation
  • Can keep good tenants
  • Avoid eviction and tenant search costs
  • Wipe the slate clean and move forward on good terms under a new agreement
  • Higher success rate than traditional debt collection methods

Traditional methods of debt collection and negotiation can become quite expensive and at times rather ineffective. However, there is a much more practical and affordable means of settling debt available on the market today. Instead of relying on debt collectors or lawyers, you can easily and efficiently settle overdue rents with all of your tenants using Debtle. Debtle is an innovative application that enables landlords to negotiate and settle outstanding debts easily and efficiently. For more information on Debtle and how it can help you as a property owner, please email [email protected] or visit www.debtle.com.

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