The havoc the pandemic has wreaked on the global economy continues to have trickle-down impacts on an array of industries, not least of all the housing and property management space.
Employment challenges have introduced new challenges for individuals that need to pay rent, but it’s not the only factor driving collections and accounts receivable (AR) headaches for property managers. Renters are also deciding to move back home or consolidate their living situation by adding more roommates to a single unit, creating many empty spaces and changes in tenant payment behavior.
And, on the commercial real estate side, small businesses struggling with lower foot traffic have been forced to suddenly shutter operations, while corporates may find they no longer need their office space as professionals continue to work from home.
“Anecdotally, late payment issues are just now catching up in a lot of ways because of the lack of stimulus and ongoing employment issues,” Musil told PYMNTS in an interview. “There’s a bit of a lagging effect, and managers are seeing [it] in a significant way.”
A Sudden Shift
Pay Ready, formerly known as Debt Logic, initially launched in the space to help property managers manage payments and collections only in the post-residency phase. If a tenant moves out and still has an outstanding balance, many property managers struggle with the current systems they have in place to keep track of those debts.
“There really wasn’t a system of record post-moveout to facilitate, centralize and report on payments,” said Musil. “Property managers would literally rely on Post-It Notes and Excel spreadsheets to try to track whatever happened at that point forward.”
But the onset of the pandemic created newer and greater AR pain points for these businesses. Changes in the rules and regulations surrounding eviction moratoriums, as well as the need for customized partial and installment payment plans, created headaches for property managers that were struggling to support their own revenue streams without finding themselves out of compliance or acting inhumanely with their residents.
According to Musil, it was the rise of those needs that led Pay Ready to change its name and introduce solutions to support payments and collections for processes earlier in the residency lifecycle. With small businesses and corporates creating unique challenges for commercial real estate firms, too, Pay Ready is looking to expand its offering to address AR challenges in other segments of the market in 2021.
A Delicate Process
Although another stimulus package is likely on the way, Musil said the current situation is about to get worse for property managers. That’s because, just as there was a lag after the first stimulus initiative, with many property managers not facing late payment issues until relatively recently, there is likely to be a significant amount of time before any second stimulus package is able to make a meaningful impact on the rent payment landscape.
The real estate sector has witnessed an expansion and acceleration of FinTech and software solutions to digitize, automate and streamline a variety of workflows. But in such unprecedented times, not all automated tools were equipped to handle the nuances of property managers’ AR needs.
One of the biggest requirements seen today is for property managers to not only be able to collect payments and chase down unpaid debts, but to do so in a way that is friendly and empathetic, considering the hardships many tenants and businesses face. Musil pointed to the ability to establish flexible and customizable payment solutions for tenants and track down unpaid fees while making it clear that a tenant is not yet in the formal collections process.
And, once the formal collections process begins — typically about 90 days past due — property managers need access to third-party solutions like legal and debt collection services that remain compliant with strict rules around data privacy and consumer protections.
Even after another stimulus or the emergence of a vaccine, Musil said he expects these payment delays to continue well into 2021 — and therefore, so will the demand for FinTech solutions that can meet property managers’ increasingly burdensome and complex AR needs.
“I think the vaccine and stimulus package will buffer these issues, to some extent, but I anticipate they will get worse before they get better,” he said. “It’s going to be a delicate process, and it’s going to get worse. So, we’re going to have to continue to build flexible, customized solutions.”