Renter households have drastically increased since the Coronavirus pandemic took hold across the U.S. As a landlord, here are some opportunities and obstacles to be aware of in the coming months.
Financing
Obstacle – Lenders have recently tightened their criteria for both homebuyers and real estate investors to qualify for a mortgage.
Opportunity – While mortgage rates are low, you may be able to refinance or borrow at a low rate if you meet the new lending criteria.
Single Family Housing
Obstacle – With unemployment at an all-time high and a 120-day freeze on evictions, landlords may be experiencing difficulty collecting payment from renters.
Opportunity – Homeowners with government-backed loans (FannieMae and FreddieMac) may be able to request forbearance for up to 360 days if they’ve experienced a reduction in income as a result of COVID. If your loans are not backed by a government agency, contact your loan servicer to talk about your options. If tenants are in good standing, you may also want to consider temporarily reducing or suspending their rent for a pre-determined time to help them get back on their feet.
Multi-Family Housing
Obstacle – The same obstacles apply here with regard to difficulty collecting rent payments from those who are experiencing hardship due to COVID. In addition, properties larger than 4 units cannot be financed with a mortgage, so the housing forbearance options don’t apply.
Opportunity – If you own a larger property, you may want to consider working with your tenants to reduce or suspend their rent payments for a pre-determined time, as mentioned above, to help them get back on their feet. You should also reach out to your bank to see what type of assistance they can provide.
Commercial Property
Obstacle – The nationwide closing of many small businesses may have hindered their ability to pay rent. The government backed relief options don’t apply to commercial properties so this isn’t an option here.
Opportunity – If you have a small business as a tenant, you can reach out to them to make sure that they are taking advantage of the PPP that is available to them. A portion of those funds can be used for rent.
Staying Prepared For Future Uncertainty
Maintaining a good credit score and available cash gives you more flexibility to handle a crisis. Keep the following best practices in mind for the future.
- Maintain very little or no credit card or high interest debt
- Maintain or build your credit score to 740 or higher
- Maintain enough cash to property vacancies and maintenance for up to a year
- Maintain enough income to pay the property mortgage through a period of vacancy
“There is a decent chance that if you make good moves in this market, you can possibly walk out of this with a better real estate portfolio.”