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COVID-19 Evictions Could Lead to Real Estate Market Fallout

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Grungy Old Door With A Yellow Eviction Notice

Whether you have one or 1,000 doors, every property owner has been watching rents like a hawk these past few months.

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March through June 2020 did not show a dramatic change for rental payments. But according to Zillow, July had a dramatic increase in tenants who could not pay. Based on specific indicators, that increase in nonpayment will continue to grow.

“During the first week of July, 22.6% of U.S. apartment households did not pay any rent. That’s up from 19.2% from the first week of June and higher than in any month since at least March. By July 13, the share of renters that hadn’t yet paid fell to 12.4%, 2.5 percentage points higher than the same period last year,” said Zillow.

There are multiple factors to consider here.

Unemployment & Assistance Programs

While the U.S. Department of Labor reported that nonfarm payroll employment rose by 1.8 million in July, and the unemployment rate fell to 10.2%, unemployment numbers are still over 10% and many are still out of work since the world shut down in March. According to Pew Research Center, in the first three months of COVID-19, unemployment rose higher than it did in two years of the Great Recession.

One of the most significant factors in the increase of non-payments is that the government surplus that had provided an additional $600 a week for unemployment since March ended at the end of July.

The fact is two million people continue to apply for unemployment benefits weekly, and it’s estimated that half of all U.S. households have lost income during the pandemic. The numbers are staggering, and it will take time to rebound.

Related: My Tenant Lost Their Job – Now What?

Without the $600 surplus, unemployment will continue, and checks will not be enough to pay the bills. Unemployment benefits vary from state to state and depend upon income. For example, in Hawaii, the weekly benefit could be as high as $648 or as low as $5!

For the past few months, rent payments have been coming in steadily with only slight declines due to government assistance. For homeowners, banks offered mortgage deferrals.

An article by Spendmenot revealed some eye-opening statistics about the amount of money Americans have. Go BankingRates stated that 69% of adult Americans have less than $1,000 in a savings account. Furthermore, Spendmenot reports show that, “More than two-thirds of Americans have less than $1,000 saved up. Worryingly, the majority of those with less than $1,000 in savings have no savings at all. Around 45% of adult Americans were unable to save any money in 2019.”

If you are out of work, getting little unemployment without a surplus, and have no savings, you will likely not be able to pay your rent.

Many were desperately in need of that extra money. Single parents and low-income households were saved by the $600 bonus that ended at the end of July. According to an article by CNBC, “millions will fall off an income cliff,” when the $600 bonus ended.

Drowning victims, Hand of drowning man needing help. Failure and rescue concept.

Eviction Laws

In addition to the $600 addition to unemployment, the CARES Act surplus package added an inability to evict any tenant for lack of payment for an extended period. Some states may extend that time, but when the moratorium on evictions expires in several states, if rents aren’t current, tenants will have to leave their homes. The current deadline is Monday, August 24.

The extensions and policies regarding evictions granted vary by states and cities. California has been one of the most aggressive to protect tenants and extended the no-eviction moratorium until September 30. Whereas Texas has not extended the deadline evictions, the city of Austin has pushed to September as well.

A Florida Phoenix headline says, “With no moratorium in place for FL renters, ‘We expect a tsunami of evictions.'” Evictions for nonpaying tenants are going to create a flurry of people needing to find other places to live. Most tenants who have been served an eviction will not have an easy time finding another home as they will have a poor mark on their applications.

Related: 6 Unacceptable Landlord Behaviors (And How to Fix Them for Higher Returns)

Also, since states will receive a tremendous number of eviction requests, it will likely take longer to execute an eviction. The time spent waiting for the eviction means more time for landlords without a payment.

Additionally, once tenants leave, there will be an expense associated with getting the place ready to rent again, including cleaning and paint at a minimum. It takes more time to screen tenants now since, at any time, eviction rulings by the government can be enforced and make having a nonpaying tenant a significant liability.

On the bright side, according to Zumper National Rent Report, rent prices are still going strong in most areas. Because there are even more renters in need of housing than houses, it seems that landlords can find tenants, but they will have to rely on reserves to manage any unforeseen events with a nonpaying tenant.

Landlord Impact

While some full-time investors own several properties and units and can offset the dip in rents, many mom-and-pop landlords own just a few properties. These landlords are already starting to face financial hardship. Many landlords with a few properties rely on the income to pay their bills, and Zillow reports that, "An estimated 53.8% of rental income is typically spent just on fixed costs of property ownership that landlords are responsible for." (Think mortgage payments, property taxes, maintenance, insurance, and capital improvements.)

Not receiving rents for an extended period will hurt these landlords to the point where they may default on their mortgages. Even if some have no mortgages on the properties, there are still unavoidable expenses. For example, home insurance is not optional, and as catastrophic natural disasters are on the rise, so are the rates.

Forbearance is not forgiveness, which means you need to pay your loan amounts regardless of whether your rents are received. A saving grace at this time is that refinances are at an all-time low, so it could be possible to change the terms of the loan to interest-only or get a lower rate using an adjustable-rate mortgage.

One of the reasons we have not seen many foreclosures is that the moratorium protecting homeowners in CARES "prohibits the initiation or enforcement of foreclosure of any residential or commercial mortgage for nonpayment of a mortgage where the property is owned by someone that is eligible for unemployment insurance or benefits under state or federal law or otherwise facing financial hardship due to the COVID-19 pandemic. Order is effective for a period of sixty days beginning on June 20, 2020."

If a landlord falls too far behind in payments next month, they may need to end up selling at a discount or default on their loans without further protection from the government.

No one can predict how the future of the real estate market looks. Many investors have been waiting for years for this sort of shakeup, and the good news for them is that their payday will be coming soon. The bad news is that the fallout could further shrink the middle class and those struggling to make ends meet. As always, there is one solution that we all can do to avoid these struggles.

Keep saving your money and be ready to start buying the deals when they come around.

How has COVID-19 impacted your tenants? What does that mean for you?

Share your experiences in the comments.

 

Tamar Hermes is a full-time real estate investor and educator. After building successful businesses in the retail and entertainment industries, she turned her attention to real estate with a missio...
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    Jerry W. Investor from Thermopolis, Wyoming
    Replied about 1 month ago
    Tamar, Thanks for the article, I enjoyed it. First think is my understanding is that the moratorium on evictions only applies to housing that has federal backed loans. I have portfolio loans and in my state I can still file evictions, but court time is limited of course. I am waiting to see about possible foreclosures. In my area housing prices and sales are actually up. This means that someone in trouble could simply list and sale their delinquent property and actually make money. I know that may not be true in other areas. I have been blessed to be a reasonably good spot and have been able to allow tenants who were laid off to work for me on a part time basis enough to pay their rent. Hopefully we are past the worst of that as most have gone back to work.
    Tamar Hermes from Los Angeles, CA
    Replied about 1 month ago
    @Jerry W. Thanks for the reply! I just invested in a multifamily opportunity in Wyoming! Yes, Fannie and Freddie are the loans with the moratorium and stats I looked at show around 70% have those loans. Also, while it is true that sales are up, you won't get a great price for a house with a non-paying tenant in it. I have a home I would like to sell now and have that issue. Thanks for the feedback. I am glad your situation is working out so well.
    Brandon Pelfrey from Boise, ID
    Replied about 1 month ago
    Tamar - thanks for the article and insight. I think there are some important points to add though: 1. The issue of unemployment varies greatly by state and region. For example, while the average unemployment rate for the US as a whole was 10.2% at the end of July, states like Utah (4.5% unemployment) and Idaho (5%) are in a much better place than states like Massachusetts (16.1%) and New York (15.9%). While there will be some trickle down effects from these large markets on a macro level, I expect actual impacts to be much more micro and regional. (Source: https://www.bls.gov/web/laus/laumstrk.htm) 2. While the unemployment rate sky-rocketed to almost 15% in April, it has since nose-dived back down to 10%. In seems that in many places people are getting back to work and (hopefully!) the government stimulus may have done its job to hold people over until that point. 10% is still really high, but that number is going down just as fast as it went up: https://www.bls.gov/charts/employment-situation/civilian-unemployment-rate.htm 3. Our natural tendency is to try and compare the current crisis we're having now to the housing market collapse of 2008-09. I think we all fall into the trap of expecting to have many of the same outcomes as we saw back then and assume that things will get as bad. I'm not claiming to know what will happen over the next 12 months or so (it could very well be as bad as 2009), but I think it's important to keep in perspective that the causes of this downturn are completely different than the causes of that downturn - that one was caused by inherent problems within the housing market, this one has been caused by people literally not being allowed to leave their house or go anywhere in public for months. I think it's apples and oranges. Again, really appreciate the perspective. And I'm very anxious to see what happens over the coming months!
    Christina L. Investor from Phoenix, AZ
    Replied about 1 month ago
    @Brandon Pelfrey These are great points, and very similar to my thoughts. Overall, I think there is much to be optimistic about, even though areas like those you mentioned are experiencing greater hardship resulting from the pandemic and shutdowns. Not to mention I'm in Phoenix, AZ where the housing market is doing fantastic (for sellers), and shows no signs of cooling off anytime soon.
    Tamar Hermes from Los Angeles, CA
    Replied about 1 month ago
    @Christina L. Yes, Arizona is a great market. If COVID-19 showed us anything though, it is that you never know for sure when the tide will turn. Thanks for reading!
    Tamar Hermes from Los Angeles, CA
    Replied about 1 month ago
    @Brandon Pelfrey THanks for the feedback and perspective. These are conversations worth having and paying attention to. While we know this market downturn won't look like 2009, we have a lot of people over leveraged and many who have fallen on hard times. Fingers crossed for everyone.
    Nkem Nwogbo from Columbia, MD
    Replied about 1 month ago
    @Brandon Pelfrey I think you many great points and totally agree about the impact really being a state by state/region basis. I am from the DMV (DC, MD, VA) area and the market for Section 8 tenants is a great safety net for landlords like myself, in addition to a lot of the jobs in this market allow you to work from home (white collar jobs) so people are decently employed and can maintain rent. @Tamar Hermes, really great article! I am very VERY curious to see how foreclosures will be handled in a years time.
    Tamar Hermes from Los Angeles, CA
    Replied about 1 month ago
    @Nkem Nwogbo Great idea to work with the section 8 market! I am needing to evict a tenant at the end of the month, so I will learn first hand! Thanks for sharing!
    Stephen Torti Investor from Providence, RI
    Replied about 1 month ago
    Great info, it's interesting to see how this will play out, put an offer $15k over asking on a 3 unit (wasn't stretching for the place) plus $15k for a nearby parking lot and was "drastically" outbid according to the agent. May just hold my cash and wait.
    Tamar Hermes from Los Angeles, CA
    Replied about 1 month ago
    @Stephen Torti Yes, the selling market is on fire. It is important not to get attached to any deal unless the numbers work right now.
    Jamie DeRossett Investor, Contractor, Appraiser for Real Estate Appraiser from Lexington, Kentucky
    Replied about 1 month ago
    I have been in real estate for over 20 years mostly as a self employed real estate appraiser and my wife is a sucessfull broker/agent that owns her own real estate company and does over 10 million in annual sales by herself, and we are active real esate investors. We have seen alot in the psat 20+ years and we have seen more demand for real estate in the 6 months than any other time in those 20+ years including the 2005 boom. Just about every house that goes up for sale has multipul offers on the first day and the only ones that dont are priced unrealisticly and we see that alot, but overall marketing time is at a all time low and values are at an all time high. I think going forward low and mid cap markets will be fine there is just to much demand and from what I have seen the markets in most of the country could use more inventory, but I do not see it happening. The fallout will come in the high flying markets that have been appreciating at 10-20% a year just like Florida and California during the 2007 bust. You have to factor in population growth and the population is growing alot faster than housing starts are going up and that means there is going to be a inventory shortage for a long time to come and I do not think there is anything that is going to change the lack of supply and add in an expotentially increasing demand for population growth and I forgot rock bottom interest rates and all that added together equals a bull market for real estate for the rest of my career.
    Tamar Hermes from Los Angeles, CA
    Replied about 1 month ago
    @Jamie DeRossett Great points! We do have population growth and low interest rates on our side.
    Paul Moore Investor from Lynchburg, VA
    Replied about 1 month ago
    Tamar: Great article! Thanks for the insights. I expected this for a long time.
    Tamar Hermes from Los Angeles, CA
    Replied about 1 month ago
    @Paul Moore Thank you, Paul!
    Steve Hodgdon Investor from Novato, California
    Replied about 1 month ago
    Thanks for the insightful article. Just got off a Zoom investor call. Indiana is "open for business" with people returning to work. Florida (really wet right now) is seeing new inventory selling during construction. I'm in California, completely locked down and tenants struggling but yet low interest rates are fueling record home sales. Giving concessions to tenants to keep money flowing. Bank gave 6 month forbearance just by asking on a SFR rental. A portfolio lender on a medical building told me flat no when I asked for a one month deferral. so I had to go back to tenants and tell them "Sorry". 2 therapists gave notice to vacate. So, different everywhere. Playing long and short game at same time. Trying to buy right. Keeping more cash than usual. Anticipating a 20% long term rollback in economy, harder in some areas (Vegas) than in others.
    Tamar Hermes from Los Angeles, CA
    Replied about 1 month ago
    @Steve Hodgdon Yes! This is a wild time. I just left California for Texas but I kept a few properties there. Luckily, mine have been doing ok. in California. I had more trouble in Texas. It really depends on the tenant situation. If they were out of work, did not use the $600.00 to pay rent, and have no savings, it is not a great situation.
    Guillermo Birmingham Accountant from Alexandria, Virginia
    Replied about 1 month ago
    My only question is related to the state of the economy and the result in renters ability to find places to lease. Given the economy who is going to replace the evicted renters? I think at a minimum occupancy rates will significantly retreat for some time to come.
    Tamar Hermes from Los Angeles, CA
    Replied about 1 month ago
    @Guillermo Birmingham I think people will scale down. So people in homes they can no longer afford, go to rent nice places, renters in nicer homes, move to less expensive places, and so on. I am very concerned for low income people as if you can't afford the housing and can't get government assistance, you could become homeless. Unfortunately, I think the problem will worsen.
    Christopher Smith Investor from brentwood, california
    Replied about 1 month ago
    Hasn't even been a blip on the radar screen for my personal rental property activities across multiple states. Rentals are all 100% paid, renewals are all on schedule and underlying prices are quite strong. My target market helps I'm sure so knock on wood I'll get through this without any damage.
    Tamar Hermes from Los Angeles, CA
    Replied about 1 month ago
    @christopher smith Who is your target market? Well done at 100%.
    Tamar Hermes from Los Angeles, CA
    Replied 23 days ago
    @christopher smith You said "Renters are all 100% paid" which sparked our curiosity.
    Jim Mills Rental Property Investor from Ohio
    Replied about 1 month ago
    Christopher Smith- what is your target market?
    Brian Hansen
    Replied about 1 month ago
    I hope you do as well. What is the target market you're referring to? I'm a first time investor analyzing various markets and I wonder where you're looking or have had success in the past.
    Stephon Mosby Williams Rental Property Investor from Philadelphia, PA
    Replied about 1 month ago
    Buy at a 10-20% discount with some Pretty good cash flow and you should have no problems at all. If value drops, at least your still making money. I don’t even think about losing properties to foreclosure. I guess I’m just too naive or optimistic lol
    Tamar Hermes from Los Angeles, CA
    Replied about 1 month ago
    @Stephon Mosby Williams or...you are just playing it smart! Are you invested in Phili?
    Stephon Mosby Williams Rental Property Investor from Philadelphia, PA
    Replied 23 days ago
    @Tamar I invest in Philly. I only buy triplexes. I only buy solid properties and screen well. My properties cash flow good so I’m not worried about anything. I’ve never paid any part of my mortgage and as long as I keep holding I won’t take much of a hit. The only way I’d suffer is if more than half of my tenants just all wake up one day and decide to not pay rent and I have to evict them all. I’ll be waiting the rest of my life for that to never happen lol
    Shannon Goldsmith Investor from Los Angeles, CA
    Replied about 1 month ago
    Hi Stephen. The risk is still there even buying at a discount - talk to any investor who lost their butts in the Great Recession. I'm friends with several of them. All smart, savvy, capable investors. Home values historically drop 30 - 40% during a recession, however this is a conservative number as in a lot of cases, the values drop even more than that. These investor friends of mine who lost their portfolios in the last recession have slowly built back up, but they do it in a totally different way. They are passionately against "debt as leverage". And use a more conservative approach. I specialize in helping investors with this realistic approach to buy and hold investing, by helping them build rapid equity even in a down or declining market. Using a sophisticated financial tool, I'm able to help these investors (and non-investors) pay off their mortgages (and all other types of debt... credit cards, student loans, car loans, medical debt, tax debt, etc.) in as little as 5 to 7 years without changing their budget or their lifestyle. No expensive refinancing, debt consolidation or loan restructuring involved. Just good old fashioned banking principles to put to work in this program. Getting on a cash basis as fast as possible is the only way to buffer yourself from the risk of a recession, losing tenants, not being able to liquidate quickly enough, etc.
    Vaughn K. from Seattle, WA
    Replied about 1 month ago
    The great recession is the ONLY time housing prices dropped that far during a recession, at least outside of individual markets which may have tanked in previous ones. So that's not accurate. Also, as mentioned, if you have positive cash flow, or are even break even and can pay your mortgage, property value drops mean nothing. Just hold until prices rebound.
    Tamar Hermes from Los Angeles, CA
    Replied about 1 month ago
    @Vaughn K. Yes, as long as your tenants keep paying!
    Shannon Goldsmith Investor from Los Angeles, CA
    Replied about 1 month ago
    @Tamar... That is my point exactly. Tenants leave, tenants stop paying and tenants start negotiating lower rents... No it's not just about property values.
    Kenneth Crounse Rental Property Investor from Aurora, CO
    Replied about 1 month ago
    Where are you getting your data for the statement "Home values historically drop 30 - 40% during a recession". This seems very extreme to me and anything but typical. That may have happened in markets that doubled or tripled quickly like Phoenix or Vegas before the Great Recession but typically housing is very stable. Please site data.
    Nathan G. Real Estate Broker from Cody, WY
    Replied about 1 month ago
    Home value doesn't matter much to a buy-and-hold investor. If my property is cash flowing $200 in January 2007, it would still cash flow $200 in January 2009 even if the property value dropped 50%. My expenses are about the same, rent income is about the same, and cash flow will be about the same (and then significantly increase as rental demand increases, which is what we saw happen). The only reason someone would "lose their butt" during the housing crash is if they tried to sell the property. All they had to do is hold on for another ten years and they would fully recover, and probably see significant increases in their return. Real estate investing is very, very forgiving for those that stick around for the long game. Anyone trying to wholesale, flip, or time the market is likely to take it in the shorts.
    Shannon Goldsmith Investor from Los Angeles, CA
    Replied about 1 month ago
    Nathan... try holding onto your tenants when the market changes. Then come back and let's have this conversation again.
    Tamar Hermes from Los Angeles, CA
    Replied about 1 month ago
    @Nathan G. Great point!
    John M. Callahan IV
    Replied about 1 month ago
    Yes
    Alex Corbishley from Minneapolis, MN
    Replied about 1 month ago
    Good article. This is all very micro market driven - some areas have 20% unemployment, some 5%. If you manage apartments in a major city it’s likely going to be much harder than suburb SFHs. We had 90% of our tenants pay on time last two months and had to get one out. I think demand in the suburbs for smaller, affordable (< $1200 per mo.) houses is going to accelerate. And I’m having the same issue as mentioned above as we shop for our next couple rentals - any new home on the market, unless it’s really bad and/or way over priced is going very quickly.
    Tamar Hermes from Los Angeles, CA
    Replied 23 days ago
    @Alex Corbishley I have seen the same and I am in Austin!
    Tamar Hermes from Los Angeles, CA
    Replied about 1 month ago
    @Alex Corbishley I agree! People are buying properties like crazy. When will we move from a sellers market to a buyers market? I recently sold two properties that I bought in the past 5 years and when I bought people thought I was crazy, but prices still increased!
    Dave Rav from Summerville, SC
    Replied about 1 month ago
    Doom and gloom. No doubt, the pandemic caused a hit to the pockets of many financially, but as others pointed out the numbers vary region to region. Plus, we need to consider sources of data. Zillow, though large, is (largely!) inaccurate. And that "apartment " data may be referencing those tenants in large MF units. This leaves out anyone in SFRs, or private-owned smaller MF. Limited data set
    Tamar Hermes from Los Angeles, CA
    Replied about 1 month ago
    @Dave Rav Zillows numbers are often incorrect, but they put a lot of money into there research and definitely have a finger on the pulse of the market. I do not think anywhere will not be hit when the market shifts, but as always, some states, like Texas, Florida, Georgia, and Arizona will likely not fall apart.
    Robert Hastings
    Replied about 1 month ago
    It will be interesting.. there’s been virtually no SFR construction since 07 so demand is outstripping supply by a mile in sales and rentals. New construction is obscenely expensive. Lumber prices have tripled plus permits, fees, bribes, taxes, pre construction cost, etc are off the chart here in Cali.. sadly many in the middle class will get squeezed
    Jack May Rental Property Investor from Pacific NW
    Replied about 1 month ago
    Interesting article Tamar. You wrote that "refinancing is at an all time low." I was thinking, " What's she talking about? " Then, I realized you must be referring to the interest rates, because the only lenders I know of that aren't doing a whopping business with refis are the ones that quit doing them for now because they're focusing on home buyers first. But, honestly, I don't see this RE sell off going as many predict. I think it will wind up being much smaller than anticipated. Besides, power might just shift to a different political party before long. And from every indication I've seen, they don't believe in a free market and will try to bail out everyone and their mother.
    Gerald Gardere Rental Property Investor from Killeen, TX
    Replied about 1 month ago
    Rental income has been unaffected so far. Deals are next to impossible for this part-time investor. I've retreated to saving and building relationships with loan officers to be ready for whatever might come. Cheers!
    Jeffrey Mata
    Replied about 1 month ago
    I have one problem with this article, in my area of Southern California refinances are going through the roof. Mortgage companies can not hire enough qualified people.
    Tamar Hermes from Los Angeles, CA
    Replied 23 days ago
    @Jeffrey Mata Maybe you should open a mortgage company?
    Peter Thielemann from Burbank, CA
    Replied about 1 month ago
    Hello Tamar, I am a newbie to investing and found your article very interesting. By newbie I mean I am beginning to dig into how to convert my 401k to a self-directed IRA to purchase rental properties. I am 61 years old and would like to retire ASAP. Other than Bigger Pockets which I am combing through feverishly to get educated. Would you recommend a place to start?
    Tamar Hermes from Los Angeles, CA
    Replied 23 days ago
    @Petere Thielemann I just left Califronia and owned property in Burbank. If you want to retire asap, unless you are attached to Los Angeles, I would move. California is very expensive and won't be getting less so any time soon. It will be much easier to invest in an area you live. I would start looking around. If you don't want to leave because of family or friends, I would convert my 401K and wait to see what happens when the mretoreum is lifted and the dust settles. It is not a buyers market almost anywhere in the country right now.
    Kenneth Crounse Rental Property Investor from Aurora, CO
    Replied about 1 month ago
    Peter I would just advise you to avoid the states that have super tenant friendly (business unfriendly) laws and policies. Also think of cash flow and demographics. I wouldn't be investing in really expensive cities or cities where population is declining (Chicago, NY, LA, tax abusive places). Maybe Texas or Florida. I think the business friendly environment and low taxes are going to fuel those economies for a long time. Good luck!
    Bill Schrimpf Real Estate Agent from Reno, NV
    Replied about 1 month ago
    Interesting read, thanks for the article Tamar! I am small time and do really observe that real estate is mostly local. It is interesting the underlying Zillow.com source says rental delinquencies were 10% last July, when everything was relatively hunky-dory, you know, record low unemployment etc. Where was the 10% delinquency observed? As with lots of Zillow data, (just ask a real estate agent about “active” listings on that site) the validity of the data must be questioned. I have never talked to a landlord or PM that has anything near 10% delinquency rate. Maybe that is just my good luck. If you’re a PM or landlord, were you seeing 10% missed rent payments last July?
    Tamar Hermes from Los Angeles, CA
    Replied 23 days ago
    @BIll Schrimpf I think the numbers are overall and Zillow does run some hefty data to stay relevant but there will be exceptions.
    John Casmon from Cincinnati, OH
    Replied about 1 month ago
    Nice article. The best thing we can do is stay proactive with all of our conversations and seek to solve any potential resident issues with rent collection. I would expect the impact on SFR investors to be greater than multifamily investors simply due to portfolio scale. If you have one door and that person doesn't pay, you may be screwed. If you have 20 doors, you should still be able to cover all expenses, even if 6 people don't pay rent (30%). According to NMHC rent tracker, rent collection is still in the high 80%, low 90% range close to where we were a year ago.
    Tamar Hermes from Los Angeles, CA
    Replied 23 days ago
    @John Casmon Thanks John! Certainly, savvy investors will weather the storm. It is all the others who don't have reserves or maybe bought to Airbnb or too high.
    Nathan G. Real Estate Broker from Cody, WY
    Replied about 1 month ago
    This should be an eye-opening example of why citizens shouldn't look to government regulation to solve problems. This "depression" was caused by our government forcing us to shut down the economy, which was completely unnecessary. Then the government said renters don't have to pay their rent and Landlords can't kick them out. Then they handed extra money to renters with no requirement that they use the money to pay bills! Landlords received no assistance and are expected to pay their bills without the income from the renters. The government should have paid money directly to the Landlords to ensure Landlord bills were paid and Tenants would be secure in their rental. The government literally incentivized renters to pocket the cash, knowing the Landlord could do nothing about it. Once the moratorium is lifted, we'll see our courts overwhelmed with eviction cases and I suspect we'll see a significant increase in sales/foreclosures by Landlords that can't afford their investment. And the renters most likely to take advantage of this scenario probably already have terrible credit and could care less about a judgment sitting on their record.
    Tamar Hermes from Los Angeles, CA
    Replied 23 days ago
    @Nathan G. You paint a grom picture that is all to real. It is a mess.
    Elisabeth Lernhardt
    Replied 25 days ago
    Nathan you hit the problem right on! Politicians with their pandering think only to fix their image, never bother to consider the domino effect any intervention has. It is basic human behaviour to take advantage of these rule changes. One of my tenants had not lost her job , works at home , but still tried to get out of paying. I cancelled a deal where one of the two tenants had lost her job, but refused available jobs, because they did not pay as much. My fear is , if this pandering to the populace continues it will destroy the real estate market. And then there is Biden , who wants to get rid of the 1031 exchange.
    Brian Ploszay Investor from Chicago, ILLINOIS
    Replied about 1 month ago
    The for sale market is not normal, although the market seems strong. It suspect it is temporary. For investors, we saw the end of the bull market. Operating rental units will not be as profitable in the next couple of years, as there are significant headwinds. I don't have time to write my big analysis, but basically revenues will not grow while expenses will. Pricing adjustment always comes, but only after a stagnant period with less transactions. (properties trading hands).
    Tamar Hermes from Los Angeles, CA
    Replied 24 days ago
    @Brian Ploszay I agree.
    Connor Foster
    Replied about 1 month ago
    How can the extra $600/week unemployment assistance that ended the last week of July affect the first week of July? Wouldn't it have more of an impact on August rents?
    Tamar Hermes from Los Angeles, CA
    Replied 23 days ago
    @Connor Foster Good point, but I think it is indicative of renters hording the money or using it for other things besides rent.
    David Miretti
    Replied about 1 month ago
    It's a good time to be wise and question assumptions. A lot of the leveraged investors of SFR rely on the assumption that the tenant will be paying the mortgage, creating cash flow, etc. If tenants are not, make sure you can ride it out and cover Capex, Mortgage, insurance, etc. People can get creative with getting people out, possibly even offering a one time cash payment to nonpayment tenants or work in lieu of rent, other type ideas. I think this will have a bigger impact than most people imagine, and will also drag on commercial properties. Yes, there will be regional variances,, but the underlying problem of a quarter of people not having to/unable to pay rents and not being evictable will definitely have repercussions and foreclosures are just one aspect of that. Thanks for the article.
    Tamar Hermes from Los Angeles, CA
    Replied 24 days ago
    @David Miretti Thanks for reading, your insight and the comments!
    Peter Thielemann from Burbank, CA
    Replied about 1 month ago
    Thank you Kenneth, couldn't reply to your message the message box was so skinny I couldn't get the message in.( again newbie me) I'm actually looking in Tennessee and have some good connections there. My first step now is to roll over my company-sponsored 401k to a self-directed IRA custodian. If you or anyone has any referrals 4 a reliable company I would appreciate the recommendation.
    Tracy Spencer Investor from Phoenix, Arizona
    Replied about 1 month ago
    Some significant benefits to doing your investing in a Solo 401K, including leverage, so I would explore that carefully before I rushed to move funds to an IRA.
    Peter Thielemann from Burbank, CA
    Replied about 1 month ago
    Thank you I will drive into this.
    Peter Thielemann from Burbank, CA
    Replied about 1 month ago
    Solo 401K's are for self employed or companys with no employees.
    Tamar Hermes from Los Angeles, CA
    Replied 23 days ago
    @Peter Thielemann Almost any self directed fund will be becnefial and you need to do what you qualify for. Try @Brian Eastman 877-229-9763 or [email protected]
    Vaughn K. from Seattle, WA
    Replied about 1 month ago
    I think the outcomes will vary by place, but I fully expect when the dust settles that all the "trendy" markets that have gone up 2, 3, or even 4 fold over the last several years are going to drop like a rock. The riots are only going to fuel that too even outside of economics. If I owned a bunch of negative cash flow properties in big trendy metros right now I'd be thinking REAL hard about shifting focus to some other areas. I bet many of the same types of boring places coastal people scoff at will do just fine through this though.
    Tamar Hermes from Los Angeles, CA
    Replied 23 days ago
    @Vaughn K. Where did you resinvest when you sold?
    Catherine McHale Real Estate Investor from Los Angeles, California
    Replied about 1 month ago
    Hello- informative article! In response to your question about how we are all doing: I have several rentals in Los Angeles and in N. Calif- and we have found that some of our tenants - about 50%- are having trouble paying the rent: they are working in the entertainment industry, teaching at private charter schools, or self employed event planners. Fortunately, all those folks have asked to break the lease, or were month to month, which allows us to find new tenants. There is still a ton of demand for well cared for properties, so we will be okay with new tenants in place. This recession is eye-opening, however, as historically here in LA tenants in the entertainment industry are well compensated and desirable. Sadly, it is not clear at this time when those folks will go back to work. Fortunately, we have a diverse economy here in LA, and housing is in such short supply, that once we get through the Covid situation, rents are only going to go up.
    Tamar Hermes from Los Angeles, CA
    Replied 24 days ago
    @Catherine McHale I have properties in Los Angeles and had the same situation. It is taking longer to vet tenants as well. With rent control and an insanely long moratorium on evictions, we have to be very careful! Where are your properties? I am mostly in Silverlake.