Landlords: Any Silver Lining Amid Eviction Ban?

The CDC’s National Eviction Moratorium went into effect on September 4, 2020.

They slapped this new ban down – something the Center for Disease Control has never done before – after the original CARES Act moratorium on evictions expired at the end of July.

After the July CARES Act moratorium ended, millions of renters around the country were at risk of eviction because the provision only ensured that they weren’t allowed to be evicted during the time period, but it didn’t pay rent for delinquent tenants.

This meant that landlords did not receive the vital rent payments they needed to cover mortgage payments, taxes, other expenses and profit.

Seeing that potentially millions of renters could face eviction, the CDC issued its first-ever nationwide eviction moratorium in the name of preventing further spread of COVID-19.

Landlords Financially Exposed

According to a 2015 American Housing Survey, there was an estimated 48.5 million rental units in the US, 43.9 million of which were actually occupied at the time. Individual investors – so called ‘mom and pop’ landlords – comprise about 22.7 million units in 16.7 million properties.

Of these individual investors, more than half – or 58% to be exact – do not have access to any lines of credit that might help them cover their expenses when faced with delinquent tenants.

This puts millions of landlords in America at risk of financial hardship.

But is there some silver lining in this bleak picture?

Silver Lining for Landlords and Real Estate Investors

While on the one hand, landlords face evictions with tenants that cannot pay their rent, on the other hand, there is plenty of opportunity for property owners to buy and sell in this market environment.

Many markets are seeing record high sales trends in August and September caused by the slowdown in the second quarter, when Covid-19 first hit. This, combined with the fact there there’s low inventory, means that tenants and buyers are spending.

The other factor that is driving higher sales trends is the historic low mortgage rates.

US Bank posted a 30-year fixed rate of just 2.99% as of today, September 15, 2020. Many experts predict that mortgage rates will remain low for 2020 and 2021 to ensure that people are able to continue buying and selling.

There could not be better music to the ears of real estate investors who are eager to expand their empires using cheap debt.

These low rates are also one of the main reasons home sales are expected to stay strong through the next year and a half. Home buyers are seeking out more space and bigger yards with lower mortgage costs.

Conclusion

Landlords have a unique challenge in this historic health pandemic. Savvy landlords must find ways to mitigate the loss of rental income caused by rent delinquency. Landlords should also look to take advantage the record-low interest rates and hot sellers’ market that we are in. There are multiple ways to seize this rare opportunity.