Regarding COVID-19 & How it could start affecting your REI business.

Regarding COVID-19 & How it could start affecting your REI business.

What a crazy month March has been already, and we’re only half way through the month. With all the COVID-19 news, it’s important to step back & take a serious look at how this all could start affecting your Real Estate businesses.

You don’t have to get the virus to be affected, and even if your tenants don’t get it, they could be furloughed or laid off and not be able to pay rent next month. Even if there’s limited COVID-19 cases in your area, you may have tenants who work for companies directly affected due to their industry.

IMO, Once congress passes the emergency bill, any of your tenants effected should get SOME help...but will it be enough to really help us as investors? Just because tenants get some funding doesn’t necessarily mean they’ll use it to pay their rent. Will Congress address your issues?

There’s a chance as small businesses we may be able to get some relief from the Gov on these cases as well. But don’t depend on it and it could be way down the road such as a tax break at the end of the year. That’s not going to pay your business expenses during this period.

So what do we do?

If you have tenants dealing with financial issues, have compassion and work with tenants as much as you can, but you also have to protect your family & business as well.

If it happens to any of my tenants, we will follow same normal routine, 5 day notice, file eviction, etc. So there’s records. But we may not actually remove them, “if” it’s even allowed through this time. Depends on a case by case basis. As long as they were paying on time before, we’ll work with them. But no one knows how long this could all take. If you do not send notice and file, and then it turns into 30-60-90-180 days... You could potentially lose everything if you were not prepared ahead of time.

Next, you have to consider Congress decision to help may be to pass temporary law preventing evictions for a certain period of time. At the same time, they may not pass anything to prevent foreclosures. So, you may not be able to get rent from tenants and your mortgage payments will still be due. Even if Congress temporarily blocks foreclosures also, it may be limited to only those in need and “owner occupant” mortgages only.

What about those with commercial properties?

And what if your business has Sub2 wraps, and seller financing to tenant buyers?

Even if Congress helps tenants with some funding, blocks all evictions, and all mortgages from foreclosure, the mortgage is only one part of your business expense. You still have to pay the insurance, taxes, repairs, management, staff, office rent, etc. and the list goes on and on. It’s a domino effect.

What about those with AirBnB and short-term rentals? First thought is many people will stop traveling, and AirBnB will be heavily impacted. But I also think many other people who live in larger metros affected, may opt for AirBnB’s if they’re in the right locations to get away from the crowds of major metro areas, and wanting to avoid hotels. Uncle Bob’s cabin on the lake is starting to look like a valuable option...

Many of you may have other open credit lines available and thinking you’ll be able to tap into that money to help get you through this period. What happens if the banks decide to recall that line before you tap into it? That can happen, it did to many during the 2008-2010 housing crash.

Also what about any vacant inventory you currently have ready to rent or sell, or even currently under contract. I HAD ONE SET TO CLOSE LAST WEEK & THE BUYERS JUST WALKED AWAY SAYING THEY CAN’T TAKE THE RISK RIGHT NOW.

I’m not trying to scare you more then the media already has, but you MUST be asking yourselves these tough questions, and be reevaluating your portfolios now for potential holes and be prepared to make some difficult decisions. Don’t wait until April 1st or depend on Congress.

Plan ahead for the worst and pray for the best. This too shall pass...

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Disclaimer: Author is not an Accountant, Attorney, Financial Advisor, Tax Advisor, Broker, or Agent. This is for general information, and not tax or investment advice. Readers should do their own due diligence and seek professional counsel prior to making any kind of tax changes or investments.