SFH landlords are facing several unanticipated yet interconnected dynamics triggered by the coronavirus pandemic. In this article, we’ll take a look at the forces at work here in the Commonwealth that directly impact SFH investors … those we can influence and those we cannot.
The SFH Market and Tenant Profiles
There are nearly 3 million renters in Virginia. About one-third are SFH tenants. That means landlords of one million rental units are facing challenges, on a continuum of mild to major, as their tenants are impacted by C-19.
Many Virginia tenants have suffered significant job losses that are predicted by economists to not be alleviated sooner than year-end, if then. Historically, renters have been more likely than homeowners to face job and income loss. The net result for SFH landlords is to work with tenants who are having difficulties paying rent.
A welcome consequence is the lessened effect on vacancies. Job insecurity, unemployment and shelter-in-place orders have kept SFH renters from seeking alternatives to their current residences. These realities of the pandemic have caused more and more tenants to extend their current leases or request to pay month-to-month … moves that are positive for landlords to avoid or limit vacancies.
There has been some added tenant incentive to not move in that SFH rent growth has bottomed out to the
lowest rate in a decade. Generally, SFH landlords are not planning rent increases other than out of absolute necessity to support property expenses … and then with tenants who are likely to be able to pay.
Note: There is evidence that SFH rentals are attracting apartment dwellers who are now looking for lower-density options in light of pandemic-inspired mandates to maintain physical distancing.
Financial Relief for Unemployed & Those Still Working
So, the above would indicate that SFH landlords have rent-related exposure due to C-19. However, it may not be as bad as many initial reports hyped. Many if not most tenants remain employed or qualify for considerable federal financial relief. That’s protection for them as tenants in meeting their rent responsibilities as well as for landlords with overhead to service.
Landlord Reality Check: Review your tenant roster to determine current actual or likelihood of job loss. Admittedly, there are some industries such as restaurants that may not bounce back as quickly as others. That said, odds are in your favor that you’ll realize little negative impact in their ability to maintain or regain bread-winner status.
As of this writing, the original $2-trillion stimulus package financial relief terms have expired. However, there is every indication that Congress will reinstate, if not expand, the benefits of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Financial relief for individuals and businesses included:
- One-time payment: of $1,200 per taxpayer plus $500 for each qualifying child
- Unemployment Benefits: Unemployment insurance is expanded if job loss is due to COVID-19. Once regular state benefits expire, eligible recipients may collect up to an additional 13 weeks of benefits plus an additional $600 per week … delivering an additional cushion for both tenants and landlords.
- Evictions: Tenants in federally-backed housing granted 120 days of eviction relief to July 25, 2020.
- Note: This eviction moratorium does not relieve tenants the obligation to pay rent.
- The Paycheck Protection Program (“PPP”): Authorizes forgivable loans to small businesses to pay their employees during the COVID-19 crisis. (Landlords: Check to see if you qualify.)
- Employee Retention Credit: Designed to encourage businesses to keep employees on their payroll.
- Paid Sick Leave Credit & Family Leave Credit: Small and midsize employers can claim two new refundable payroll tax credits … paid sick leave credit and the paid family leave credit. Each fully reimburses eligible employers for the cost of providing COVID-19 related leave to their employees … and to make that repayment immediate.
- Evictions: Financially strapped apartment landlords with government-backed mortgages can avoid foreclosure if they don’t evict tenants. The order applies to the Fannie Mae and Freddie Mac mortgage companies, which will extend mortgage forbearance to any landlord “negatively affected by the coronavirus national emergency,” according to the Federal Housing Finance Agency.
As SFH residential landlords, the above resources for financial relief to the unemployed is a positive element in avoiding rent delinquencies. If history is any predictor of the future, expect Congress to expand, not abandon, monetary support.
“President Donald Trump signed multiple executive actions one day after coronavirus relief negotiations fell apart in Congress. It remains unclear what legal authority Trump has to enforce the actions.”
There will likely be delaying actions initiated to prevent President Trump’s executive orders to be implemented. It is also possible that Congress may reconvene and agree on extensions to most, if not all, of the CARES Act provisions. The next few weeks should tell the story.
Clearly, the current C-19 pandemic adds to the many elements of maintaining and enhancing your SFH asset. How long it will last is anyone’s guess … with the best projections at a preventative/curative vaccine early next year. Meanwhile, the key is remaining alert and diligent in serving your tenants and protecting your investment. That calls for capable, experienced management. For your consideration:
Whether becoming a landlord was a choice or a result of circumstance, it doesn’t change the fact that managing any property comes with its challenges… and we want to help. At KRS Holdings, we stand by our core principles to always be straightforward and honest in every situation. We strive to make our clients the most money possible. We’d love to share with you how we can make your property profitable.
Give us a call or drop an email. We’ll respond promptly and
relieve your stress to evaluate your property management options.
Join us in our next issue for help to maintain positive cash flow
plus help our renters get through these next few months.