| Preparing For The Covid-19 Recession With Your Rentals
If you are like me your inbox has been loaded with every company you ever had any contact and their explanation of how they are functioning in the new world of social distancing and a pandemic. This is totally uncharted waters and there is no one business that can provide the perfect response beyond washing hands, working from home, and avoiding human contact. We are social creatures and this appears to be a real test of human ability to separate from the typical needs for social interaction. Thankfully, this is 2020 and not 1980 and we have a wide open world available to us in social media, online video chat, and every type of content we desire right in our homes.
What Actions WILMOTH Took- So Far
We have taken two significant actions so far to address this pandemic.
One, we closed our office to the public and provided our team the opportunity to unplug their laptops and VOIP phones and work from home. Not surprisingly, the only people who wish to work from home are doing so because of schools closed or loss of child care. They need to be home with their kids and we are happy we set up this business to easily accommodate them. But everybody else wants to be at the office! Which tells you how hard social distancing really is going to be to enforce unless you close all places where people can congregate.
Two. we temporarily suspended in-home inspections of interiors of homes. We are considering alternatives to this important function so that we can protect your asset as usual and our important team members.
Time To Prepare
What will be our response when we start hearing that our residents can't make their April rent payment? Or their May then June payments? It is going to happen and likely happen a lot.
Now is the time to prepare.
What We Know Today
The economic stress of all of the closings is starting to hit home for many of our tenants. They may still have funds but many of them live paycheck to paycheck. Many employers are trying hard to continue to provide wages but many of the hardest hit will be those who rely on tip income and service industries. Many of these folks are your tenants.
The government is quickly approving assistance programs for individuals and small business. It is still not clear how long such assistance is going to take to be helpful. Government assistance will be vital to softening the blow of the new recession (which likely started last week).
Bottom line- the problems associated with this pandemic will linger throughout 2020. As a landlord, it is important to be prepared.
What You Should Expect
Renewals: This is not the year to push your tenant to fund improvements or to agree to larger-than-market rent increases. Strange as it sounds, this may be the year to take a step back and actually give your tenant a break by lowering their rent. We expect vacancies to climb and with that lower rental rates. We want to do what we can to keep your tenants from exploring what alternatives are available.
Days On Market: Before COVID-19 we were already seeing a great deal of competition in the smaller multi-family units, and less than 3 bedroom homes. The competition is not going to go away. Increasingly, the best path to renting the smaller units is to be willing to invest in the property enough to qualify for Section 8 tenants. We understand the program and can make it work for an owner facing these challenges. But, understand, if we have not suggested it to you it is because we know the unit needs money invested to make it eligible.
Slow Pays: We will be working with tenants one on one to make sure the first dollar they have goes to your rent. We will work with them on forgiveness of late fees in order to retain the tenant and not force them into collections. It is safe to expect that we will see a significant amount of slow pays, delinquencies, collections, and vacancies.
Eviction: Evictions have ground to a halt as ordered by local government entities. People who have not been paying are not going anywhere. When we can start to claim possession again there will be a huge backlog in the courts.
Our attorney has told us that most of the small claims courts are already requesting increased staff to handle the backlog and increased volume of cases. The problem is these requests are going to already strapped governments.It is likely that we may see backlogs of 60 days or more when we can begin filing possession cases again. Existing cases are being rescheduled and right now that is projected as a 30 day delay with additional delays possible.
We know the delays will make it much more important to try and work with slow paying tenants.
Delays In Turns or Rehabs: The pandemic is hitting contractors and vendors also. Between reduced access to supplies, and staff illness, patience will be required. The times have changed and expecting the way it has always been is likely setting up for disappointment.
What Next?
We lived through the 2006-2011 period of real estate difficulty. Many of you actually acquired your properties in the outcome of that recession. There will be great opportunity that rises from this pandemic. Patience will be your best friend as you accumulate cash and begin to follow how the real estate market changes as a result of COVID-19.
When the time is right, you will be in position to grow again. We thank you for allowing us to be your partner now and in the future.
Stay Safe!
WILMOTH Team | 
