The Stakes Are High For Independent Landlords

As we move into the last two months of what has been, to put it mildly, a crazy year, independent landlords face unprecedented challenges. The economy is still recovering from a flash, COVID lockdown induced recession in March and April. COVID hasn’t gone away; unfortunately, cases are on the rise again in New York state and around the country. No one is sure how much social unrest will follow the upcoming Presidential election. Now more than ever, REIs have to stay informed and “on their toes” to make the sound decisions required to weather the current crisis and to take advantage of new opportunities as they arise.

Currently, there is a nationwide moratorium on evictions (The CDC edict). This moratorium is being challenged in several courts, but the eviction ban remains firmly in place as of late October. Government subsidies and stimulus payments helped tenants pay rent from March through the end of the summer. While the situation is fluid and could change, it seems doubtful that Washington will offer any additional relief near term. According to Moody’s Analytics, as of September 2020, some $25 billion in back rent was owed. That number is expected to rise to $75 billion by year’s end. According to the Apartment List survey, one in three tenants failed to make their rent payment on time in September.

Various surveys, such as those conducted by the National Association of Hispanic Real Estate Professionals and Avail, show that 25% to 35% of all independent landlords dipped into savings or borrowed money to cover operating costs from March through September. I do not need to tell you that being an independent landlord is a low margin business. As the weather turns colder, landlords’ costs increase with added heat bills, ice and snow removal, and other seasonal expenses.

So when I say that the “stakes are high” for independent landlords, I’m probably understating the magnitude of the problems. If rent payments are reduced, that means income for landlords is interrupted. That leads to rental property mortgages going unpaid, repairs not being made, necessary services not being performed, and so forth. How long will landlords be required to carry this burden without Federal and/or State help? This much is certain – the current situation is unsustainable long term.

Okay, that’s the gloomy side. There are also some positive developments on the horizon…

The economy is rebounding from the COVID shutdowns. Third-quarter GDP numbers will be released on October 29th and are expected to show off the charts growth – 20% plus on an annualized basis. People are going back to work; more than 11 million of the 22 million jobs lost in March and April have been replaced. Most of the jobs that have been permanently lost are in specific sectors such as airlines, hotels, restaurants, retail and tourism. The real estate market, in terms of new and existing home sales, is strong. If we can escape any further COVID lockdowns and a vaccine becomes available sooner rather than later, then the outlook for economic growth in New York and nationwide is positive no matter who wins the Presidential election.

After the November 3rd election is over, will Washington offer some assistance, whether that’s in the form of additional stimulus checks for taxpayers and/or rent relief funds? That’s an open question, but it does seem more likely to happen post-election. Will the CDC moratorium on evictions be extended after January 2021? There will be pressure to do just that, especially if COVID spikes and the economic rebound stalls. Right now, all the Feds have done is kick the proverbial can down the road. Sooner or later, the core problems have to be addressed. People thrown out of work by the COVID crisis need to find employment. Landlords need to balance their books and, as tough as it is to face, that means evictions for non-payment of rent must resume.

Unlike our corporate REI competitors, we do not have access to Wall Street cash to fund us through hard times. So, right now is the time to conserve your resources and manage your rental properties as efficiently as possible. At Sterling Property Solutions, our team can answer all of your property management questions and address any challenges. Together, let’s form a plan for you to take full advantage of the current conditions and put in place a robust, long term program for your success. Please give us a ring at 914-355-3277 or send us an email at [email protected].