There has been a surge of renter households in the United States. As a result, the financial shock waves triggered by the coronavirus pandemic will reverberate not just for tenants but the owners of those homes also. Whether you are an unintentional property manager that has enjoyed income from your old primary residence or are depending on your multi-family property portfolio to supply most of your earnings in retirement, here is a summary of the obstacles and opportunities you require to consider.
Challenge – The existing economic recession has actually drawn several comparisons to the most recent recession. While the causes are significantly different, lenders have actually tightened their requirements again for house purchases for both home buyers and real estate investors. Recently, the FHA has substantially tightened their credit scoring criteria for receiving a loan. In addition non-qualified (NQ) loaning has apparently taken a hit as well. This is a considerable concern for some real estate investors that need short-term financing to purchase and remodel if they do not meet income standards.
Opportunity – While credit has tightened on a number of fronts, financing might provide significant upside for property owners that qualify. Today’s rates are relatively low. If you satisfy mortgage lending guidelines, you might be able to refinance a property at lower rates. Additionally, if you were planning to broaden or improve your real estate portfolio, you can borrow against the equity in your existing properties at historically low rates.
Single Household Housing
Challenge – With unemployment increasing as a result of this pandemic, anyone owning rental property is most likely worried about their occupants’ ability to pay. Because of the passage of the CARES Act, evictions are frozen for 120 days starting March 27, 2020 for renters who live in properties that receive federal subsidies such as Section 8 vouchers or for renters whose landlords have government-guaranteed loans, including loans backed by Fannie Mae, Freddie Mac, the FHA, or the USDA. If the rental unit is not covered by the CARES Act, numerous states have issued similar suspensions on evictions.
Opportunity – While the CARES Act gives some tenants a method to prevent eviction, house owners with government-guaranteed loans may be able to request forbearance for as much as 360 days if their income is decreased as an outcome of COVID. In order to figure out if your mortgage is backed by a government firm, start with the two largest entities: FannieMae and FreddieMac. If your loans are not backed by a government agency, speak to your loan servicer and inquire about what alternatives would be readily available in your situation.
If your tenant is struggling to pay however they are an otherwise great tenant, think about utilizing the mortgage reprieve to temporarily lower or suspend rent for an established period. You should also help make your tenant aware of the stimulus support and temporary unemployment benefit increase. These resources will not only help them pay you but help get them get back on their feet faster once the financial downturn subsides.
Challenge – Much like smaller properties, multi-unit apartment complexes are going to deal with issues with tenants who have lost their job or taken a pay cut. Anything bigger than 4 housing units can not be financed with a mortgage, so the loan forbearance options through Freddie Mac or Fannie Mae do not apply.