Property manager Justin Becker shares some of his thoughts on why some types of rent payments show less decline during the pandemic.
By Justin Becker
Facing a pandemic has been difficult enough on its own, but its impact on the overall economy has only added to the situation.
As a more tech-savvy or advanced society, we have definitely proven that we are not going to take this lying down. The good news is that remote work and online commerce are surging.
Of course, this does not take away the fact that millions are currently unemployed, or that their $600 a week Pandemic Unemployment Assistance was being spent on the essentials like food and healthcare – and that was before it ran out July 31.
But what about housing?
Having a place to live is a necessity, so why is it that a significant number of people are unable to make their rent?
Clearly, many Americans are unable to work from home or have lost their jobs during this time. When this reality is coupled with the fact that many people were already struggling to afford their cost-of-living expenses, it is understandable that tenants, in these uncertain times, are having even greater difficulty paying rent. In response to this, many states have adopted eviction moratoriums, and property managers have become more flexible with late rent payments or lack thereof.
For most, this information is not news, since much of 2020 has been spent on lockdown. However, what has suddenly changed is the U.S. government has officially put a stop to the Pandemic Unemployment Assistance.
The reality is that rent payments received across the United States have been steadily declining since April. According to Rentec Direct, rent payments are down 26 percent as of July 10, 2020, compared to rents received in March 2020. Furthermore, there has been a two percent decrease from June to July 2020. In fact, looking at these numbers alone, many are concerned that this is just the tip of the iceberg. As a result, COVID-19 has truly had an impact on the rental and real estate industries.
Rent payments decline
As briefly mentioned, there has been a steady decline in rent payments received, and this is particularly true when it comes to multifamily houses and traditional home rentals.
That said, the majority of people are still paying their rent – or at least making partial payments/adhering to financial-hardship agreements they made with their landlords. A particularly interesting thing to note here, however, is that a significant number of people who are renting mobile or manufactured homes are still making on-time rent payments. When you think about it, this makes perfect sense, as both manufactured and mobile homes for rent are more affordable. In other words, paying mobile-park-lot rent is generally only a few hundred dollars.
Similarly, manufactured homes for sale or that have been purchased, typically cost less than a traditional house. Thus, even if the home was financed, mortgage payments are more inexpensive.
That said, overall, there is still a clear decline in rent payments and mortgage payments due to COVID-19. Moreover, despite many in the industry being optimistic, the truth is the unemployment rate continues to fall, and very few people these days have more than three months’ worth of savings (only one in four Americans currently have three or more months of savings). Likewise, only 28 percent of U.S. adults have an in-case-of-emergency savings, and things have not been this bleak since the Great Depression.
Consequently, all people can do is wait.
The next few months will clearly demonstrate if people are able to make their rent without additional government assistance. The possible silver lining in all of this is that there continues to be talk of a possible second round of stimulus checks.
If another stimulus package happens, then tenants may just be able to get by for a few more months or hopefully until researchers come up with a viable vaccine. Ultimately, landlords and property managers are going to have to continue to find the best way to navigate the adverse effects of this ongoing pandemic.
Online rent payments show less decline
However, a caveat to COVID-19’s impact on rental and real-estate industries is that there has been less of an adverse effect on rent payments received online.
In fact, there has only been a 1.4 percent decrease in online rent payments, which started in June 2020. Prior to June, tenants who paid their rent online continued to do so, despite the pandemic. Many online rent payers are seemingly staying afloat because this particular payment method allows for direct transfers from financial institutions (both checking and savings accounts), and generally accepts credit or debit cards.
Besides easy online payments, many mobile or manufactured home communities allow their tenants to pay by phone.
Ultimately, both payment methods make it easier for renters to pay and to pay on-time. Thus, if you do not have a tenant portal or online-payment system in place, then it is time to change that. The statistics clearly show that you are more likely to receive rent payments this way, so what are you waiting for?
Whether you are a landlord with only a few tenants or a property management company with several mobile home parks under your belt, offering alternative payment methods like the ones discussed above will help ensure your business/rental community can survive COVID-19.
As you can see, the futures of the real-estate and rental industries are unclear. We are still in the midst of a pandemic, with no indication that the administration can truly handle the task at hand. In only a few months, COIVD-19 has dealt a devastating blow to the American economy. Thus, as a property manager or landlord, you need to have certain securities in place.
If you are currently accepting new tenants, thorough tenant screening is a must, now more than ever. Obviously, if your prospective tenant has a history of debt or trouble maintaining their particular expenses, then now is not the time to turn a blind eye.
Along those same lines, your income-verification method should also be automated if it is not already. Before the onset of the pandemic, people provided false information and old pay stubs, which led to all sorts of problems. Through automated income verification, you can ensure that you receive only accurate and current information, which means you no longer have to scrutinize someone’s ability to pay rent in the future—everything you need to know is provided for you in a manipulation-free report. Note, you should also run an automated income-verification report at the time of renewal with existing tenants.
COVID-19 has changed life as we all know it. In fact, you would be hard-pressed to find an industry that has not been drastically affected.
Therefore, a certain amount of flexibility and understanding is required now. For instance, if you have tenants that are trying to end their lease early without penalty because they can no longer afford their rent payments, as a property manager, you need to know what rights your tenants currently have. Moreover, you need to be realistic with your expectations.
If your tenant is already struggling to stay afloat, the likelihood that you will receive any additional monies is very low (outside of keeping their security deposit). That said, former tenants can still influence your ability to rent to others in the future, so you should choose your battles wisely. This is just one example of the possible situations that you are likely to encounter in the months ahead.
Ultimately, all you can do right now is be as accommodating as possible and stay optimistic in the face of so much uncertainty.
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About the author:
Justin Becker is a property owner in Michigan and has a passion for managing communities. He owns apartment complexes and mobile-home communities, and has been writing blogs for his properties for several years.