In 2020, the COVID-19 pandemic started off with lockdowns around the world in the U.S., France, Australia, Canada, and many other countries. These lockdowns led to an economic shutdown that put thousands of small businesses out of business rather quickly.
Since these lockdowns, some businesses have recovered, and people have started new businesses that seem to be doing okay. However, many property investors have been negatively impacted beyond repair.
Many landlords are behind on their mortgages by a year or more because their tenants aren’t paying rent.
Why landlords are suffering during the eviction moratorium
The first national eviction moratorium in the U.S. came right on the heels of the first lockdowns, and the moratorium has been extended several times. Many tenants have not been paying rent for over a year, and landlords have been scrambling to pay their mortgages. Some have been able to live out of their savings account. However, most property investors are struggling financially.
At first, certain lenders like Fannie Mae and Freddie Mac offered forbearance options for mortgages during the moratorium. However, as time went on, the forbearance options disappeared despite the rent moratorium being extended to protect renters.
Currently, there’s a moratorium on evictions in the U.S. through October 3, 2021. This extension only protects tenants from eviction for non-payment of rent caused by a pandemic-related hardship.
Still, many tenants are choosing not to pay rent even when they aren’t struggling. This is putting landlords in an awkward and financially destructive position.
Although the eviction moratorium is challenging for property investors, hope is not lost. Here’s how smart property investors are planning to thrive during the next potential series of lockdowns.
- Landlords are handing the reins over to a property manager
Managing properties during the pandemic has been tough on all accounts. Tenants are easily triggered into aggression and reactivity when they’re struggling financially. That’s why landlords are handing the reins over to property managers to work on their behalf.
For example Texas, landlords are working with professional property management companies like Green Residential. With a property manager, there’s no need to stress about dealing with upset tenants.
Property management companies know their legal rights, responsibilities, and boundaries regarding tenants. They are experts at handling difficult tenant situations, including non-payment of rent and legal evictions.
For landlords to thrive during a new potential lockdown, they’ll need to follow the law to the letter. Evictions are no longer cut and dry. There are all kinds of new stipulations and in some states, like Washington, some of the moratorium’s rules have become state law. Working with a property manager will ensure properties are managed according to current laws.
- Landlords are consulting with a lawyer before filing for an eviction
Evictions are lawsuits and there’s a specific process landlords must go through in order to evict a tenant. However, under the moratorium, not all evictions are legal. Smart property investors know they can’t keep up with all the details of the current eviction laws. The CDC’s national moratorium along with statewide moratoriums make it hard to pinpoint what constitutes a legal eviction.
It’s better to work with a lawyer rather than risk filing an illegal eviction lawsuit, which puts a landlord at risk of being sued by their tenant. Sometimes tenants easily win the right to remain on the property when a landlord doesn’t follow proper eviction procedures. Landlords can’t be too careful.
- Property investors are selling their properties
Nobody could have predicted the current situation with tenants being behind more than a year on rent and landlords being unable to evict. It’s unfortunate, but sometimes the only way to stop the damage is to sell.
Property investors who are behind on their mortgages are selling their properties. They probably should have done so before, but nobody knew the moratorium would be extended for such a long period of time. Investors who don’t want to lose any more money and risk a potentially longer moratorium are selling as quickly as possible to get out from underneath their growing debt.
Lockdowns could potentially come soon – be ready
If you’re a property investor, be ready for the next set of lockdowns. Although you can’t know for sure, the possibility exists. Be ready to make adjustments to the way you do business and be prepared to sell if you don’t think you can recover easily.
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