Coronavirus Updates for Property Owners
Coronavirus Updates for Realty Masters' Landlords
We're doing our best to keep you up to date with resources and information as it changes daily. We think this website will be a good resource for you, however, please reach out should you have any questions for our team!
Landlords, please begin by completing the Owner COVID-19 Impact Survey.
Coronavirus Updates from Realty Masters
COVID-19 Updates from Realty Masters- Coronavirus updates for all of our clients including financial resources, food assistance, & Pensacola area coronavirus updates
How is COVID-19 Affecting Your Rental?
The main effects we've seen from COVID-19 at this time are:
- Everyone changing their practices due to social distancing and mitigating risk through limiting exposure.
- Legislation being passed that changes your rights as a landlord.
- Financial effects on tenants causing them to express difficulty in making or maintaining payments.
- Tenants giving notices to vacate as they are aware they will not be able to continue making payments.
There have been a number of legislative actions that have impacted landlords over the past few weeks. It is not business as usual. A huge majority of our residents have been impacted in some way. Here's a few of the ways we've been working with tenants to help ensure owners get rent during this time.
Options for Cooperating with Tenant Payments
While we are not recommending you reach out to your tenant with free rent and unsolicited concessions, we are recommending that you work with tenants during this time. We can talk more about the benefits of working with your tenants and even give you a cost benefit analysis to help you make decisions. For the meantime, please be thinking about these options.
- Payment Plans: We are working with tenants on payment plans. We can ask your tenant what they can pay now and then spread the balance over future months.
- Rent Concessions: We have some owners who are able to offer a small concession or discount on rent should it be paid by a certain time. We can say- $200 off your rent if you can make the payment by the 15th of the month. Some rent is obviously better than none.
- Accessing Double Deposits: In some instances, we have double deposits and may be able to tap into some deposit money if absolutely needed. We would need tenant authorization to do this. We would always suggest leaving one month's rent as a deposit.
We are utilizing addendums created by our attorney to document these arrangements.
Delinquency Rates & Expected Delinquency
- April Delinquency Rates- By the 5th of April, when we compiled late rent reports, Realty Masters had around an 8% delinquency rate with over 92% of tenants paid by the 10th of the month. We will continue to monitor these figures and update as we move forward.
- May Delinquency Rates- As many tenants received stimulus checks, we did see rents coming in at a rate similar to April. We received over 92% of rents by the 10th of the month. Most of April's payments have now been received, although we do have a few outliers who are not making payments at this time.
We expect delinquency to increase over the coming months. While we are optimistic the virus will be controlled, social distancing recommendations will relax, and the economy will rebound, we must be realistic to the challenges we are facing. We invite our landlords to be prepared for this possibility and for a potential sudden change in income. Here's a few reasons for this:
- As you know, social distancing orders have caused many businesses to close and lay off workers in a number of ways. We've heard of entire businesses closing permanently, some closing temporarily, lay offs, furloughs, reduced hours, and reduction in overall business due to COVID-19. The tourism industry which should be kicking off its busy season is at a standstill as area beaches are closed and orders to suspend vacation rentals exist. Most everyone has been affected financially by this crisis.
- Many of our residents have filed for unemployment. As with many states, Florida is inundated with unemployment claims and our local news station reports a 4-5 week delay in getting payment.
- Tenants are also hopeful that stimulus money arrives to assist with bill payments. As of now, we are unsure when these payments will be issued.
- Legislation has now been passed that prohibits landlords around the nation from filing evictions or giving notices to vacate in certain circumstances.
Legislative Updates for Landlords
There have been a number of legislative actions that have impacted landlords over the past few weeks. This is why it is SO important to only rely on localized information, as information shared from other cities, counties, and states do not likely apply. Please be sure you are getting your information to make decisions on your Pensacola area properties from us. As members of NARPM and the National Association of Realtors, we are receiving the most up to date information possible. Our attorney is also advising us daily through this process, updating us of new legislation, and helping us to create new legal documents to navigate this. Here's a summary of local, state, and national legislation affecting landlords.
County/ City Officials- As of now, there are no local ordinances affected landlords issued from local cities or counties. This may change, however, we do not anticipate it to as our county officials have made few executive orders during this time.
Local Courts- Escambia, Santa Rosa, and Okaloosa County courts are not currently processing eviction cases due to the Governor's orders.
Florida Supreme Court- Issued a ruling that the Clerk of Courts is not required to issue a Writ of Possession until May 30, 2020.
Florida Governor- On April 2, 2020, Florida Governor Ron DeSantis issued an executive order suspending all evictions for 45 days. Additionally, effective midnight on April 2, 2020, Governor DeSantis issued a stay at home order for the entire of state of Florida. This order closed all non-essential businesses and effectively terminated some income.
National Legislation- The $2 trillion COVID-19 stimulus package (Coronvirus Aid, Relief, and Economic Security Act) passed on March 27, 2020 includes several provisions that affect real estate and rental investment properties. Here's a summary of how the bill has affected real estate from the National Association of Realtors. This is the main body of legislation affecting our practices at this time.
Legal Resources for Landlords
Here are some of our favorite legal resources being updated during COVID-19.
- Heist, Weisse, & Wolk, PA- COVID-19 Legal Updates. Harry Heist is a true Florida Landlord Tenant Law expert. The information he has provided for landlords is unsurpassed by any other legal experts. His website is an excellent source for legal updates on COVID-19 in the state of Florida.
Good Reading for Landlords
Seems some of us have extra time on our hands to learn! Here are a few of the best articles we've come across that we think will be of interest to our owners.
- New data shows more Americans are having trouble paying their rent- An article from CNN highlighting April rent delinquency data from the National Multifamily Housing Council. Keep in mind, the multi-family market does see a higher percentage of delinquencies but this is likely a sign of what we should anticipate for May.
- The Importance of Cash Reserves in a Crisis- This BiggerPockets article gives some great information on debt and how important is it to have cash on hand in a down economy or in a crisis like the one we are facing now.
- Why the Housing Market May Weather Coronavirus Impact Better That the Great Recession- Article by First American Chief Economist in regards to the impact of COVID-19 on the housing market thus far.
- The Truth About Unemployment & Missed Mortgage Payments- An article from Movement Mortgage about the challenges to the housing and mortgage industry.
- 10 Podcasts to Binge During Quarantine- This BiggerPockets article highlights 10 specific podcasts episodes related to real estate investing in the current economic climate.
- NARPM Webinars & Videos Shared Resources- This is a page packed full of resources through our affiliation with National Association of Residential Property Managers. Two of our Realtors® serve on the local Board of Directors for the Pensacola Area Chapter of NARPM. We have watched ALL of these so you don't have to, however, you may find some of these resources valuable.
Let's talk about the CARES Act
So What Does it Mean?
The CARES Act is the $2 trillion dollar stimulus package passed by congress. The best summary we have found on how it impacts real estate comes from NAR and you can read it here. The main provisions that affect us here include:
- 120 day moratorium on evictions, late fees, and notices to vacate for covered properties
- Mortgage forbearance options for single and multi-family property owners
Do you Own the Property Outright?
If you do not have a mortgage on the property, you are not subject to the terms outlined in the CARES act. We still have to abide by any local, state, and federal laws as mentioned above, however, will be able to conduct "business as usual" with your tenant.
Do you have a Government-Backed Mortgage?
If you have a mortgage on your property, your property is likely a "covered property" under the CARES Act. As the language is quite extensive, the majority of mortgages are either owned or serviced by a lender that falls in these categories. Many landlords are operating under false pretenses that their conventional loans are not grouped into this category. Unfortunately, as the language reads "made, issued, guaranteed, or assisted in any way by any officer or agency of the Federal Government," most mortgages are affected by this ruling.
More on Mortgage Forbearance
The CARES Act also requires lenders to allow mortgage forbearance options for 90-180 days with an option to extend another 180 days. Mortgage forbearance can allow you to defer, not waive, mortgage payments. Additionally, this option may be available to you without negative consequences to your credit. The CARES Act does not allow your lender to report negatively to the credit bureau during this time. While this sounds very enticing, we've heard of lot of negative chatter from mortgage and financial professionals on the mortgage forbearance options being offered. Because of this, we are advising against mortgage forbearance unless it is absolutely needed.
Here's some of what we've heard:
- A lot of the forbearance agreements contain provisions that call the deferred payments due as a balloon payment at the end of the forbearance period, called "reinstatement" to bring your account current.
- Some of the forbearance agreements call for a repayment plan to repay the deferred mortgage payments for a period of up to 12 months. Keep in mind, you would need to pay your mortgage payment plus the additional amount under the repayment plan each month in order to keep this agreement.
- Some of the forbearance agreements allow you add the missed payments on the end of your loan. This is best case scenario, but make sure the language is guaranteed. For example, if it is says "at the end of the loan period, you may apply to have these payments added on..." does not guarantee this.
- We've heard that some of these agreements may call for loan modification and can actually change the terms of the loan or call the loan due if you are unable to pay the amount back within a specified amount of time.
Obviously, each mortgage company has different policies, which is why it is so important to read the details of an agreement before signing it. I've not heard if these details can be negotiated, but we would recommend trying.
If you find yourself worrying about making your mortgage payment(s), we recommend you reach out to your mortgage company immediately. First, ask them if you fall under the covered category for the CARES Act. Second, ask them about your options for forbearance or any deferred payment plans or options. We strongly advise you to read the fine print of any agreement the mortgage company sends you before agreeing to a plan. In some instances, it makes more sense to investigate alternative options including home equity, personal loans, refinancing, or even selling.
While we advise using mortgage forbearance only as a last resort option, it may turn out to be the best option for some, especially if your bank is more lenient than some of the others. It's best to pay as much toward the amount due as possible at this time and defer only what is necessary.
Should you get a mortgage forbearance, you are not obligated to share this information with us, but we do recommend that you make a plan that you can adhere to even without your tenant's payment. While we are working very hard to ensure tenant's understand their requirements under their lease agreement has not changed and there will be repercussions should they fail to adhere to these responsibilities. We cannot assure you that your tenant will not use this as an opportunity not to pay their rent. Please consider this when making plans.
Here's a few articles to read with more information about these issues.
- Consumer Financial Protection Bureau- A guide to Coronavirus Mortgage Relief Options from the U.S. Government.
- Coronavirus Mortgage Relief Confusing Struggling Homeowners- An article by USA Today that summarizes a lot of concerns in regards to the mortgage forbearance options being offered by mortgage companies.
- Many Struggling Homeowners Not Getting the Mortgage Relief Promised- An article by NPR outlining some of the issues with mortgage forbearance.
Other COVID-19 Considerations
COVID-19 has changed the way we must approach several of our practices. Our primary goals are always to maximize your profits and to reduce your liability. At this time, we are focusing as much as on reducing your liability and mitigating your risk while working to ensure profits are still achieved. Here's a rundown of changes we've had to make to our practices.
Maintenance- We are still obligated to maintain the property and make repairs on your property. While we may be holding off on non-essential repairs at this time, we may not refuse to make essential repairs during this time. You are also prohibited from refusing a repair should your tenant be past due on rent.
Inspections- At this time, we are no longer continuing occupied evaluations. We have introduced a self-evaluation option for tenants to complete these evaluations on their own until further notice. These will be uploaded to your online portal with photos as well.
Showings- We are still showing properties at this time. As our agents have enacted extra measures and sanitization processes, we feel it is safe to continue these as long as tenants cooperate. Should your tenant refuse to cooperate or indicate they have been sick, our attorney has advised us to discontinue showings until the property is vacant. We are working hard to lease your property and keep your income stream coming in, but please consider that we are also working to mitigate your risks at this time as well.
Lease Renewals- We may have to reconsider our normal practices for lease renewals. Some of the considerations we will likely have to make during this time is in regards to more flexible lease terms and rents. We may want to allow a month-to-month lease or a 7 month lease with no additional fees to allow more flexibility for both parties. It may be better to agree not to raise the rent at this time. In some instances, we may even consider reducing a rent to keep a tenant.