How Can Landlords Prepare For 2021?
Founder and CEO of Rentec Direct, property management software for real estate professionals.
While most of us were more than ready to bid adieu to 2020, there’s still a fair amount of uncertainty as we dive into 2021. While we can see the proverbial light at the end of the tunnel, there are still many unknowns. One thing is for certain: We have more challenges ahead, especially in certain areas.
The rental real estate space continues to see turmoil as our research finds that renters across the country are still struggling to pay rent. It’s no secret that landlords have in turn felt the impact of the decrease in rent payments received. When investing in rental properties, there’s always a risk that you may not get your rental payments, but historically landlords have been able to take action, such as eviction, if the rent was not paid. Today, this isn’t the case.
What are my landlord rights when the CARES Act expires?
The CARES Act was an emergency response intended to protect Americans from the economic effects of the Covid-19 pandemic. One way it supports renters is by imposing a moratorium on rent-related evictions for qualifying tenants. Some tenants are eligible for rental relief or rental assistance that will actually help cover rent costs incurred during the pandemic.
When the CARES Act does expire, landlords with delinquent tenants will have several options:
• Collect the entire back rent amount and begin collecting regular monthly rent payments moving forward.
• Disregard unpaid back rent and begin collecting rent from tenants moving forward.
• Allow tenants to pay back rent over time while resuming regular rent payments.
• Evict non-paying tenants.
The CARES Act is designed to assist renters who are facing income loss as a result of nationwide business shutdowns and widespread layoffs. Its expiration will mean not only that eviction moratoriums will be lifted, but that unemployment benefits and federal student loan payment relief are also likely to end. This will result in a loss of supplemental income and debt assistance for many of those trying to pay rent and avoid eviction.
How will this affect me as a landlord?
It’s a good idea to keep a close eye on the news right now, especially when it comes to the ins and outs of any new proposed stimulus packages, such as the federal American Rescue Plan. An estimated 14 million Americans have fallen behind on rent and are at risk of eviction. The government, both at federal and state levels, is seeking ways to facilitate economic recovery through elements like stimulus payments, extended unemployment compensation and rent, utility and food assistance.
When it comes to the extension of eviction and foreclosure moratoriums, pay careful attention. If no additional relief measures are put in place, extensions are likely to increase the burden on already overextended private landlords — in particular, those whose rental properties are their sole income source.
How should I proceed?
Landlords should anticipate facing some tough decisions in the months to come, and we’re likely to see a flood of evictions hit the market all at once. The decision to evict is an important one and will depend on your own financial means, the strength of your local market, the employment status of your tenants as well as your history and relationship with each tenant.
If you had issues with your tenant prior to the pandemic and the rental market in your area is healthy (therefore simpler to find new tenants), then pursuing an eviction might be the best option for you. Many landlords underestimate the cost of the eviction process, which can often be more than $5,000 when all is said and done. If you have respectful and responsible tenants who have previously paid their rent on time, you might consider coming to an alternative agreement like a payment schedule.
The coming of the new year didn’t magically wrap up all the turmoil we experienced in 2020. When it comes to the intricacies of the rental housing market situation, landlords should closely monitor new regulations and relief packages and fully understand their rights. Carefully consider all of your options and move forward with what makes the most sense for your unique situation.
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