Coronavirus Impact on Apartments
The coronavirus has made a huge dent on investment portfolios across the world. There has been extreme uncertainty and none more so than rent collections for landlords, especially, given that states have restricted evictions during this time. Less rent money with no way to evict tenants is a scary situation for any property owner.
However, now that we have data from April and May to look at, we are beginning to see that the current situation is possibly not as bad as we may have feared. The National Multifamily Housing Council has reported that 88% of tenants have paid their rent.
As to be expected with any type of recession or financial contraction, rent collection is down. Rent collection is down for sure but not in a massive way. In fact, collections are only down 2.1% year over year and are actually trending up from April 2020. Now does this mean we’ve made it through, and the worst is behind us? Maybe, maybe not. However, the current data shows that by and large most tenants are meeting their obligations for the time being.
That said, collections may be trending in the right direction as Americans have finally received their stimulus checks in the mail. However, as of now that is the only extra check they are receiving, even though there have been talks of a second round of stimulus. Will tenants continue to be able to pay their bills in the months ahead? With unemployment numbers at record highs there is still a lot of uncertainty in the markets, but it’s encouraging to see states and businesses reopen. Depending on how fast these reopenings happen and how much the government will step in to help will play a major role in how apartments weather the storm.
No one has a crystal ball to see how this will ultimately play out but currently despite the huge economic challenges, residents are for the most part still paying rent. We don’t know when, but we know for certain that the economy will eventually recover. Apartments may even see a net increase once the dust finally settles as banks put stricter qualifications in place to buy a house and some multifamily owners are planning for the growth of tenants working from home. Remember, one of the reasons we purchase cash flowing real estate is its ability to ride out the ups and downs of the economy and come out the other side in one piece.