Extended Eviction Moratorium – All Is Not Lost For The Landlord

There is an ancient Chinese curse that says “may you live in interesting times”. Interesting is a good term for the days we live in, made moreso by the fact that the cause of hyperventilation these days comes from China.

Numbers don't look like we are approaching a dip in the real estate market, however some people are experiencing financial distress, putting them in a position similar to the last major real estate crash, During that time, many people found themselves owing much more than their property was worth. The banks weren't in a bargaining mood, or people didn't try, so more than a few homeowners simply walked away from their property after living there many months while pocketing the mortgage payment.

This may happen this time around for those who bought with no, or almost no, money down and they have no equity to speak of and not much income. Fortunately, much of the economy is coming back and, barring a catastrophic event in November, may well continue and iron out many of these issues.

Commercial Owners Have Learned

Owners of some commercial properties that have been particularly hard hit by the Chinese flu inspired personal isolationism have adopted a similar strategy. Not to mention any names, they are available to those who seek them, some large hotel and mall organizations have stopped making payments on the troublesome locations... while they are gathering funds for investments better suited for today's world.

The economic slowdown is hitting the banksters as well. It will also be hitting local governments unless these same banksters will kick in the property tax payments. Some of these same commercial property owners, and others, have found a way to make lemonade out of these lemons. The ones with decent cash positions that help them weather this financial storm have bought back the notes at significant discounts.

Their actions, if nothing else, show us that when bad things are happening, don't hide under the bed in a fetal position, but look around. There ARE opportunities. You may have to understand leverage to make them work. I mean, what is a bankster going to do with and empty mall or hotel?

Bringing It Down To The Individual Investor

Will this strategy work for the individual investor with his rental properties? The banksters really don't want to take back massive numbers of properties. With banking regulations what they are, they cannot have too large a percentage of non-performing loans on their books.

Many investors buy properties with private loans from individuals – sometimes friends, sometimes sellers taking back paper on their properties. In these cases, it is not a faceless, heartless institution that gives money to causes you don't like, it is personal – real people getting hurt.

In either case it can be damaging to the property owner. With the banks, unless you had a good relationship that they did not require a personal guarantee on the loan, personal credit is trashed. Even if there was no guarantee, there will probably not be another similar loan in the near future. With inidividual lenders, your personal integrity, and possibly friendship, is gone, along with the potential for future profitable deals.

Considering Eviction

Whether you want to do it or not, sometimes evicting the tenant is a matter of your own survival. How many rent payments on how many units can you miss before the financial crisis sets in? I know of some landlords who start the process if the rent check is five or ten days late. I try not to rent to that type of tenant and don't like being put into that position. However, it is a fact of life when you provide housing.

Particularly if you have few units and know the tenants personally, you might even consider them to be friends. However if you have expenses and are running it as a business instead of a charity, sometimes you will find that their problems become your problems.

Years ago, I was offered a property that was rented to an older gentleman and his daughter. They were having trouble making the rent that was way below market, and the owner felt he would rather sell the place and let someone else deal with it. I looked at the place and talked with the man and came to the conclusion I was not the one to get the owner off the hook. For some of us this is not just a dollars and cents business... even though it IS a business.

Along Comes the Eviction Moratorium

Recently there has been heard in the back room of real estate investors offices a weeping and wailing about the CDC ban on evictions. That is nice for the renter but what about the property owner who still has mortgage payments and property taxes, and is still expected to maintain the property in livable condition. This ruling only takes care of half the problem.

Will the banksters forego payments? Maybe. Will the tax collector be sympathetic? Here you may have a little leeway if you aren't far behind already. How about the electric company if you have been handling the utilities?

No Need To Panic

Things are not as dire as you might think from listening to the talking heads on TV. Tenants can't just use this as an excuse to stiff the landlord. They have to apply for this protection and show that they have lost their income and that they have paid as much as they could toward their rent. If run properly, it will not be a haven for deadbeats.

As is usually the case, if there are tenants who have been hurt financially by thie panic-induced shutdown, and you are generally happy with them, working out some kind of deal is usually better than kicking them out. If you have a bank loan, now may be the time to revisit the terms of the loan. The same may apply to private lenders, but keep in mind most banksters do have the resources to carry you (and your tenants) as BoA, if they chose to do so. Just keep in mind they can only carry so many non-performing loans.

All we can do is what we have been doing. Taking things one day at a time, looking for opportunities that may be lying just below the surface, and not being overcome by the gloom and doom served up to us on most news channels.

Tough Times... We are Tougher!

I've pointed this out before but it's good to consider one more time. Robert Schuller was fond of saying “Tough times don't last, tough people do.” Thomas Paine told us, “These are the times that try men's souls. The summer soldier and the sunshine patriot will, in this crisis, shrink from the service of their country; but he that stands by it now, deserves the love and thanks of man and woman.” We aren't fighting an enemy trying to kill us with muskets and swords, but we are fighting an enemy that can destroy lives and our economy – our way of life.

Obstacles In Our Path

We looked at this a while back, and the situation has improved for some of us in the more free states that have opened up and people have been allowed to return to many of the “non-essential” jobs. We can see an end if we are not regulated back into economic suicide mode.

Daily we see reports of riots in many big cities. Police are forbidden to stop the destruction by mayors more concerned about the rioters than the safety of the innocent citizens. Downtown areas become boarded-up ghost towns.

On top of this we are still dealing with the Chinese flu. We hear conflicting reports and it's difficult to know who to believe anymore. So much of what we hear comes from those with a political agenda. We are told restrictions on us are for our protection. The story has shifted from wearing masks to care for ourselves to following our betters directions to protect others. This motivates some to become self-appointed enforcers, and added to the conflict we are facing.

Personal Cost

Even though many of us are seeing better days and those who can set their fears aside are returning to a level of normalcy, we still see far too many people hurt by our disinclination to travel, congregate in larger groups and go to restaurants. This is especially true in the coastal regions of Florida where vacationers have not been lured back in large numbers.

These choices are either their own or by decree. Sometimes they are the right things to do but often those who can least afford it pay the greatest price. The government is trying to ease the burden with some cash, but in spite of the benevolent claims, by their very nature they cannot take care of everybody damaged by the imposed economic shutdown,

Hospitality workers who are simply not needed for sparsely populated hotels. Waitresses and waiters are dependent on tips are working in mostly empty restaurants. Clerks aren't needed in shuttered mom and pop stores. The list goes on. There are people hurting financially, emotionally, and spiritually now. Like the government, we can't help everyone, but perhaps we can help a few. Particularly those of us who we have the privilege of providing housing.

Inadequate Solutions

Among the suggestions is that people should be forgiven rent on their homes. This is a fine suggestion by some of the elites with no skin in the game and nothing to lose or mortgages to pay. Like pretty much all give away schemes, they are proposed by those who think someone else should pay the bill if someone has a need. There may be some large corporate property owners with free and clear properties that could do this but many have mortgages to pay and simply cannot forego the monthly revenue.

There is talk of more “stimulus” money, but even though it is a major expense to the taxpayers, it will hardly make a dent in the financial problems of those in need. The real stimulus will come when people return to work and the economy gets back on track. It is a fool's errand to try and do otherwise..

Overcoming Adversity

Many small businesses cannot afford to be shut down or work without sufficient revenue for long periods. The real estate business is no different, some allowances for those in financial pain won't be too damaging long term. I am suggesting that rather than cursing the darkness around us in the form of the Chinese virus, socialist temper tantrums, and sometimes overbearing government responses, we can light a candle and pitch in and help where we can.

One thing I have learned over time is that we aren't bothered nearly as much by all our inconveniences and annoyances when we are helping someone else. Americans came together after the War Between the States to become one nation again. Americans defeated the Axis powers in World War II. Americans put a man on the moon. Americans developed much of the technology we use every day.

We will come out on the other side of this virus in spite of the bellyaching and carrying on by the whiners among us. Each of us has a choice we can join the whiners or we can be overcomers who find answers rather than tell people that there are none. It's easy to get down sometimes, but keep in mind that feelings follow actions, so – get out and DO SOMETHING!