Taking care of your tenants in difficult times is the best way to take care of your investment. For multifamily owners and managers, priorities should include keeping staff and residents safe from illness, continuing to keep properties safe and well maintained and maintaining cash flow to ensure that loans, vendors and employees are paid. The current economic freeze has created a challenge for all property owners, but with planning and staying aware of new developments, best practices and programs, properties can stay on track.
Keeping Staff and Residents Safe
Keeping staff and residents safe and healthy is the first priority. Steps that are being taken by multifamily communities include:
- Eliminating on site tours and encouraging potential new residents to take online tours
- Having staff work from home as appropriate
- Closing down common areas such as fitness centers and meeting rooms
- Asking that all packages be directly delivered to resident apartments
- Have a plan in place to work with residents who must self quarantine; note that information about a resident’s health status must be kept private
For more information on keeping your apartment complex safe and operating well during an emergency, as well as detailed information on working with self quarantined residents, the National Multifamily Housing Council has prepared a comprehensive guide which can be accessed here:
Maintaining Your Property
Properly maintaining your property helps protect your investment and keeps your staff and residents safe. This may be a challenge in the coming months as cleaning supplies have fluctuating availability, staff may not be available due to illness or family care and vendors may be subject to similar issues with staffing. In some cases, they may be faced with a shutdown of their services by state or local government officials. Having back up providers or plans if services are disrupted is critically important. For example, solid waste services in many communities are already changing. In Durham North Carolina, cardboard recycling pick up is now limited to what will fit in bins to minimize handling of materials. Additionally, supply availability is being impacted by heavily increased demand and supply chain issues. One noticeable shortage has been in appropriate cleaning agents as the EPA is continually updating what cleaners and disinfectants are effective against COVID-19. For a comprehensive list of approved disinfectants, visit the EPA Website.
Managing Rent Payments
A record number of people filing for unemployment means that many of your tenants may struggle to pay rent. At the same time, states are putting restrictions on the ability to evict tenants. At this time, Montana has no such order, but conditions may change as time goes on. Relief for unemployed workers at the federal level that expands unemployment coverage and benefits has been passed. Additionally a $1200 check is being send to most American adults, regardless of employment status. While financial relief for many of your renters is on its way, it may not arrive in accounts until after April 1.
Given the disruption, it is advised that landlords:
- Work with tenants that are delayed on payments and get agreements in writing on any payment plans
- Waive late fees/administrative fees over the next 30 days
- Go out of your way to point tenants to the various resources available to help them get through these difficult next few months.
Pay very close attention to federal, state, local and trade association level assistance programs. The investment of you or your property manager’s time in educating tenants on these resources will pay off for everyone involved.
Fannie Mae/Freddie Mac
If you have a property financed by Fannie Mae or Freddie Mac, additional resources are available to you and your tenants. For tenants of these properties, additional assistance is available. Link to more tenant relief information: Fannie Mae for Tenant
For owners of rental properties financed by Fannie Mae or Freddie Mac, there are a number of resources available to tenants thru Fannie Mae. At this time, owners of properties financed through Freddie Mac or Fannie Mae can reach out to their loan servicers for a 90 day deferral on loan payments. Restrictions on evictions apply.
Most economists see the COVID-19 outbreak as a short term impact to commercial real estate. Avison and Young predicts a shorter time frame on a recovery than is traditionally seen in times of recession, with the greatest impacts felt in the second and third quarter of 2020.
Multifamily is generally seen as a stable asset and analysis by JLL indicates that in the short term, value fluctuation is almost certain. But, in the long term, multifamily is still a stable and resilient asset. The recent actions of the federal government to shore up unemployment and increase payments should help ease uncertainty.
“From an investor perspective, the living sectors have defensive investment characteristics, benefitting from stable cash flows and the ability to actively manage rents in order to maintain occupancy and limit void potential. Demand is typically resilient to economic shocks and is fundamentally supported by the unaffordability of home ownership, urbanisation and increased interest in more flexible-living solutions. However, diminishing consumer confidence and reduced mobility will impact demand during this period of uncertainty. Residential Multifamily, as an asset class, will remain resilient to the effects of the COVID-19 outbreak with its more stable, longer-term income profile and defensive investment characteristics. Where new housing supply is supported by investor purchases, there will be near-term demand uncertainty for locations that rely on international sales. Technology is an important mitigator and plans for new online transaction platforms will be accelerated in 2020.“
For Missoula, the outlook for multifamily remains positive, although the next few months will be volatile as the economy restarts. Don’t panic, though. We anticipate that Missoula will recover quickly as soon as businesses can begin operating normally and the pent up demand caused by quarantines will be like a compressed spring being released. At the end of the day, Missoula has a diverse and resilient economy. It remains an attractive market for educated professionals seeking an alternative to larger cities. As a result, businesses and people will continue to want to work and live here. That simple fact feeds much of the local economy.
Lastly, the multifamily market in Missoula started 2020 in a healthy position, with very low vacancy rates and steady rent growth driven by strong demand. It is expected that short term, new demand may soften, but quickly return as the population becomes mobile again. Additionally, any disruption to the for-sale market housing (already struggling with a lack of inventory) will continue to push residents towards rental properties.
You’re invited to contact us for additional resources, advice and ideas as we all wade into this new reality. SterlingCRE closely monitors the programs available to landlords and renters and we are available to answer your questions and help you find solutions. 406-203-4547 | firstname.lastname@example.org