In a recent interview, Roy True, business manager of GoldenWest Management met with Brad Seaman of Keller Williams in San Diego, and Ryan Loeding with Keller Williams in Phoenix, over the internet, to discuss what’s happening with the rental market and what renters and owners can expect in the coming weeks.
Coronavirus and Its Impact on The Rental Market
As of March 30th, 2020, the economies in San Diego and Las Vegas have been severely impacted by coronavirus as “non-essential” industries have been shut down.
This means that the hospitality industry, restaurants, Gym’s, nightclubs, movie theaters, and other businesses are now closed and the result has been a dramatic increase in unemployment claims.
The situation is different in Phoenix where businesses have largely remained open during coronavirus thanks to “suggested restrictions”, but that could change as Governor Ducey is just now starting to take action and has ordered schools in the state to be closed until April 30th.
With more people unable to work due to coronavirus, most owners will likely start hearing that their tenants will be unable to pay their rents by April 1st and that number could increase dramatically by May when economic stimulus checks have come and gone, and the rent payment is due again.
Las Vegas has been hit the hardest economically from coronavirus because the city relies heavily on tourism and hospitality. Sadly, with most people being laid off, Vegas could likely see 20%-30% of renters report that they will be late or unable to pay their rent in the coming weeks.
What Should Owners Do?
Now that California and Nevada have statewide moratoriums on eviction, the big question is what should owners due when there’s no money coming in from rent to cover their mortgage and other bills?
Work with Your Tenants – Start contacting your tenants now to see if they will be able to pay their rents next month. If they are unable to pay rent, offer them a payment plan so that they can pay what they can pay now while paying the remaining balance on their rent over the course of one year.
Build Cash Reserves – If you don’t have cash reserves saved up now, it’s best to take action to start building your reserves by choosing options like a cash-out to refinance loan.
Your goal should be to have at least $3,500 in cash reserves per multifamily tenant and up to $5,000 in cash reserves for single-family tenants because this money will also help you to cover repairs on your properties when needed as well.
Consider Refinancing or HELOC – As recommended by Ryan, another option is to consider using is a home equity line of credit. Yes, the credit market is tightening but if you pull the cash out of the home equity line of credit and put it into savings, the bank can’t touch it.
Talk with Your Lender Before Things Get Bad – You should speak with your lender ASAP and find out if they have any options for you like a forbearance to keep your rental from foreclosure. Being proactive now and reaching out to your lender now will save you the hassle of having to wait to wait for them to call you back once they do start getting a lot of calls.
The fallout from coronavirus (COVID-19) is evolving because it’s affected each rental market differently so during this time it’s important to focus on getting your news from qualified sources, avoid fake news, and social media posts that promote hype.
Remember, we’re all in this together and until coronavirus is over it’s up to owners and tenants to work together to create an outcome that’s best for everyone.
Contact GoldenWest Management
For more information about what’s happening with the rental market in San Diego, Phoenix or Las Vegas, during coronavirus, or to speak with us about the property management services we can offer you, contact us today by calling (866) 545-5303 or click here.