How Coronavirus Pandemic Is Affecting Rental Property Owners

BREAKING NEWS: How Coronavirus Pandemic Is Affecting Rental Property Owners

The coronavirus pandemic has plummeted the U.S. economy.

• This holds especially true with real estate
• The U.S. economy prior to the coronavirus pandemic was stronger than ever
• Home values were increasing year after year
• Many lenders created and implement alternative mortgage programs
• Specialty loan programs were created for real estate investors for the first time since the 2008 financial crisis
• Not only was the residential home market booming, but many investors started to invest in real estate
• Many investors started purchasing investment real estate for the first time since the 2008 housing collapse
• Real estate investors were enjoying steady appreciation, easy financing, and a strong rental market
• Many lenders launched non-QM loans for real estate investors
• Bank statement loans, asset depletion, and other investment mortgage programs were launched
• Countless of other loan programs helped the fast-growing investment market for real estate investors
• Then the coronavirus pandemic hit the U.S.
• The U.S. economy tanked due to the pandemic
• Over 22 million Americans filed unemployment in the past three weeks
• Many Americans had economic impacts that they could not pay their mortgage and/or rental payments
• With a large percentage of renters not being able to pay their rents, it is now affecting real estate investors

In this breaking news article, we will discuss and cover How Coronavirus Pandemic Is Affecting Rental Property Owners

Rental Property Owners, Lenders, And Renters

The coronavirus pandemic has created major chaos in the multi-family rental market.

• Affected are renters, rental property owners, and renters
• Over 22 Americans have filed unemployment claims in the past three weeks
• Unemployment claims are expected to skyrocket in the coming weeks
• All restaurants, bars, and non-essential businesses have been ordered closed until further notice
• As days pass, the economic damage is devastating
• The economy needs to open and open fast
• Americans are protesting throughout the country demanding the government open the economy
• With millions of Americans unemployed, they do not have the means to pay their monthly rent
• Smaller rental property owners are the ones that are the hardest hit
• Mom and pop rental property owners do not have tens of thousands in reserves
• They are dependent on the rental revenues to make their mortgage payments and expenses
• To add more stress and financial hardship to rental property owners, many government agencies have introduced eviction moratoriums
• Eviction moratoriums during the coronavirus crisis have been put in place by local, county, and/or state governments
• The team at Gustan Cho Associates is getting countless calls from rental property owners asking us for assistance
• Many want to see if they can do a cash-out refinance
• Others are just asking for professional advice

Yet others are asking us for a referral for a bankruptcy attorney.

How Coronavirus Pandemic Is Affecting Rental Property Owners With Little Capital

Rental property owners of apartment buildings are the most affected due to the coronavirus pandemic crisis.

• Most renters live paycheck to paycheck with little to no reserves
• A large percentage of the 22 million unemployment claims are renters
• With their wages halted, it will be difficult for unemployed workers to make their rent payments
• City, county, and state governments have issued a freeze on evictions
• The halt of evictions has been placed for at least 90 days by governors in most states
• With no revenues from rent, many landlords cannot pay their mortgages, utilities, taxes, insurance, and other expenses
• The coronavirus pandemic economic crisis also affects larger landlords
• Many large companies such as Dick’s Sporting Goods, the Cheesecake Factory, and others have suspended paying rents to landlords
• These rents are larger amounts that can devastate larger landlords of shopping centers and strip malls
• If a real estate investor just owns a few rental units, they may be able to scrape by
• However, if the investor has dozens of rental units, the investor may get hurt financially
• The main reason investors get financially devastated is due to liquidity issues
• Smaller investors do not have business lines of credit to tap into

There are countless rental property owners who are stressing as we speak.

Issues And Solutions Facing Real Estate Investors

If the property owner has a mortgage on the rental property, there is not much room in cash flow.

• Smaller mom and pop investors rely on the cash flow of the property to survive
• Many investors do not have a large amount in reserves to be able to pay the mortgage and expenses
• The coronavirus pandemic crisis most likely is plummeting the real estate market
• Therefore, taking out a second mortgage and/or doing a cash-out refinance can be explored but not likely
• There is a domino effect with the coronavirus pandemic crisis
• With renters losing their jobs and/or taking significant pay cuts, they cannot pay their rent
• Property owners cannot collect the rent so they cannot make their mortgage payments
• The landlord cannot evict the tenant due to the eviction moratorium
• The landlord needs to work out a payment plan with the tenant
• The property owner needs to contact the lender
• The lender may give the property owner a forbearance
• Forbearance is not free money
• The lender can give the property owner a forbearance for several months
• However, once the forbearance period is over, the full amount is normally due
• However, lenders can often give a payment plan to pay the missed payments
• If the property owner cannot pay the mortgage payments and/or forbearance missed payments, they can request a loan modification and/or a workout
• The lender does not have to grant a loan modification
• However, more lenders may be open to the idea of a loan modification

This holds true during times of a major financial crisis like the coronavirus pandemic.

How Coronavirus Pandemic Is Affecting Rental Property Owners: Mortgages For Investment Properties

Many investors got into investing in real estate due to the great mortgage programs.

• Non-QM loans became very popular
• It took some time after the 2008 financial crisis to launch alternative types of financing for investment properties
• Fix and flip loans became very popular
• So did asset depletion loan programs as well as bank statement loans
• All non-QM investment loan programs have been suspended until further notice
• The halt in investment property mortgages was due to the coronavirus pandemic
• Many non-QM lenders went bankrupt while others closed its doors until further notice
• Sprout Mortgage reopened operations
• However, they did change their credit guidelines
• Sprout now requires 35% down payment and/or 65% LTV on non-QM mortgages
• The team at Gustan Cho Associates is optimistic that non-QM loans will return

We will keep our viewers posted once alternative financing on investment properties return.