It comes as a relief to many that the economy is starting to strengthen. The lowering unemployment rate is one sign it is healing—a rate that is generally mirrored by the mortgage delinquency rate. The mortgage delinquency rate, particularly for the one-to-four-unit residential properties, has recently experienced a significant drop. It peaked in 2020 at 8.22 percent, and it dropped to 6.38 percent in three quarters. In context, this rate drop is the fastest one in recorded history.
While this drop is impressive, it doesn’t mean all homeowners are now current on their mortgage payments—many are still struggling, but it does give hope that things are mending and the economy is healing. This is welcome news, but how can landlords and homeowners hold on until the economy is more stable? Even with the inevitable end of the pandemic approaching, we will likely feel the effects of COVID-19 for a while. It’s been a long road, but the aim is to survive until there are opportunities to thrive.
Here are some tips for landlords to consider in order to survive financially until better days:
- Reevaluate cash flow. When money is tight and mortgage payments are at risk, it’s important to reevaluate all money coming in and all money going out. (If you’ve already done this, it may be beneficial to do it again with fresh eyes.) Find ways to cut costs. Look over your financial account in TenantCloud to help you parse high priority versus low priority expenses. Brainstorm new ways to bring in additional income. Maybe there are new opportunities to increase your income that weren’t options before.
- Connect tenants with local resources. It may take some hand-holding, but you can work with your tenants to help them receive financial aid if their circumstances merit it. Maybe they qualify to receive unemployment benefits, aid for utilities, or food stamps. There may be local organizations, in addition to federal, that can help them out while they get back on their feet. The more money they have, the more likely they’ll be to pay rent.
- Work with renters on delinquent rents. Keeping Fair Housing in mind, consider working with your tenants to form a rental repayment plan. If your tenants are delinquent, they probably won’t have enough money to pay all the money they owe back all at once when they’re finally back on their feet. While a rental repayment plan slows the process of you receiving back rent, it may be better to receive some money in smaller payments instead of no money if they decide to move and not pay.
- Plan for the end of mortgage forbearance. If you’ve received mortgage forbearance, it’s important to plan for it to end. Talking to your mortgage lender before your forbearance term ends is essential—but beyond that, meeting with them early is critical. Don’t wait until the last minute. With many homeowners coming out of mortgage forbearance at the same time, mortgage lenders will have an extra heavy workload. To ensure your case has the attention it needs and you have enough time to (1) meet with them, (2) come up with a plan for repayment of missed mortgage payments, and (3) have the paperwork processed on time, it’s important to give your lender enough time to get everything done.
- Get a line of credit. Many landlords have used up their emergency funds to keep on top of financial obligations. With those gone, it can be panic inducing to not have a safety net in case of emergencies. Consider setting up a line of credit until you can build up your cash reserves again. Having something in case of emergencies is important, and, if it’s too difficult to build a cash reserve right now, choosing the best credit line option before an emergency happens will likely ease your mind.
While everyone would rather thrive than simply survive, right now you may need to aim at staying financially afloat. The future will offer opportunities to thrive again as some semblance of normalcy returns.