In the last few months, property managers have been hyper-aware of two things: 1) the physical health of their community and 2) the financial health of their portfolio.
You call your doctor when you’re wondering about your health, but you call your accountant when you’re wondering about your portfolio — and our phone has been ringing!
We handle bookkeeping and accounting for property managers all over the country, and we’ve been here to support them (remotely) throughout everything. Whether you’re a property manager with 200 units or a property manager with 4,000 units, having a thorough understanding of the financial health of your portfolio is the first step in preparing to navigate this new, post-COVID world.
While there are numerous considerations to keep in mind when it comes to COVID, tenants not being able to pay their rent is one of the hairiest.
Rental income is the primary (and sometimes only) method for property managers to make money, so at this moment it’s vital to stay apprised of new legal requirements and start asking all the important questions, like…
Do my tenants need to pay rent now?
Yes, and no.
The CARES Act provides 120 days of eviction relief for tenants in federally-backed housing. Specifying that they may not be served with an eviction notice until July 25, 2020 and the notice must give them 30 days to leave the property.
During the 120-day eviction moratorium, they may not be charged late fees, penalties, or other charges for paying rent late. The eviction moratorium does not relieve tenants of their obligation to pay rent, it just protects them from being evicted during that period for late payment.
When will tenants have to start paying rent again?
The way it’s working in California, is that if a tenant is unable to pay rent due to COVID-19, they have 12 months from when the state of emergency was announced to pay back rent.
Some tenants are going to pay back their rent as soon as they are able, but others who struggle to get their jobs back will have the full 12 months. That means property managers have units that are not vacant, and not making any money.
On the commercial side, some states are offering deferment payment plans to start paying back rent, spread over 2-3 months over the full year of 2021.
Our best pieces of advice:
1. Quickly find out your state laws on delayed or deferred rental payments due to COVID.
In addition to following your state and local leaders on Facebook, our customers recommended the International Real Estate Managers Association’s bill tracker that tells you what bills have just passed.
2. Get your residents and tenants on clear payment plans.
All commercial tenants that asked to defer rent can sign AIR addendum’s, and on the residential side, the Apartment Owners Association has this handy form that lays out a repayment plan, as well as other forms you may find helpful.
*Deferring payments doesn’t necessarily mean no payments at all.
Most folks asking to defer rent are receiving government support of some kind and might be able to swing at least a small percentage of their rent. Knowing this, a number of our clients are encouraging tenants to begin paying a little bit towards what they owe – whether it’s half their rent, or just $100. This helps with goodwill, keeps some cash flow for you, and doesn’t make the deferred payments as overwhelming for the tenant in the future.
COVID’s impact on rental rates
Los Angeles county has frozen rental rates for an entire year from when the health restrictions are lifted. So, if property managers were counting on rental increases, they now have to wait.
Not only is that problematic for the future, but it’s also throwing a wrench in some buyer’s plans. Some purchase prices for building sales that were in escrow before the pandemic were based on rent increases over the next couple of years, and now buyers can come back and ask for changes.
For property managers, in addition to less potential income, that means more stressed, harder to please owners.
Supporting tenants while protecting your bottom line
If you haven’t already, secure paperwork for rent forbearance and post it on your website so tenants can easily find it and fill it out.
This way, you’ll understand who didn’t pay and whether or not you got all the proper documentation. These forms will also help you in gathering information about tenants to aid in creating payment plans.
Multifamily NW has some very helpful resources to this end, but be sure to check with your local and state authorities about any necessary paperwork for your area.
Getting your financials in order
You’ll need to make some serious adjustments to your budget for the rest of 2020, and likely into 2021 – from general cutbacks to postponing capital improvement projects. Making sure your books are in tip-top shape now is how you’ll be able to weather this storm.
If you’re in need of support, please talk to us about our accounting and bookkeeping services. We’d love to chat to learn more about you and tell you how we can help.
We’re here to provide exceptional services, save you money on accounting costs, and help you weather any storm you might be facing. Give us a call today, and let’s get you ready for whatever tomorrow may bring.
For more COVID-19 support, read our articles on Property Managers’ Government Aid Options During COVID-19, Coronavirus Preparedness for Property Managers, and How Property Managers Can Work Remotely During Social Distancing.