Managing Multi Family Real Estate During the COVID-19 Crisis
In a blink of an eye, the world changed for many of us. Most of us around the world are now quarantined in our homes, only to leave for essentials. We find ourselves worried about our families’ health, watching the stock market ride up and down, and learning a new normal. We never imagined being worried about empty toilet paper shelves, or waiting in line outside grocery stores, trying to be admitted.
Beyond the changes in our daily lives, for many, the coronavirus has massive economic impacts . As the nation is forced to shut down businesses, jobs are being lost at an alarming rate.
There is uncertainty abound, and that is no different in the real estate investing space. Historically, we have seen multi family apartments to be “safe” investments during downturns, based on the fact that “people have to live somewhere”.
That, too, will be tested in these unprecedented times, as unemployment claims skyrocket and residents will be stretched. However, we are grateful to have strong and experienced operator partners that we trust are making strategic decisions and preparations for fallout that will undoubtedly impact our residents.
What we are doing to during this uncertainty:
1. Ensure our Resident Safety and Well Being – Relationships with our residents is always crucial, but now it is especially important we ensure they feel safe.
Postpone socials and events, and close gyms, parks, and pools.
Post social distancing policies.
Educate residents of the CDC and local recommendations.
Provide residents information on assistance programs and unemployment benefits.
Be empathetic and compassionate to those impacted by health and income loss.
Proactively reaching out to residents to create a plan for those who are impacted and need rent assistance.
2. Increase Investor Communication
Increase communications around operator action plans to preserve capital and their investments.
Prepare investors that there could be temporary pauses in distributions during this pandemic. This serious action is a proactive measure to protect the asset by preserving cash in anticipation of lower rent collections in the coming months.
Build Cash Reserves
Pause or significantly reduce renovations based on current demand.
Delay all unnecessary operational expenses during crises, like routine maintenance orders.
Halt or delay all capital expenditures that are not required.
Pause or reduce distributions.
3. Focus on Occupancy
Annual renewal offers to lock in rents w/ no increase for renters who have given notice to move, or whose lease is coming up in the next three months.
Accept credit card payment w/ no fee for impacted residents
Waive late fees
Allow a limited number of partial and deferred payment programs (case by case basis, not advertised).
Record and track all conversations with any renter on any program above. With no eviction rules being enforced in many cities, operators to document all resident situations and plans that impact their ability to pay rent
4. Understand Government and Lending Options
Understand lenders options, such as potential forbearance.
Explore, refinancing options w/ lower rates.
Leverage other government assistance programs in stimulus packages and help educate residents on unemployment etc. the pandemic.
Update underwriting model with reduced cash flow expectations.
Revise stress test and sensitivity models.
We, along with our operators and partners, are committed to protecting investors' capital and ensuring clear and frequent communications during this time of crisis. Learning options and getting ahead of anticipated impacts, will help us push through the days ahead. None of us have a crystal ball and know what’s ahead, but preserving cash will be paramount, and we also need to remember the human impacts and be empathic and work with residents.