All the businesses shuttering, the shelters-in-place, and the economic setbacks of the COVID-19 outbreak have landlords worried -- and rightly so.
What happens when a renter is one of those affected? When their hours are slashed or their jobs are eliminated altogether?
Obviously, the effects would trickle down to the landlord. The tenant would have trouble making their full rent, they might not pay on time, or worse yet, they could stop paying entirely. For landlords who still have mortgages to pay and property taxes to cover, it could mean serious financial trouble.
If you're in this boat, or worried you might soon be, you aren't without options. Here are a few ways to cope if the coronavirus keeps your renters from paying up:
1. Apply for deferment or forbearance
Fannie Mae and Freddie Mac have both told servicers to provide up to 12 months of forbearance for borrowers who are suffering financial hardship due to the pandemic, and if you're a multifamily operator with a Fannie or Freddie loan, deferrals are available for up to 90 days.
Additionally, there are also lender-specific deferral programs from Bank of America (NYSE: BAC), Ally Bank (NYSE: ALLY), SunTrust (NYSE: STI), and BB&T (NYSE: TFC), too. If your mortgage is serviced by any of these companies, you could pause payments for up to 120 days in some cases. Payments are then simply added to the end of your loan term.
If your lender isn't on the above list or you don't have a Fannie- or Freddie-backed loan, you still have options. Call up your servicer and ask about their deferral, forbearance, and financial hardship programs. Most will be willing to work with you during this difficult economic time.
2. Tap your home equity
If you've paid down a good amount of your loan balance, you should be eligible for some sort of home equity product -- like a home equity line of credit (HELOC), home equity loan, or cash-out refinance. These can all give you a little more liquidity when times are tough, potentially buying you (and your renters) a few more months to ride out the storm.
Just make sure you consider the costs of these options, upfront and over the long term, and weigh the pros and cons before moving forward.
3. Consider a rent assurance tool
Property management platforms like NestEgg and Avail actually help landlords in two ways, streamlining the maintenance and administrative tasks associated with owning a rental and offering rent assurance in one fell swoop.
What does having rent assurance mean, exactly? Essentially, it means landlords are protected if a renter can't pay up. With NestEgg specifically, landlords are guaranteed up to six months of full rent payments -- even if the renter hasn't settled up yet. If you just want rent assurance on its own, with no management tool, Steady is a good option.
Don't try to evict your tenants
Evicting your tenants is not an option in most places right now. States like Connecticut, Texas, and Illinois have paused all eviction proceedings for the time being, and in some counties and cities, like Seattle, for example, landlords can't even file a notice of termination until the state of emergency has ended.
If you're worried that your renter's COVID-19 troubles will soon become yours, try to stay calm. As long as you have a Fannie Mae, Freddie Mac, or FHA-backed loan, you're not at risk of foreclosure anytime soon. The Federal Housing Finance Agency has suspended all foreclosure actions for at least 60 days due to the outbreak.
Once you know there may be an issuing making your mortgage payment, contact your loan servicer ASAP. You should also explore your financial options with a lender, and work with your tenant directly to come up with a plan. More than likely, they don't want to fall behind either.
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