Landlords: How COVID-19 is Affecting Your Business
The world around us has significantly changed in the last several weeks, hasn’t it? We went from living life outdoors to being asked to stay home. We went from having a low unemployment rate to having a rate so high it is breaking records. Not to mention that we are almost becoming numb to the talk of death because it is happening in great numbers.
In all of this, uncertainty, fear, and frustration are forming at alarming rates. What is going to happen to our economy? When will the virus be under control? Will life ever return to normal?
If you are a landlord, though, you are probably wondering how this pandemic is going to affect you and your business, right? Good question. Well, the U.S. Government has put together a stimulus package for our economy – and portions of it will apply directly to you. Let’s take a look.
Mortgaged Rental Property
If you have a mortgage on your rental property, then you may get some help if you are struggling to pay your mortgage. After all, many renters are going to find themselves struggling to pay their rent. And, in turn, this may affect your ability to pay your mortgage. The new stimulus package allows for up to 180 days of forbearance for holders of federally-backed mortgages who find themselves in a tight spot thanks to the novel coronavirus. It is important to note, however, that if your mortgage is for a multi-family property with 5 or more units, this forbearance time frame is reduced to 90 days.
Further, beginning March 18, 2020, foreclosures on all federally-backed mortgage loans (containing 4 or fewer units) will be prohibited. This should allow you time to get back on your feet. Of course, don’t miss these other benefits that may pertain to your property management:
Support for small businesses. For those businesses with 500 or fewer employees, you can get a loan/grant up to $10 million to help with things such as payroll and overhead. A portion of this loan will be forgivable.
Tax credits for those wages paid during the COVID-19 crisis. This refundable tax credit (for 50% of wages paid by employers to employees during the crisis) is available to businesses with fully or partially suspended services due to a COVID-19 shut-down order – or – those businesses whose gross receipts decreased by more than 50% when compared to the same quarter in 2019.
Payroll tax deferral. The social security payroll taxes that employers have to pay is deferred until 12/31/2021 (50% due) and 12/31/2022 (the remainder due.)
Evictions, Late Payments, and Other Moratoriums
For the nonpayment of rent, the federal government has entered a 120-day moratorium on things such as evictions, notices to vacate, and even late fees. However, while this has been greatly discussed amongst individuals, it has been done so without looking a bit deeper. This moratorium only applies to those landlords who hold a mortgage that is backed by the federal government, such as FHA and VA loans. And, those backed by the rural housing voucher program or the Violence Against Women Act of 1994.
It should also be noted that those rental property owners who take advantage of the forbearance of their federally-backed multifamily mortgage loan must abide by a moratorium on late fees, evictions, and notices to vacate during the length of the forbearance.
What does all of this mean for you? Well, this moratorium would not apply to you if your mortgaged rental property is not backed by a federal program.
The “Federally-Backed Mortgage” Defined
Not sure where your mortgage fits in? The more specific definition of “Federally-backed mortgage loans,” would include those mortgages “made in whole or in part, or insured, guaranteed, supplemented, or assisted in any way, by any officer or agency of the Federal Government or under or in connection with a housing or urban development program administered by the Secretary of Housing and Urban Development or a housing or related program administered by any other such officer or agency, or is purchased or securitized by the Federal Home Loan Mortgage Corporation or the Federal National Mortgage Association.”
It is important that you read and understand these new enactments so that you can take full advantage of them without finding yourself penalized down the road. Keep in mind that, depending on where you reside, state Governors are also putting additional restrictions on things such as evictions. These may take the rules from the Federal Government a step further.
Know your rights! And, if you have questions – ask!
Marina Shlomov, a managing partner at ALH|Podland Rental Homes Property Management is the author of many articles on Landlording, Property Management, and Real Estate Investing. A residential builder in the state of Georgia since 1999, Marina is an investor herself. Her property management company is intended “For Investors” and “By Investors” for a simple reason – she knows what investors’ goals are and she works hard to reach their goals. In her spare time, Marina likes to spend time with her family, friends, garden, read and travel. Check her out atwww.alhpodland.com. You can find Marina’s articles and comments at @rentalhomesatl on Twitter, on Facebook, Google+, Blogger. and YouTube, Bigger Pockets and REI CLub and LinkedIn.