The rent is coming due. How will new stimulus help landlords with their assets?
It is believed that somewhere between 10% to 20% of US renters are late on their rent. For some that may just be rolling a few days late each month. Others have accrued several months of back payments due to recent lockdowns. Will new cash injections into the economy change this dynamic? Whether it does or doesn’t in the short term, what does it mean for real estate investors?
Stimulus & The Rent
Data suggests previous stimulus was used by recipients to catch up on credit cards and auto loan payments. Now that eviction and foreclosure moratoriums are ending, and renters realize they won’t be able to get into new housing with a fresh eviction on their record, they may be likely to use that to catch up rent. Some are expecting thousands of dollars in the next few weeks, which could easily catch up their back payments. The same goes for tax refunds which are right around the corner for renters too.
Maxed out credit cards, and cars when you no longer have to commute and can’t travel seem to pale in comparison to the importance of keeping a roof over your family’s heads.
Positive economic trends, a new round of PPP loans and a strong and fast growing real estate industry is also helping housing, employment and business values. Businesses are now about as adjusted to new norm as we can hope they will be. These factors together will likely shake out the good tenants who will stay and pay, and those few just looking to stretch out not paying for as long as possible.
The net effect from all of this ought to be a boost in performance for landlords. Property values have already been soaring by double digits or more in many places. Now the rebound of cash flow and yield payouts on top of wealth building is going to make real estate even more attractive as an investment. While there are those who have failed to nurture relationships with tenants during the past 12 months and may have to exit and sell at discounts, other investors are ready to take on these opportunistic and value add opportunities and elevate their performance and value over the months to come.