Ryan David purchased three rental properties in 2017 and hoped that the $1,000 he was earning after expenses would continue to be a regular source of income long into his retirement years.
He was also counting on the rent money earned from Dupont properties to support his cash flow business that buys and sells distressed properties.
The pandemic struck and the federal and state authorities put moratoriums on evictions. The rent unpaid began to mount. Just when he thought it was over, the Centers for Disease Control and Prevention announced an extension of the moratorium that would last until October 3. Last week, a federal judge rejected a legal challenge against the order.
David, the father to a 2-1/2-year-old boy, is worried that the $2,000 he owes in rent back rent will soon rise to the thousands.
According to the 39-year old, the latest moratorium was “the final gut punch” and he plans to sell the apartments. “This internal struggle has been going back and forth. I’ve lost my sleep at night and have come to the decision to sell the business and walk away.
Since the outbreak, most evictions of unpaid rent have been stopped. According to the Aspen Institute, there are more than 15,000,000 people who live in households that owe up to $20 billion in back rent.
According to the National Rental Home Council survey, the majority of single-family home owners were affected by the pandemic. Half of them have tenants who missed rent due to the situation.
According to the National Association of Realtors, 58% of landlords who have fewer than four units were left with tenants behind on rent. Smaller landlords owe more than half the back rent.
Large and small landlords are furious about the moratoriums which they consider illegal. Many tenants believe that some tenants could have paid rent if the moratorium hadn’t been in place. The $47 billion of federal rental assistance meant to help landlords has not been able to materialize. Only $3 billion of the initial $25 billion tranche had been distributed by July.
David points out two tenants who were paid paychecks during the pandemic, but did not pay rent or file for rental assistance. Others cited delinquent tenants who claimed they were still able to drive a luxury vehicle, order food delivery or travel.
Gary Zaremba said, “Without rent we’re outof business.” He sold 40 properties in Ohio because of the moratorium, and still has 25% of his tenants in the remaining 100 buildings that are struggling to pay rent. He said that he has assisted some in applying for rental assistance.
He said, “It’s almost like a restaurant without patrons.” “I don’t get the rent. I can’t pay my maintenance staff. They have to be laid off. I cannot fix them and maintain their condition. They are likely to get worse. I cannot pay my taxes.”
Zaremba also owns several properties in New York City. He sold some of his single-family houses to home buyers, and some multifamily commercial apartments to small investors.
Many landlords have lost thousands of dollars in rent, money meant to be used for retirement, college funds, or investors who had sought safe investments. They’re maxing out their credit cards and dipping into savings to pay maintenance, property taxes, staff salaries, insurance, and water bills.
Matthew Haines, who lives in 253 units in Dallas/Fort Worth with his wife and owes more than $300,000. in rent back rent, said, “I keep thinking about myself, when does my household get paid?” He has referred $250,000 to collections.
To avoid losing their seven employees who were full-time, and three part-time workers, the couple contributed $50,000. To save money, Haines also repairs such as changing the pool light or replacing an air conditioner unit. Retirees, who usually get a return of 7%-9% annually, lost nothing last year on two multifamily apartment buildings and 3% on the third because of unpaid rental.
“We went through many hoops to help those who were in dire need. He said that we have not had to evict anyone who tried to work with us, despite people owing us seven, eight or nine months of rent. “We’re trying to do the right things, but it’s becoming difficult.”
Michael Reid, an upstate New York resident, sold three of his homes to stop losses. He also paid thousands to tenants who were not paying their rent. Reid was already owing more than $100,000 in rent on 13 of his 31 properties and $20,000 in unpaid water bills. Reid borrowed $90,000 to pay his property taxes and other bills. He finally received $9,000 federal rental assistance on Tuesday. This is a fraction of the amount he owes.
Reid said that he has lost an unbelievable amount of money in addition to the rent owed. He was referring specifically to his tenants in Endicott and Binghamton, New York. “Thank God, I have a good day job.”
Some homeowners are using the hot housing market to sell their units either to wealthy investors who can wait for the moratorium to end or to families who intend to live in them. Critics fear that out-of-town buyers or equity funds will buy the property and renovate it, thereby causing them to be sold at much higher prices.
“A lot landlords are disgusted. They are losing money. They are getting out period,” Reid stated about the dozens or investors that he has spoken to.
Even those who are still in the property business claim that the moratorium has forced their businesses to change.
Apartments are often left vacant for several months because of lack of funds or fear of being stuck with unpaying tenants. Others won’t buy new properties while the moratorium remains in effect. They will only purchase in more wealthy neighborhoods.
Others are increasing their screening and giving more scrutiny to those who were unemployed for prolonged periods during the pandemic, or who owe their landlord months of rent.
Reid stated, “If someone stiffed their landlord out of 12, 15, or 18 months rent I don’t want them to rent to me.”
This could mean that low-income tenants will have fewer options for housing when the moratorium ends.
It makes things worse for everyone. It is worse for tenants in particular because we will lose affordable housing,” stated Stacey Johnson Cosby, who owns 21 units in Kansas City, Missouri with her husband.
“The investors will come. They will buy the property, invest money in it, renovate it, and rent it for a higher price.
Rick Martin gushed over this before he sold two of five buildings in Boston’s Dorchester neighborhood. The moratorium had left many of the buildings vacant, resulting in a loss of rent of thousands of dollars for the 62-year old.
Martin stated, “The moment they enacted a moratorium on rent collection, that was the trigger for my decision to sell the properties.” “I didn’t want anyone moving in who I couldn’t get rid of if the rent wasn’t paid.” This would only make things worse.
Martin stated that he was conflicted about selling to investors. One converted a building into condos. One other has doubled the rent for a three-family house.
He said, “Honestly, it’s a very difficult choice.” “I want small property owners to prosper and grow. We are losing everything because of this moratorium.”
