What can landlords and investors do in times of (Corona) crisis?

Wow, just wow. That’s the feeling I have at the moment. The world, not just the UK, has been taken by storm. Such incredible, drastic measures have never been seen before, with everywhere I look trade has been affected. Restaurants, bars, places of worship; everything has been forced to close and people are banished to their homes en masse. It’s for good reason that I’ve not spoken out as yet, I’m still taking it all in - and the letting landscape is changing on an hourly basis!

What does this mean for you as a landlord?
Financial - Well, for starters your tenants’ employment may be affected. Do they still have a job? Will they be able to pay their rent? I for one have sent out my sympathy to all tenants and asked to reach out in confidence if they have been affected, this to preempt any cash flow issues when mortgages need to be paid. To further preempt I have asked all my mortgage lenders for a payment holiday just in case I will need it further down the line, this to buffer my cash flow. I have received criticism for these in my circles, and really I noticed that people fell into two camps: on one hand they said I should use my own reserves to buffer any losses, and on the other hand some felt that the banks may as well buffer the cash flow, you’re paying for it after all (interest is added to the loan). I chose the latter because a)I don’t know what’s around the corner (tenants that are paying today may not do a month down the line and b)after hundreds of thousands of pounds of down valuations I’ve experienced I feel it’s the least the banks can do for me.

Repairs - I’ve knocked this down to bare essentials to comply with my obligations. Only drastic leaks and so on will be seen to, loose door handles will have to wait (and if you know me I will direct them to a screwdriver anyway)! Heating, hot water and so on are a priority, nothing else. We have since last week had some guidance as to gas safety certificates and the like - basically for the contractors to use social distancing measures- the tenant to stay in another room and so forth.
Communal cleaning on properties that I manage has been suspended to avoid unnecessary contact, as well as inspections.
Check-ins for new lettings are going to be done wearing protective gear and as remotely as possible the show must go on to some extent, but safety first. Government guidance insists that moves are kept to a bare minimum.

Longer term effects
Not just will tenants potentially lose their jobs today or tomorrow, trade will suffer massively as we enter into a large scale economic slowdown. We have only just started to see good movement return after the stamp duty surcharges and countless other things we’ve seen destroy the housing market (ahem, Brexit). Any business offering products and services that people don’t use as often when they have less disposable income - new cars, restaurants, luxury goods like watches, tailored suits (don’t need those when working from home!) will suffer for a long time yet. What about all the people employed in those sectors; they could be your tenants. They will have to pivot to another sector, but with little disposable income retail will suffer, the list is endless. In short, people with a job today aren’t certain of a job in 2-3 months’ time. Less disposable income will mean that rents are likely to come down also, landlords will be competing for those in employment as they become less abundant.

What can I do in the short term?
As mentioned above, I recommend that you have a safety cushion - if you feel that your reserves are lower than your risk tolerance allows then do apply for a mortgage holiday if that makes you feel more comfortable; do know that this will increase your payments slightly over time as the interest is added to the loan.

Speak to your tenants, ensure that they are happy and ask them to let you know straight away if your situation changes, giving you as much time as possible to plan things. Chances are they will be able to find a new job eventually, just realise that them playing catchup will be difficult. If you do have a guarantor in place then it’s worthwhile contacting them in order to talk about paying the rent for the person they’re guaranteeing. A fellow colleague investor has had a few tenants give a month notice (they were on a periodic tenancy, something I don’t advocate but that’s for another blog post!) and go home to their parents, leaving him with many voids - I suspect that “normal” level of moves won’t return overnight. I’m curious to see what will happen in the usual August/September rush!

So in summary, communication is the key! There’s more resources available online from RLA - https://news.rla.org.uk/coronavirus-frequently-asked-questions/ and widely on google. I don’t claim to be an expert in this new minefield we find ourselves in, but the key is to act with common sense and practicality in mind. Tenant can’t pay? Work out a payment plan. If they leave reletting will be tricky. Repair? Essentials only like gas safety and leaks. And so forth.

I hope you found that a useful update! Do stay tuned for property investment tips/tricks and updates and by all means do check out the DownToSouthLondon YouTube Channel for entertaining and informative videos to help you invest with confidence! I also offer coaching on a one-to-one basis so if you are looking to get into property investing and require personal guidance then head on over to www.jeroenhoppe.com.