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2020 Strikes Again!
CDC Moratorium on Evictions
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At this point, 2020 has both real estate investors and property managers desperately attempting to keep up with the ever changing rules and regulations regarding rent collections, late fees and evictions. Unfortunately, most of us are fairing about as well as Lucy and Ethel during their stint working for the chocolate factory.
In order to help you “catch up” (since stuffing our faces with chocolate will not help our current situation) we have broken down the most recent moratorium for you. Keep in mind that, while this moratorium encompasses all areas, each county and/or states could have additional regulations in place.
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On September 4th, 2020, the CDC Eviction Moratorium was set in place in order to protect “covered persons” from eviction due to COIVD-19 related delinquencies. However, it is still possible to issue eviction notices and file with the courts regarding those tenants who have not paid rent. A delinquent tenant under eviction may become a “covered person” at any time throughout the process by producing a Declaration, attesting to the five circumstances detailed below, under penalty of perjury. This is true even up to the point of execution of a Writ of Possession.
This moratorium does not restrict evictions due to lease violations outside of non-payment and an owner or owner’s representative may dispute the validity of the tenant’s Declaration with the court.
However, with the economic impact of the virus having been so wide spread, we have concerns with attempting to dispute a tenant’s qualification for protection and the likelihood of the dispute being dismissed along with the case. Before disputing we would need to ensure that there was a strong case against the tenant to claim that they do not qualify as a “covered person”.
Luckily, with the last moratorium, we had an immense amount of success by keeping the communication lines open with the tenants and working though payment issues as they presented. We hope to emulate this success with the new moratorium.
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A “covered person” means any tenant, lessee, or resident of a residential property who provides to their landlord, the owner of the residential property, or other persons with a legal right to pursue eviction or a possessory action, a declaration under penalty of perjury indicating that:
- The individual has used best efforts to obtain all available government assistance for rent or housing;
- The individual either (i) expects to earn no more than $99,000 in annual income for Calendar Year 2020 (or no more than $198,000 if filing a joint tax return),[6] (ii) was not required to report any income in 2019 to the U.S. Internal Revenue Service, or (iii) received an Economic Impact Payment (stimulus check) pursuant to Section 2201 of the CARES Act;
- The individual is unable to pay the full rent or make a full housing payment due to substantial loss of household income, loss of compensable hours of work or wages, a lay-off, or extraordinary [7] out-of-pocket medical expenses;
- The individual is using best efforts to make timely partial payments that are as close to the full payment as the individual's circumstances may permit, taking into account other nondiscretionary expenses; and
- Eviction would likely render the individual homeless—or force the individual to move into and live in close quarters in a new congregate or shared living setting—because the individual has no other available housing options.
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Warning! You May Need Shades for This Bright Side
While 2020 has certainly had its fair share (and more!) of dark moments, no one has ever injured their eyesight by looking on the bright side—the bright side of 2020 for real estate investors…LOW INTEREST RATES!
BY refinancing at the right time, real estate investors could save quite a bit of money, however the process of refinancing your portfolio can be daunting! As your trusty and reliable real estate brokerage and property management company, Frontline Property Management, Inc. is here to help!
For any of our investors looking to refinance, we would be happy to discuss values with you and run a comparative market analysis at no cost!
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Jay Hartley MPM®, RMP®
Owner - Managing Partner
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Office | 817.377.3190
Direct | 817.288.5546
Frontline Property Management, Inc.
3000 Race Street, Suite 132
Fort Worth, TX 76111
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Real Estate Investing
COVID Has Caused a Massive Housing Shortage
Here’s How to Profit From It
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COVID-19 has changed every industry in the country in some way—oftentimes, in ways we didn't expect. The media and social networks publicized many of the impacts of the virus, but some may have flown under the radar. Here's what I mean: a major unexpected impact of COVID on real estate is a severe housing shortage. So, what is going on in the housing market, and how can real estate investors profit from it?
Historically Low Housing Supply
Let’s start with understanding the supply side of housing. There are four major things causing the supply of housing to shrink rapidly.
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New construction down- The construction of new units has been either halted or extremely scaled back over the last 6 months. New construction of rentals adds a significant amount of volume each year, hovering around 300K units. But we are seeing delays in getting permits due to COVID, as townships aren't having regular meetings. We are also seeing delays in financing, which also causes projects to slow down.
Finally, in many areas, there are still restrictions on the number of workers that can be in one place at the same time. The bottom line here is that new units are not being built at the same rate as normal, and we expect this delay to continue for at least another couple of months.
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Rehabs slowed- Many rehabs were either halted or slowed down the last 6 months, as well. Similar to new construction slow-downs, rehab crews were not moving at their normal pace due to the many restrictions put in place. Several of these units would typically be turned into rentals after they are rehabbed.
Tax sales delayed- One of the ways that housing comes back on the market is after a tax sale. Most townships delayed tax sales for months—or even for all of 2020. These properties are often in disarray and not livable. The tax sale forces offloading of the property to a buyer who will get the property back online.
Evictions and foreclosures paused- The CARES Act, the CDC, and individual states have all issued stays on evictions and foreclosures in 2020. In an average year, there are approximately 2 million foreclosures and evictions. The first half of 2020? There was half the normal amount.
Many of these properties are abandoned. However, the bank or owner cannot get the units back online until they are able to move forward with the eviction or foreclosure process.
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On the demand side, people do not want to co-habitate as much due to concerns about the coronavirus. This affects a wide range of housing—from college housing (roommates who may want their own units) to people in their 20s who may not want to live with their parents for safety concerns.
Opportunities for Investors
All of this leads to a severe imbalance between housing supply and demand. So, as an investor, in what ways might this imbalance be beneficial to your business?
Here are a few suggestions of what investors can do in 2020:
Offer cash for keys- “Cash for keys” is a highly controversial topic for landlords. In essence, it’s encouraging a tenant to move out by giving them a cash incentive.
For example, if a tenant owes $2,000 in back rent and the security deposit is $1,000, a property manager may offer a tenant $500 of their security deposit if they leave the unit by a certain date and/or leave the unit in decent shape.
Rehab projects- Now is the ideal time to complete a rehab that you may have been delaying. Units are renting quickly, and it’s a huge advantage to know you can get a unit rented shortly after completing a big rehab project. Also, you may be able to get an extra $100-$200 in rent than you previously expected due to the demand for housing and lack of supply.
Rent instead of sell- If you are buying a new primary house to live in, it’s a great opportunity to rent out your house rather than sell it. The lack of supply means that your house should rent faster than normal. With a typical time to close of 45-60 days, you should be able to nail down a tenant to move in within a few days of when you move out of your house.
Buy a vacant unit- The year 2020 is a great time to acquire a vacant unit. One trick that we like is to market the unit during the closing process. Often you can actually have the unit filled with a great tenant ready to move in mere days after you close on the property.
Market units quickly- Market vacant units as soon as tenants give notice. A property management tip we employ is getting the current tenant to film a walkthrough video. This way prospective tenants can see the unit without actually having to be in the unit at the same time as the current tenant.
The Bottom Line...
It’s been a crazy year! But you do not have to sit on the sidelines of investing if you use the market to your advantage. Try out some of the above tips. I hope you find them helpful!
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5 Habits That Help Average People Make Millions
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1. Aim purposefully to leave your 9-5 job behind.
So the first thing you need to do is quit your job. It’s called a J-O-B, which means “just over broke.” You’re working a 9-5, you’re getting someone else richer, you’ve got an hourly rate, you’re limited to how much money you can make, and you can’t really go beyond the industry average there, right?
Most multi-millionaires and billionaires own businesses, because there is no limit to how much you can earn in a business. You can flip one, 10, or 100 properties. But for the person with a job, there are only 24 hours in a day—and many of those hours are taken up while you’re only getting paid an hourly rate.
2. Don’t get into debt.
This country has so much debt, it’s mind-boggling—student loans, mortgages, car loans, credit cards, etc. It doesn’t make any sense to me. Only spend what you can afford to spend, which means the money that you have in your account should be the money that you are spending. Simple.
On top of that, I’m going to go out on a limb and say you should strongly weigh your decision on whether to go to college. I know, I’m sorry Mom and Dad, but college is going to cost you hundreds of thousands of dollars. And you’re going to learn how to be good at a job and how to make your boss richer. It doesn’t make any sense to me. I think that the world will start going in a different direction when it comes to that. We’ve got a lot of entrepreneurs who don’t have college degrees; they don’t even have high school diplomas. But they’ve got businesses that are achieving amazing success. So that piece of paper, that document, that diploma doesn’t really mean as much today as it did back in the day.
3. Stay frugal.
When I started my journey as an entrepreneur and a business owner, I was told by some of my mentors that I had to keep costs to a minimum and drive revenue. That means don’t buy a new phone, don’t buy a new suit, and don’t buy a swanky new couch. There is no need to spend money on things that do not give you a return on investment. Instead, spend one dollar and get two back.
To do this, you have to keep costs to a minimum. Don’t be like everyone else, buying the new phone when it comes out. Unless it’s helping you get more money, do not spend it. Stay frugal. When I was broke, I could only afford to buy dollar gas station coffees, and I was eating teaspoons of peanut butter to survive. Guess what? If that is what you have to do, do it. Even to this day, we have a system in place where we check any $2 unrecognized charges on our cards.
4. Learn to sacrifice everything and anything.
That is probably the hardest step out of all of it. There aren’t any walks in the park, and there aren’t any vacations. I personally left everything and everyone behind, and I moved into the unknown.
I had a great paying job in Australia, plus familiarity, family, friends, and memories. I left it all. I made a huge sacrifice and moved here with nothing. I worked my freaking butt off, and I still do to this day work 16-, 17-, or 18-hour days. Every dollar that I have, I invest back in my business.
Nothing comes easy in life. You have to work hard, you have to sacrifice, and you have to do whatever it takes. You have to put everything on the line. If you want to succeed, there aren’t any excuses and it’s going to take a lot of hard work. I don’t believe in talent. I believe in hard work.
5. Methodically invest in property.
I’m not sure what the statistics are out there, but the majority of multi-millionaires and billionaires all have very large property portfolios. There are many ways that you can invest in real estate, as you guys know. Regardless of the niche you use, you want to get to a certain level of financial status where you can buy and hold.
Long-term wealth, in my opinion, is built by buying and holding properties. They hopefully will appreciate in value, which will hopefully continue to expand your multimillionaire status, and you will also receive residual income from them so you can achieve true financial freedom and enjoy your life.
BONUS: Surround yourself with the right people. No ifs, ands, or buts about it.
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Disclaimer: This is designed to provide general information regarding the subject matter covered. It is not intended to serve as legal, tax, or other financial advice related to individual situations. Consult with your own attorney, CPA, and/or other advisor regarding your specific situation.
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