Are Rental Properties Still Profitable?

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2020 was a disruptive year in the world of property management. In a flash, millions of tenants lost their jobs and began spending an unprecedented amount of time in their homes due to the COVID-19 pandemic. While huge swathes of tenants across the country were, and in many cases still are, unable to continue paying rent, landlords and property management companies still had to perform upkeep and maintenance on their properties without any cash flowing in.

However, there is a small silver lining to the disaster that was 2020 in the world of real estate and property management. Mortgage rates are the best they have been since the 1970s, giving those in the world of property management a huge advantage when it comes to long-term success by providing a once-in-a-lifetime investment opportunity.

Even with this ray of sunshine, is it ultimately worth it to own rental properties in a post-2020 market?

The Prospect Can Seem Bleak

Tensions between landlords and tenants can be rather high even in the best of times, but relations have certainly taken a hit due to the negative effects of the COVID-19 pandemic. With the CDC eviction moratorium in effect through March 31, 2021, landlords largely have their hands tied when it comes to their current residents’ tenancies.

At this time, tenants are still bound by law to pay their owed rent eventually. But this does little to assuage the fears of property management companies and landlords that have been sinking money into their properties for the past year with little return on investment.

There is additional pressure on landlords when it comes to making improvements and repairs to their properties. In normal times, scheduling a third-party vendor to complete work in a rental property was fairly straightforward. In the post-COVID-19 market, finding a contractor to come out to make necessary and vital repairs to an occupied rental property is not only more difficult, but a landlord will likely face a great deal of pushback from their tenants.

Tenants, having been forced to quarantine in their homes for months at a time, are understandably wary about maintenance technicians and third-party vendors entering their homes. While this is understandable, it is also why understanding your legal rights as a landlord is so important right now.

While a tenant might try to deny entry to a maintenance technician who needs to make a necessary repair, there is likely going to be legal language in their lease that allows for entry, regardless of permission, with 24 hours of notice. While it won’t make many friends, it will allow for the necessary work to be completed in a timely manner.

Now Is a Great Time to Invest

Though the stream of revenue for rental properties has been largely hamstrung throughout 2020 and into 2021, now is a fantastic time to double down and purchase another property. Any potential investor should do their due diligence and ensure that they have their financing in order before sinking more money into the field. But with historically low mortgage rates, if someone has the money to invest, it would be smart to look into it.

Since a landlord is already dealing with a lack of rent payments coming in, now is a great time to look into investing in a fixer-upper. With an unoccupied fixer-upper, you can make any and all improvements needed. This will make it a desirable rental property to tenants without stepping on any current tenant’s toes. Then, when the market normalizes, the return on your investment should come in relatively quickly.

The low interest rates the market is seeing right now have also significantly lowered the barrier of entry into the world of rental property management for a huge number of people. Millennials, many of whom are purchasing their first properties, are taking the opportunity to dip their toes into the market and make long-term investments for their futures. After all, the pandemic will eventually end and things will largely go back to normal, including the world of property management.

Think Toward the Future

One thing that any landlord should consider right now is the importance of retaining tenants. After all, it will still end up costing more to rent any unit to a new tenant even if the current tenant is having difficulties paying their rent. Though relations might be strained, tenants and landlords really are in this together and are interdependent on one another. Landlords and property managers should do everything in their power to help provide assistance to their tenants. It’s in everyone’s best interest to get tenants back on their feet so that they can once again begin paying rent.

This isn’t just the morally correct choice — it can affect a landlord’s success for years to come. If, at the end of the pandemic, landlords or property management companies have a huge number of negative online reviews related to their conduct during the pandemic, that stain will follow them for quite some time.

Time is money in the world of rental properties. However, reputation is just as important, and rental property owners should do what they can to show compassion and understanding to their residents now in order to develop better opportunities down the road.

Until things calm down in the market, the best course of action is really to focus on resident retention. Try to work with tenants when it comes to scheduling maintenance requests when you can. Set up partial payment plans for those who are struggling, and consider forgiving some debts if at all feasible. This way, you’ll be flush with tenants once the pandemic is over.

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