When the COVID-19 pandemic emerged as a major threat in the United States and states went into lockdown mode, federal agencies like Fannie Mae, Freddie Mac, and the FHA enacted eviction moratoriums to help prevent homeowners and some renters from being removed from their residences due to nonpayment of rent or mortgage. As fall approaches, so does the end of those moratoriums. The result could be mass evictions across the country.
The West Coast in Particular Could Suffer
In Silicon Valley alone, more than 43,000 households are facing evictions as local technology company workers struggle to figure out how to work remotely. While it might seem counterintuitive that employees of Google parent company Alphabet, for example, would have difficulty working from home during the pandemic, Realtor.com notes that many lower-tier support workers who provide services that keep the buildings and facilities running rather than the software or the search platforms are currently in serious jeopardy. If all 43,490 renter households currently facing eviction in Santa Clara County are evicted this fall, it would amount to a mass eviction more than 16 times the typical number of annual evictions for the area.
“Many tech companies in the area have closed their campuses amid shelter-in-place orders. While mostly higher-paid employees are working from home, the workers whose jobs required them to be onsite have either had to show up or risk their hours being cut or their positions eliminated,” explained Jeffrey Buchanan, director of public policy at the nonprofit Working Partnerships USA and Law Foundation of Silicon Valley.
Local assemblyman David Chiu added, “We could see a massive rate of evictions without intervention.”
Coronavirus-Resistant Economies Could Hold the Key
In total, the country might see about 11 million evictions this coming fall, with some estimates placing nearly 16 million renter households at risk. Although usually the country sees about 2.3 million evictions annually, August and September could post evictions numbers nearly that high each month. Many policymakers are suggesting ongoing eviction moratoriums in order to “save landlords from themselves,” as housing advocacy groups describe it, but landlords complain that most stimulus proposals do little to protect their interests or help them avoid foreclosure in the event that they cannot pay the notes on their rental properties.
For real estate investors still interested in purchasing rental properties, the options are more numerous than you might first think. Here are a few things to consider if you are investing in rentals during the pandemic:
- Buy in an area where local employers are able to keep the majority of your target residents working at least part-time on a remote basis. This includes areas with high concentrations of tech companies, digital service providers, and biotech companies, and areas that are integral to national infrastructure, such as cargo, shipping, and distribution hubs.
- Invest in states that have historically been “investor-friendly” and that appear to continue to be so during the pandemic.
- Purchase properties that do not qualify for moratoriums. Remember, you do not have to evict a tenant, but you need to be able to do so if your own investment capital is at risk or if the tenant is abusing the system (and your property).
- Invest in projects with high projected returns and lots of “wiggle room” that allows flexibility and profit even in a negative short-term scenario, such as properties that may be purchased at a deep discount, fixed, and then held or flipped.