What the Eviction Moratorium Could Mean for Real Estate Investors
Last week the Supreme Court rejected the Biden administration’s moratorium on landlord evictions. The ban could spell trouble for both tenants and landlords.
A tenant unable to pay their monthly rent (in some cases, for several months) could find themselves without a legal precedent for staying on the property. As such, they are subject to eviction. Landlords now can evict unpaying tenants who may find themselves unable to rent out their properties due to economic hardship. They may be in a position where they need to sell their rental houses fast.
From an investment perspective, the eviction moratorium ban may present opportunities for real estate investors looking for good deals on rental houses.
Why Landlords Are Selling Their Rental Properties
According to a recent study by the STOUT Institute, tenants currently owe landlords over $34 billion in late rent. This puts landlords in a pinch regardless of the moratorium extension ban. Renters unable to catch up on back rent will attempt to ‘start over’ with landlords, find ways to stay on the property legally, or just leave without paying.
In any case, landlords may look for a quick solution, which means selling the rental property as quickly as possible. Landlords who carry a mortgage will feel increased pressure from lenders. They may see selling the property as a way to avoid bankruptcy or foreclosure. Rental property owners will also incur a variety of expenses in repairs and renovations once tenants move out.
All of this points to a potential spike in rental properties entering the real estate market. The only good news for landlords is that the market is the hottest it’s been in a decade. Landlords may benefit from the market by selling their properties for top dollar. However, the ongoing threat of COVID-1 and its impact on jobs and the economy at large means that landlords may have to lower the proper price to account for the risk associated with owning a nonpaying rental property.
Real Estate Investors Need to Think Long-Term...
Real estate investors should consider the long-term outcome of the eviction moratorium. There are two reasons for this.
First, there is a good chance that renters will utilize other legal means for staying on a rental property after the moratorium period ends. Consequently, it may be longer than anticipated before landlords can resolve the current problems they face with renters. Some tenants are highly resources when it comes to staying in properties long after the rent is overdue.
Second, there is a likelihood that landlords may have difficulty finding new qualified tenants after the property becomes vacant. With millions of Americans unable to pay rent right now, landlords are in the position to potentially face new problems such as record-high vacancy rates after a mass exodus of renters due to evictions.
...However, Investors Need to Be Prepared to Act Quickly Now
Investors looking to take advantage of foreclosure rental properties that will inevitably flood the market should be prepared to act quickly. Even with the current lack of properties available and competition from other real estate investors within the same market will remain high regardless of how many new properties enter the market.
Working with a lender, investors can obtain the financing they need quickly. Using this time to gather the necessary financials and documents will make securing funds easier when the foreclosure ban does end. Investors also need to monitor their immediate markets closely and be aware of which properties are in danger of foreclosing or which landlords are considering selling the property.
Direct Marketing to Landlords
One of the ways that real estate investors can gain leverage in the rental property market is to market directly to landlords. There are several strategies that investment companies can use to attract property owners, including
- SEO-driven Blog topics focused on rental properties, foreclosure, bankruptcy, and the eviction moratorium
- Social media posts with keywords and hashtags that target landlords and rental properties
- Creating landlord-focused landing pages or backlinks
- Creating landlord-focused LinkedIn, Google, or Facebook ads
The ban on the eviction moratorium is just the beginning of what could be multiple real estate trends involving rental properties. Marketing directly to landlords could put investors in a key position to grab rental properties as they become available.
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