JF2143: COVID-19 June Rent Collections | Syndication School with Theo Hicks

July 15, 2020 | Joe Fairless | 00:16:08

JF2143: COVID-19 June Rent Collections | Syndication School with Theo Hicks

Theo shares the rent collection data for June 2020. During COVID-19 the rent payments were actually the highest it has been since COVID-19 started. He shares some thoughts for you to think about to be better prepared for July rent collections.

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To listen to other Syndication School series about the “How To’s” of apartment syndications and to download your FREE document, visit SyndicationSchool.com. Thank you for listening and I will talk to you tomorrow. 


TRANSCRIPTION

Joe Fairless: There needed to be a resource on apartment syndication that not only talked about each aspect of the syndication process, but how to actually do each of the things, and go into it in detail… And we thought “Hey, why not make it free, too?” That’s why we launched Syndication School.

Theo Hicks will go through a particular aspect of apartment syndication on today’s episode, and get into the details of how to do that particular thing. Enjoy this episode, and for more on apartment syndication and how to do things, go to apartmentsyndication.com, or to learn more about the Apartment Syndication School, go to syndicationschool.com, so you can listen to all the previous episodes.

 

Theo Hicks: Hello, Best Ever listeners and welcome to another episode of The Syndication School series – a free resource focused on the how-tos of apartment syndication. As always, I’m your host, Theo Hicks. Each week, we air two podcast episodes that focus on a specific aspect of the apartment syndication investment strategy, and for a lot of the episodes, we offer free resources, especially during our first part of these syndications school series where we went through the entire apartment syndication process from A to Z, from having no experience or knowledge of apartments syndications to selling your first deal. So make sure you go back and check out those episodes and check out those free documents, and then also some of the future episodes where we go back and go into more details on some of those steps. We’re also providing documents as well; all of that can be found at syndicationschool.com.

Today, I’m airing this in the beginning of July; you’re listening to this probably in the middle of July, so we’re going to go over the rent payment tracker. We’re going to go over the NMHC rent payment tracker, National Multifamily Housing Council, to see how the rent collected in June compares to May and April. And since we are into July, we can also take a look at the beginning of July. So we’ve got some good news and some maybe not so good news, and again, this payment tracker started back in April because that was the first full month of the Coronavirus.

So I think this will be the second or the third syndication school episode we’ve done. I believe I did one for May, and I might have done one for April; I’m not 100% sure, but if you want to get the actual data that I’m talking about, you can just google ‘rent payment tracker’, and then it’ll bring you to the NMHC rent payment tracker website. They essentially track the rent paid by the week ending on the 6th of the month, the 13th of the month, the 20th, the 27th and then the end of the month, so on weekly basis. So as of this recording, all of June data is in; obviously, all of April and May data is in, and then the data ending the week of July 6th is also in. So we’re focused mostly on June, and then at the end, we’ll also mention July, and then of course, next month around this time, we will be going over July’s data in full.

So first let’s go over what it was like last year in 2019. So for 2019, the rent collected for the total month actually goes down month over month. So April 2019, 97.7% of renters pay their rent and May, it went down slightly to 96.6%, and then in June, it went down to 96.0%. So traditionally, at least historically last year, it was about 96% each month, but gradually going down month over month.

Now let’s go into 2020. So April, which was the first full month of Coronavirus was 94.6%, so 3.1% lower than the previous year. So clearly, a pretty big impact from the Coronavirus. Now, again historically, from April to May and May to June, the rent collections is likely to go down, but since April was so low due to Coronavirus, it’s really hard to predict what’s going to happen. So in May, due in part to the stimulus package, the percentage of renters who paid their rent on time actually went up to 95.1%. So compared to April, that’s an increase of 0.5%, but still less than the rent collected in May 2019. So it was 1.5% less in May 2019, which we talked about and last month’s episode.

Now let’s go to June. So in June, the percentage of renters who paid rent on time was 95.9%. Up 0.8% for May and actually only down 0.1% from June 2019. So due to the stimulus package and due to things beginning to reopen in June – again, I’m sure there’s other factors as well – but people were able to pay their rent in a similar proportion compared to June. So obviously, that is great news. So you’ve got the same amount of people paying rent in June during the Coronavirus than the people who paid rent in June last year without the Coronavirus.

Now, obviously, this doesn’t mean that is going to continue to go up. If you’ve been paying attention in the news, it seems like they’re saying that there’s a second wave potentially coming. I’m not sure if places are actually closing down at the moment, but we do have some July data. So we have the week ending by the 6th. So just like April, May and June in 2019, the percentage of rent collected in July was less than June. I’m not sure why people are paying rent less in the summer; I’m sure that’d be an interesting thing to look into, but 79.7% of people had submitted rent by the 6th of the month in July 2019 as compared to 81.6% in June, 91.7% in May, in 92.9% in April.

Now going back to 2020, again, April was the lowest. It was much lower, it was actually still about 5% lower by the 6th, which is the same as it was for the entire month, and then for May it bumped up 2.2% from April, but still below May 2019, and then June was actually more than 1.1% below June 2019. It was actually almost 1% lower, but it seems like people are paying by the end of the month, probably at least in part, rent payment programs that say, “Hey, you can pay rent by the end of the month. You don’t need to pay it on time; as long as you pay it by the end of the month, we’re okay with it.”

Now July, by the 6th, only 77.4% of people have paid their rent by the 6th, which is less than the percentage of people who paid their rent by the 6th in June, in May and in April. So it’s been the lowest since the outbreak of the coronavirus pandemic. So every single time they update the data on NMHC, they input a statement, a quote from the president who’s talking about why he believes that it is tracking in this way. So I’m just gonna go ahead and read that to here to you. So it says, “The National Multifamily Housing Council, NMHC rent payment tracker found 77.4% of apartment households made a full or partial rent payment by July 6th in a survey of 11.4 million units of professionally managed apartment units across the country. This is a 2.3 percentage point decrease from the share who paid rent for July 6th, 2019”, as I mentioned, which was 79.7%. So 79.7% minus 77.4% is where they’re getting that 2.3% from, and compares to 80.8% that paid by June 6th, which is a 3.4% decrease. “This data encompasses a wide variety of rental properties across the US which can vary by size, type, and average rental price.” So obviously, some people are collecting a lot less than this and some people are collecting a lot more than this. This is just an average.

So here’s where the quote from the NMHC president comes in. He says, “It is clear that state and federal unemployment assistant benefits have served as a lifeline for renters, making it possible for them to pay their rent. Unfortunately, there is a looming July 31st deadline when that aid ends. Without an extension or a direct renter assistance program, the NMHC has been calling for since the start of the epidemic, the US could be headed toward historic dislocations of renters and business failures among apartment firms, exacerbating both unemployment and homelessness.”

Now, it sounds scary, but there are talks of an additional stimulus package, additional direct payments for the American population, which is what they’re referring to here. I think the July 31st deadline might be the PPP program he’s referring to, but it does seem like another stimulus package is on the horizon. Obviously, it’s only July 9th, so it’s still too early to tell what’s going to happen by the end of the month; things seem to be happening pretty quickly. At least the stimulus package happened pretty quickly last time. So hopefully, that alleviates this problem, but it’s just something to keep in mind, that we’ve done previous episodes on syndication school, we’ve done previous blog posts on syndication schools on how to approach this coronavirus pandemic with your residents, and really, probably the most important thing that I’ve learned from interviewing people on the podcast is having conversations with your residents, understanding if they have the ability to pay rent or not, and understanding if they do have the ability to pay rent, where that money is coming from, and if it’s something that they’re going to be able to continue to do in the future. So it’s better to have those conversations today in the beginning of July, than wait until the end of July or into August and realize that your residents aren’t paying rent.

So I think the number one takeaway I’ve gotten is to have a conversation with your renters to see what they’re capable of doing, and then come into some agreement at best, but at the very least, you have an understanding and you know what they are capable of, and so you can plan ahead to know what to expect in August, and if you need to cut any expenses or cut any projects you have so that you have enough cash to hold you over for August or any of the future months. But again, all of this could be alleviated by another federal package.

So overall, make sure you’re staying up to date on what the federal government is doing, what your state is doing, what your city is doing, and then have that conversation with your residents to understand what they’re capable of doing.

So that concludes this episode. As I mentioned, we will likely do, at the latest, another update on the rent payment tracker the same time next month. But again, this data is released every single week, so I might briefly mention it at the beginning of syndication school every week; we’ll see. It just depends on if the data is drastically different than what it has been.

So until tomorrow, make sure you check out those syndication school series episodes I talked about in the beginning of the show, as well as download some of those free documents. All of that is available at syndicationschool.com. Thanks for listening. Have a best ever day and I’ll talk to you tomorrow.

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