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As Ernest Hemingway once wrote, “Remember, everything is right until it’s wrong.” Today, the COVID-19 pandemic and government actions have exposed the vulnerability of our health, economy, and investments.
The true effect of the current pandemic on real estate won’t be more clear for a few more years because real estate is a lagging indicator. That said, this health crisis has already created a ‘new normal’ for landlords that involve better cleanliness, more virtual options, efficient operations through technology, communications strategies, and the list goes on.
In this chapter, we’ll focus on actionable tips for landlords to help them better weather future health crises. In the end, this will help investors nurture a longer and healthier real estate investing business.
1. Technology is your biggest ally
Even before the pandemic, savvy rental property investors were upping their game by building efficiency and scale with the best technology. In today’s new normal it’s more important than ever to have property technologies on your side:
- Use online listing services, virtual tours, and tenant relationship systems to move your entire marketing and leasing process online from start to finish.
- CRM (customer relationship management) systems streamline property and tenant management while your property is leased.
- Electronic payment solutions handle rent payments and deposits online and can notify tenants when the rent is coming due.
- Financial management systems such as Stessa organize your finances all in one place to help keep your cash flow positive and healthy during these trying times.
- Sign leases and sales documents electronically while using a cloud-based solution to safely store, retrieve, and share.
- Smart home technologies let your tenants know their safety and well-being is your biggest concern.
It’s clear that the 2020 pandemic forced everyone to be more reliant on smart technology. Savvy real estate investors know that an investment in tech will help reduce expenses in the long run and streamline operations.
In fact, research predicts a compounded annual growth of smart home technology of 12% until 2027, reach a total industry value of US$157 billion.
2. Amenities for landlords
Whether the recovery is V-shaped or U-shaped, it’s quite likely that tenants will be more concerned with some amenities than they were pre-pandemic. Amenities for landlords to consider moving forward include:
- Web or mobile apps for contactless rent payment.
- Screen repair requests with videos or photos to minimize in-unit maintenance time. This can be part of your work order submission process, which should all be digital.
- Move all steps of the tenant screening process online, including tours.
- Smart home technology to minimize touching keys, locks, and switches (see above).
- Improve personal outdoor space, such as the backyard or balcony.
- Two-bedroom+ properties allow for more work-at-home space.
- Extra closet/storage space as space becomes more and more important.
- Increased kitchen space for cooking-at-home.
- Install in-unit washers and dryers.
- Longer-leases with fewer built-in rent increases help tenants affected by uncertain employment.
- Consider including utility bills as part of the rent payment to attract more renters if vacancy is an issue.
- Make rentals pet-friendly due to the increase in stay-at-home orders.
3. Have a PR plan in place
PR means controlling the what, how, and when information between yourself and your stakeholders such as tenants, co-investors, lenders, and vendors is released. To avoid getting bad publicity or uninformed tenants, it’s critical to be proactive by having a solid PR plan in place. Create a standard operating procedure by documenting all of the below points, so you will have a central point of reference when a crisis occurs.
Analyze your real and perceived risks
- What are the risks to tenants, vendors, and your property that arise from a virus outbreak?
- How can transmission be minimized if and when a healthcare situation occurs?
- Will property management operations and rent collections be affected while you maintain critical safety obligations?
- What are the best uses for social media to proactively maintain your positive messaging?
Develop your response plans: Your action list
- Maintain the cleanliness of common areas daily.
- Review the updated safety guidelines of all vendors to ensure their processes are aligned with yours.
- Use the guidance from local health authorities to develop a reasonable response program and make appropriate changes as needed.
- Keep your tenants and stakeholders up to date on the systems and procedures you have to place during the health crisis.
- Make it easy to stay in touch by phone, email, and website portals while offices remain limited and anxiety levels are high.
- Have a system in place so that you are notified if a tenant or vendor has their health compromised.
Comply with privacy and other laws
- Government orders are interpreted as laws and your lease likely requires the tenant to abide by them.
- Understand your local obligations for reporting people that are ill to the local health authorities.
- Take appropriate privacy considerations into account before notifying tenants in a multifamily property of a potentially ill neighbor.
- Verify that the providers of your proptech services such as online rent payment portals and tenant application processing are designed to meet increased usage volumes.
- Beware of increased phishing and cyber crimes within your own communications and between tenants and vendors as criminals seek to profit from health crisis scams.
Review leases and amend rules
- Consider amending your rules and regulations to require enhanced health and safety procedures from tenants and guests.
- But if you aren’t required to do so by local law, consider the risks and rewards of updating your rules.
- Review your loan documents to see if you are required to alert the lender if you modify or amend any existing leases.
- Check insurance policies for language covering additional cleaning and remediation costs relating to the prevention of virus transmission.
4. Educate yourself and your tenants
In today’s new normal, part of your duty as a rental property investor and manager includes educating yourself and your tenants on how to reduce health risks. Here are a few action items for real estate investors to consider during a health crisis:
- Routinely check the website of your local health department or the CDC (Centers for Disease Control and Prevention) for the most recent virus information and transmission control guidelines.
- Provide notices in multiple languages to educate tenants and vendors about required hygiene and health etiquette.
- Limit the allowed attendance of events held on the property.
- Ensure your property manager is following all OSHA (Occupational Safety and Health Administration) requirements to ensure a safe living and workspaces and minimize personal liability.
- Communicate with your tenants on an on-going basis to let then know the steps you’re taking to keep property sanitary and clean.
- Avoid being pressured by co-investors, stakeholders, or even tenants to deviate from the standard operating procedures during the health crisis.
5. Cleaning goes to the next level
With more tenants working from home, it’s more important than ever to do everything you can to protect your tenants and property from any health crisis. Some of the extra precautions you can take include:
- Increase the maintenance and cleanliness of shared areas.
- Regularly clean public and outdoor surfaces such as door locks and handles, doorsteps, handrails, and any other shared space.
- Install sanitary cleaners at all entrances and high-traffic areas including antibacterial gels, sprays, and shoe disinfectant mats.
- Ensure vendors are maintaining enhanced cleaning protocols endorsed by the CDC and your local health department.
- Provide your tenants with how to protect guidelines published by the CDC for in-property cleaning and health safety tips.
- Notify tenants in multifamily property of confirmed cases if your local laws allow, and encourage tenants to anonymously report any suspected cases to help protect themselves, their fellow tenants, and your property.
- HUD has prepared a special questions-and-answers document for multifamily housing stakeholders who may be affected by the coronavirus.
These action items will depend entirely on the type of properties you own. In some cases, you may want to include monthly or quarterly cleaning services and include this additional cost in a higher rent amount. Getting into your units, even if it’s cleaners, is a great way to keep an eye on your assets and shows your tenants you are a conscientious landlord and care about your units.
There’s no doubt that the 2020 pandemic created a new normal for everyone, including real estate investors. Rental property owners must now create standard operating procedures and communication strategies to stay on top of any crisis that comes in the coming years. Now’s the time to document and plan those procedures. Use the action items above as your framework to begin developing your plan, so you’re prepared and informed for the next health crisis.