Being a landlord has never been easy – but the current pandemic restrictions can challenge even the most seasoned of landlords. As the summer PCS season approaches, if you are thinking about converting your home into a rental property, it will be well worth it to mull over the following considerations, to determine if landlording during a pandemic is the right choice for your financial goals, and your risk tolerance.
Landlord / Tenant Law Updates
Should we continue to build home equity, and maybe make a little extra, or just cash out and sell? These are the constant questions military members and families encounter, upon buying a home – and then facing a PCS. But, landlording cannot be taken lightly. If you are even remotely considering renting out your home, you must invest the time to learn and understand basic landlord/tenant law, at both the state and federal levels. Some counties also impose additional restrictions.
A solid grasp of the legalities of landlording has always been a constant — but COVID-19 has brought in several new restrictions, notably for the eviction process, court summons, and rent relief programs.
Effective until at least March 31, 2021 – evictions across the nation have largely been halted through a number of legal actions, stemming from the September 4, 2020 Centers for Disease Control and Prevention (CDC) order entitled, “Temporary halt in Residential Evictions to Prevent the Further Spread of COVID-19.” Residents are afforded protection from eviction if they meet certain criteria and file a CDC Declaration Form for Eviction Relief to their Landlord.
It can be reasonably expected that this federal CDC Eviction order of protection will likely be extended past March 31, 2021 — until vaccinations have become more widespread. Many states (and particularly city/county governments) may also continue to mandate eviction and rent reliefs in their respective jurisdictions for quite some time to come.
The current unpredictability of a rolling, federally-mandated eviction order is unprecedented. As a landlord – you must be willing to stay on top of these legalities, and rolling changes. “I’m new,” or, “I didn’t know,” won’t cut it, and if you violate applicable Landlord/Tenant laws, you’ll easily find yourself on the wrong side of a judge.
The Unexpected Emotional Toll of Landlording
While legalities can be easily learned – what isn’t so easy to conquer, is the unexpected emotional toll that can stem from becoming a landlord.
The concept of “home,” and securing shelter is one of our most basic human needs. Speaking from personal experience, it can be incredibly difficult to convert what was once your primary residence — into a rental property. And it is absolutely gut-wrenching if things go sideways, and you have the misfortune of placing a tenant in your property, who then either does not maintain it, or destroys it. Because as a beginning landlord, it isn’t just “property” that has been destroyed, it was also at one time, your home.
Tougher COVID Protections and Unintended Consequences
COVID-19 has wreaked havoc in so many ways, but small landlords have been particularly vulnerable. There is no corporate portfolio of property to bring in income, if one unit cannot pay. True, eviction moratoriums have offered protection for tenants who are struggling to pay rent, but those same moratoriums have offered little, to no relief for landlords.
It is a product of today’s desperate environment, but landlords are struggling. Some have encountered tenants who falsified their application information just to get into a home, and once in – stopped paying rent. Still more landlords are finding themselves crushed under mounting debt, once they stopped receiving rent from tenants. Other tenants have simply claimed “COVID”, have not filed the proper CDC eviction relief protections, and with closed courts – it is all but impossible for a landlord to get a non-paying tenant out.
Can your emotions handle a non-paying tenant, and how robust is your financial cushion to cover a mortgage, with no rent?
This is a contentious problem for sure – and is not meant to trivialize either a tenant or a landlord’s plight – but if you are even remotely considering becoming a landlord – these unintended consequences might end up landing on your door step.
A Professional Property Manager Might be Worth It
For those weighing the option to rent their home – the next question is the best way to do so? Some members elect to self-manage their home, while others opt for a professional property manager. Both options have their pros and cons, one of the largest drawbacks of a professional manager is that they usually charge a 10 percent fee, calculated from gross rent.
However, with continuing, volatile changes in landlord/tenant law at federal, state, and county levels, it may be worth it to bring on someone with expertise. Not all property managers are created equal, and if you do elect to go with a manager – grill them thoroughly on current tenant restrictions, and the management firm’s tenant screening processes. Scour reviews, and ask for other property owner references, as part of your due diligence.
Being a landlord is never easy, and the combined stress of a PCS, and deciding to keep a home as a rental is not a decision to take lightly. It certainly can be done, and many military families have successfully added a rental home or two, to their financial portfolio during their careers.
But, in the age of COVID, everything has changed – including landlording.