June 17, 2020

JF2115: COVID-19 Impact On June Rent | Syndication School with Theo Hicks

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COVID-19 has been kind of quiet lately in the media due to all the protesting but today we are going to share with you how it has still impacted the rent collections for landlords in June and we will also be sharing the forecast of future 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. 


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-to’s of apartment syndication. As always, I am your host, Theo Hicks. So each week, we air two syndication school episodes that focus on a specific aspect of the apartment syndication investment strategy, and we give away a lot of free documents with these episodes, as well as our free PDF how-to guides, free PowerPoint presentation templates, free Excel calculator templates, things like that, that’ll help you along your apartment syndication journey. So make sure you check out our previous syndication school episodes, as well as all of those free documents at syndicationschool.com.

Today, we are going to be talking about the Coronavirus again, more specifically, how it has impacted the June rent collections for landlords. So I am recording this on the 10th of June, and we have already talked about May rent collections as well, so those were actually hard data points… Whereas today, we’re going to talk about the forecasts, but also why people are confident that these forecasts are accurate. But first, let’s do a quick refresher, and talk about the May rent collections so we have some context.

So the amount of rent that was collected in May, by the 6th of the month was at 80.2%. The same time in 2019 was 81.7%, so slightly down. However, the rent collected from April 2020 to May 2020 actually went up. So by the 6th of April 2020, the amount of rent that was collected was 78%, and then in May 2020, the amount of rent collected was 80.2%. So it actually went up from April to May, which was obviously a positive sign, because a lot of investors when this first started that I spoke to in April thought that it would gradually get worse before it got better. So it started at the end of March, so they expected April collections to be pretty close to normal, and then May would be lower, and then June would be even lower, and then July would be even lower, and then maybe some people were predicting turnarounds around August, September timeframe. Whereas in reality thus far, April 2020 was actually lower than the April from the previous year by over almost 5%, and then the May collection was only down by 1.5%, and they actually went up from April to May. So again, I think that’s interesting, just to quickly give a refresher on the rent collection for April and May.

Now, what about June? Because in May, it was possible to tell, “Okay, we’ve got two data points. It went up from April to May. May seemed to be close to being in line with what it was in the previous years,” but obviously, it’s only two data points. So what happens in June? Well, the J Turner Research company, what they’ve been doing since– I believe they started in April, or maybe even March, but they started doing a survey where they asked multifamily residents a series of questions, and one of those questions was – do you expect to be able to submit your rent this month? The responses were categorized as either “I might be unable to make the rent payment, I’ll be able to pay rent by the end of the month, I’ll be able to pay rent by the 10th, or I’ll be able to pay rent on time.” So those are the four categories. So on time, by the 10th of the month, by the end of the month, or I won’t be able to make it at all.

Based off of this survey for June, 90.3% of the respondents said that they expect to pay their June rent by the end of the month. So 90.3% expected to either pay their rent on time, by the 10th or by the end of the month. Now of that 90.3%, 84.3% said that they expected to pay their June rent by the 10th of the month. Now compared to May, where they did the same survey, this was a 5% increase. So when they asked people in May the same question – do you expect to be able to pay your May rent? – a little bit under 80% said that they’d be able to pay their rent by the 10th of May, compared to the 84.3%. And then the remaining 6% of that 90.3% said that they expected to pay by the end of the month.

So the vast majority of people expect to be able to pay their rent either on time or by the 10th. Now of that 84.3%, 74.6% said they expect to pay their rent on time. So not by the 10th, but on time. So whatever the terms of their leases are; typically they have a day or two cushion, so it’s due by the 3rd of the month. So 74.6%; in May, that number was at 70%. So again, a 5% increase from May to June in the number of people expected to pay their rent on time, and then the remaining 9.6% of the 84.3% expected to pay by the 10th, and then obviously, you’ve got the 90.3% paying the rent by the end of the month; again, either being on time, by the 10th, or by the end of the month. And then you’ve got the remaining 9.6% saying that they did not expect to make their rent payment for the month of June, which is about 5% lower than the number of people who said the same thing in May.

Now you might be saying, “Well, Theo this is just a survey. This is not actual rent collection data. So how can we trust their forecasts and numbers in such a time of uncertainty?” Well, as I said in the beginning, the reason why a lot of people are trusting J Turner Research’s numbers is because of how their predictions for May compared to the actual collections for May. So just to give one example, because this is really the most important number, is – what did they project to be the rent collections in May? So when they did the same survey in May, and they asked people, “Will you be able to pay your rent for the month of May?” 80.8% of people said that they’d be able to pay on time or by the 10th, and then NMHC has a rent payment tracker where they update the percent of rent collected a few times a week. By early May, they found that 80.2% of rent was collected. So J Turner predicted 80.8%, the actual was 80.2%. So their predictions are very accurate. So assuming that their predictions are going to be accurate again, then we can expect June to be better than May. The president of J Turner Research, the firm that did this study was quoted as saying, “If our numbers are as on target as last month’s, rent receipts will be stronger than May which bodes well for the industry.”

So again, the main key takeaways here is that from this survey, 84.3% of respondents expect to pay their rent either on time or by the 10th, which was a 5% increase from the same time in May, and then if you look back at the numbers that I talked about last month for May, there was a 2% increase from April to May in the rent collected by the 6th. So if again, this survey is accurate, then we’ll also be seeing a trend of 78% of rent collected by the 6th in April, 80.2% of the rent collected by May 6th, and then 84.3% of rent collected by June, keeping in mind that the main reason for the bump in the May rent collection was likely due to the stimulus checks that went out towards the end of April, whereas there has not been a second round of stimulus checks in May. So it seems as if the impact from Coronavirus may potentially be over. However, when I was looking at the actual NMHC rent payment tracker which– I recommend going to that website, just bookmarking it. It’s just NMHC rent payment tracker. If you find it, you can bookmark it so you can keep tracking the rent payment collection tracker for as long as you need to, as long as they keep creating it.

As of this recording, they haven’t updated it for June yet, but I expect them to do it within the next few days. So we can see what the actual collections have been by the 6th, and then see what it is by the 10th to compare that to the projections.

But the President of NMHC said that, “The hardships caused by the outbreak are not ending anytime soon.” So just because these numbers are trending in the positive direction according to this person, it’s important to make sure that you’re staying up to date on any new rental assistance legislation, any changes to the eviction laws, make sure you’re staying in contact with your residents to make sure that they’re still able to pay their rent on time, but continue doing what you’ve been doing in the past to make sure that you’re able to maximize your rent collections, because it’s hard to tell what’s gonna happen. Is there gonna be a second wave? Is this thing actually really over? It’s hard to tell. So just be a smart, conservative investor and expect and prepare for the worst-case scenario.

Now, something else that was interesting, before we sign off, from this J Turner Research survey, that was more of a reinforcement of things that we’ve talked about on  syndication school before, and then most people already know, is how people prioritize their expenses. So another question that was posed in this survey was related to the order in which people planned on paying their expenses. So the four expenses that people were asked about was their rent, their car payments, their utility payments and their groceries, and the number one expense that people said that they’d pay first before anything else was their rent. So more people said they’d pay their rent first, some said they’d say their car payment first, their utilities first or even their groceries first.

So again, as I mentioned, it’s reinforcing the fact that as a multifamily investor, in renting your units out to people, one of the last things they’re going to stop paying is their rent, even before they buy groceries or pay their utilities or car payments. So even during these times of economic certainty, as long as people are making money, the first thing they’re gonna apply it towards is their rent.

So again, the main takeaways here is that it seems as if the collections in June are gonna be stronger than the collections in May, which were stronger than the collections in April, so we’ve got three data points trending in a positive direction. But again, as a disclaimer, we don’t necessarily know exactly what’s going to happen. So this is positive news for now, but it’s important to continue to stay on top of this to continue to stay up to date on any new information surrounding the Coronavirus and real estate, and then also, I highly recommend bookmarking that NMHC rent payment tracker. Just Google it, you’ll find it; bookmark it and maybe check in with it every Wednesday or every Friday or every Monday. I’m not exactly sure when they update the numbers; maybe it’s a daily thing. It just take two seconds to look at it. On the site, it has a thermometer that shows you how much of the rent has been collected thus far, and then it compares it to the previous month. So I think they began tracking in April. So they’ll have April, May, and then pretty soon June numbers for the rent collected. In this case, the first one would be 6th, because that’s the first data point they collect.

And they also have the full month results for previous months. So it says, for example, April 2020, for the month, 94.6% of people paid their rent, and then in May, it was 95.1%. So trending in the positive direction. And then they compare that to the 19th as well, and also– so it does say here which data points they look at. So on the 6th of the month they have the data, on the 13th of the month, on the 20th of the month, the 27th of the month and the end of the month. So I’m sure right after the 6th, it looks like– today’s the 10th, so maybe we’ll have it today or tomorrow. So it’s a four-day delay. So if you look at it every week, you should have new data to look at. Again, that’s NMHC Rent Payment Tracker, and NMHC is National Multifamily Housing Council.

Alright, so that concludes this episode. Quick update on how the June rent collections are expected to go, and we should have hard, concrete numbers here in the next few days, maybe even by the end of day today. Until then and until our next syndication school episode, make sure you check out some of our other syndication school episodes, as well as those free documents at syndicationschool.com Thank you for listening. Have a best day and I’ll talk to you tomorrow.

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