You’ve probably heard that the government has announced a moratorium on evictions for the next 6 months. So what does that even mean and where does that leave you as a landlord?!
Basically it means that a landlord can’t kick out a tenant who cannot make rent because they’ve lost their job due to Corona Virus, or through impacts caused either directly or indirectly by Corona Virus, for the next 6 months. It does not mean the tenant can end a tenancy agreement for unrelated issues, or get away with trashing the place on their way out.
Obviously the moratorium doesn’t make things very favourable for you as a landlord. We know that the Covid-19 has impacted people from all walks of life and all income levels, so chances are you’re already doing it tougher than normal. How are you expected to handle this hit too if your tenants decide to cash in on the moratorium offer?
Today I spoke to Clayton at CID Finance, an expert Mortgage Broker, who has assured me that most lenders have some sort of help package if you hit financial hardship. Therefore my suggestion to you is stay calm, don’t stress, and be pro-active in this crazy situation.
First of all, chat to your tenant now, human to human. Find out if they have been impacted in a financial, health or emotional way. See what challenges they are facing and work out if it’s likely they’ll default on their rent payments. If so, talk about reducing their rent for a set period, and even work out a plan to catch up the payments when things return to normal for them financially, or set a time to review the situation. Even if your tenants are not affected now, you could look at putting a contingency plan in place in case they encounter financial difficulty down the road. Just make sure everything is clearly documented and countersigned by both parties. If your property is looked after by a property manager then talk to them. Find out of they have already heard from your tenants or have already put out any general emails about this. The main thing is to make sure you keep up the lines of communication and let the tenant know to talk to you before defaulting on any rent payments. This open, honest communication with your tenant will be appreciated and will most likely pay off in the future.
If you’re concerned that you’re not going to be able to make your financial obligations, whether it be because the tenant can’t pay the full rent, or you have your income cut, then talk to the financial experts. Go to your bank and see what they can do to help. Most of the banks are offering interest rate cuts, or the option to switch over to an interest only loan for a shirt period of time. Depending on your loan type, you may have a redraw or offset facility you can use. You may be able to take out a supplementary loan using the equity you have in your property to help pull you through.
If you haven’t had your home loans reviewed for a while, now could be the perfect time to look into this. Seek the expertise of a mortgage broker, rather than a bank, for unbiased advice, They will be all over the best deals to suit you and your personal situation. There may be a better loan with another institution that puts you in an a better overall position.
Whatever you decide to do, look into the long term affects any of these things could have on you. Taking out extra loans, not being empathetic of your tenants situation, or pressing pause on repayments now, just to make your feel comfortable, may have a greater negative impact on your financial situation down the track. It would pay to consider where you could cut back costs in other areas too, before making any big loan changes. You don’t want to end up with an empty house and high mortgage repayments in 6 months time because you haven’t thought things through.
***If you are a landlord feeling overwhelmed by the Covid-19 crisis and how it’ll affect your investment property and mortgage, then please reach out to me and I can put you in touch with an expert who will confidentially assess your situation and help you find a solution to suit your needs. ***