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Hardship of Paying Rent During the Lockdown


May 19, 2020

Many low income individuals who live paycheck to paycheck all of a sudden find themselves out of work. The government passed a stimulus program that roughly translates to $1,000, but many people are still struggling to pay rent in areas where the rent is between $500-$800/mo.

If too many people do not pay rent, landlords have to shoulder the weight. This can lead to unprofitable investments, which should lead to increased supply in the real estate market. However, we do not see an increased supply, in fact the opposed has happened.

One reason could be that real estate investors are not short term focused and usually have enough cash reserves to withstand these turbulent times. Banks have also laxed their credit reporting for late payments. The payments still need to be made, but perhaps onces the encomony is back to normal the investors can collect the past due rents and pay their late mortgage payments without any negative credit impact.

This goes to show that the government is relying on the flexibility that is provided by investors who have either cash reserves or are in a more favorable position to make delayed payments with a higher likelyhood.

The more investor owned properties there are at any given time the less risk in the real estate market during times of high unemployment.


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