Rentals

With four rentals, we are basically running a small business, with income and expenses, profit and loss. We don’t actually make very much with the rentals, although that’s partially due to less-than-ideal management (we’re our own management, lol). Our two big mistakes are buying and selling too frequently, and investing in upgrades. We refuse to let the houses fall into disrepair like so many other landlords do. But there goes our profit.

We barely make money even in a good year, and now, like nearly every other small business on the planet, we are being hit hard by coronavirus knock-on effects. Two of our four tenants have given notice, and a third has needed a temporary rent reduction.

Typically we wouldn’t have any trouble getting new tenants in, but we are worried because so many people in the rental market have rapidly changing situations with their income. Just because they might be employed today, does not mean they will be employed tomorrow.

Many cities (including Santa Fe) are no longer allowing landlords to evict tenants for non-payment if they are impacted by the coronavirus (and who isn’t?). They can stay rent-free, meanwhile, our expenses don’t go away. This makes sense for the renters and for our country as a whole; we don’t want everyone losing their homes. Problem is, John and I aren’t a big real estate holding company with funds sloshing around to support a bunch of families rent-free, we’re just mom and pop on a single income.

So, like most of the rest of the small businesses in the world right now, we’re going to try to cut back to reduce our risk and exposure. We’re going to try to sell the two rentals that are coming empty. It may be too late – the housing market is freezing up. Almost no one is buying or selling right now. Also I’m hearing that it’s taking much longer to close than normal.

Up until very recently, the market has been strong here. Prices are high and many houses have been going under contract within a day, or even getting multiple offers. But now everything is grinding to an abrupt halt. There’s currently very little on the market, so that’s good for sellers. But buyers are getting cold feet. What’s next? Will the people who are losing their jobs be forced to sell? Will the market glut and prices fall?

The first house we’re going to put on the market is one of the three in Albuquerque. That tenant is out, it’s been cleaned, and the yard guy is working out there this week. The marketing photos are scheduled for tomorrow, and we should have it listed by this weekend.

The second house we’re going to put on the market is the one in Santa Fe. Those tenants don’t need to be out until the end of the month, and realistically, sometimes tenants run a bit late getting out. So I expect it will be at least until mid-May before we can get that house on the market. Who knows what the market will be doing by then!

Note that I said, “We’re going to put on the market” not, “We’re going to sell.” They may or may not sell. We do not want to take a big loss if prices start to fall, and we don’t want them just sitting empty on the market for very long if it turns out there are no buyers right now. If we can’t sell them for a fair price quickly, we’ll take our chances and try to get good tenants in.