4 reasons small landlords are selling their properties fast
All over the U.S., small landlords are selling properties like hotcakes. Who can blame them?
The market is hot in just about every state and the supply, which wasn’t that rich before last year, is steadily dwindling. Bidding wars are jacking up the price of homes by over $70,000 in some cases.
Although the opportunity to make a profit is quite substantial, there are at least four other reasons that small landlords are selling their properties these days.
1. They’re not willing to risk a market crash
Dodging a market crash is the number-one reason small landlords are selling their properties fast. Although experts seem to agree that the market is currently in a bubble, nobody really knows how soon that bubble could burst.
All we know is that, eventually, something must give. Property investors who want to get out quickly still have to go through the usual process of requesting inspections, ordering an appraisal, and possibly performing key repairs.
All of this is time-consuming and costly, of course. Fortunately, there’s another option: selling to a company that buys homes as-is. That’s exactly what many Long Island property investors are doing.
Owners are selling their homes as-is, which bypasses the necessity for inspections, repairs, and appraisals. Selling fast is the best way to get out of the housing market if you can’t afford to ride out the pending major crash.
2. They’ve received an offer they can’t refuse
Not all small landlords intentionally put their property on the market. Some private landlords have received unexpectedly generous offers they can’t refuse.
In the uncertain economy we’re seeing today, selling is a sharp move. It’s not just the housing market that’s in trouble; to some extent, it seems as if our society as a whole is crumbling.
We’ve been seeing shipping container issues, product shortages, truckers going on strike, and thousands of people laid off from their jobs. In the current roiling economy, many small landlords dare not pass up an opportunity to obtain a hefty chunk of cash.
3. They can’t afford to lose more rent
Ever since the CDC enacted the national eviction moratorium, small landlords have been suffering significant losses. Many landlords haven’t received rent in more than a year, yet some have had to spend tens of thousands of dollars on necessary repairs and maintenance.
Worse, landlords who included utilities in the lease have been stuck paying for their tenants’ utility services, since it’s illegal to shut them off for unpaid rent.
Landlords don’t get mortgage forgiveness
Small landlords may have been hit the hardest by the pandemic-driven economic shutdowns. While the CDC’s eviction moratorium was a relief for renters, no comparable moratorium was ever set up for landlords.
Despite having received little or no rent for more than a year, landlords still have to pay their mortgages. Some were able to get relief through Fannie Mae and Freddie Mac, but that only postponed their mortgage payments.
If they continue to get insufficient rental income, forbearance won’t help small landlords in the long run. It’s been estimated that by March 2021, 11% of landlords were forced to sell at least one property. That number is probably substantially higher today.
4. The eviction moratorium might continue
Not long after the Texas Supreme Court ruled the CDC’s eviction moratorium unconstitutional, the United States Supreme Court struck down the eviction moratorium for the same reason. It’s been argued that the CDC didn’t have the legal authority to declare the moratorium in the first place.
That seems to be true: normally, the CDC doesn’t have the authority to declare a moratorium. Former president Donald Trump granted the CDC temporary authority in September 2020, and the moratorium was extended several times over the last year.
Further moratoriums imposed by the CDC would probably be illegal. However, a new bill has been introduced to Congress that would amend Section 361 of the Public Health Service Act to classify evictions as a contributing factor in spreading the COVID-19 virus.
In other words, this bill is designed to establish a permanent ability for the CDC to enact a federal moratorium. If passed, the bill would grant the CDC the legal power to implement an eviction moratorium at its discretion.
If this happens, small landlords will be out of luck for collecting rent. Those who can’t afford to take the risk are choosing to sell fast.
Do you have a property to sell? Now may be the best time
If you’re a small landlord and you don’t want to wait out the pandemic to see how the housing market and economy will survive, you’re not alone. Many small investors are cutting their potential losses while they can.
If you lack sufficient funds to carry you through another possible shutdown, think hard about selling some of your investments in the near future to avoid losing them someday.