Here’s what we’re seeing right now
Who would have predicted that a virus could’ve had this much of an impact on us? I didn’t see it coming.
So, what are we seeing right now?
April was good as far as rentals go. We are at about 90% on our collection rate. What I wrote to you about talking to our tenants and being proactive really proved to be effective and beneficial. What we found at the time was that most people were still working. (Remember, this was late March when we were calling people and was before Gov. Kemp gave the shelter in place order.)
As we talked to our tenants, we were glad to hear that many of them had already filed their taxes and had set their refunds aside for living expenses. We even had one who had a few months’ worth stored up. That was good news. Our people were all healthy and optimistic.
Of the 10% we hadn’t collected from, two needed to be modified with different payment dates, one needed a rate reduction, and the last was unable to pay due to Covid-19 issues.
As far as stimulus checks are concerned, none of the ones who had payment issues had received those funds yet.
At the time of this writing, we had two flips scheduled to sell within the week. One, which was supposed to have closed at the end of March, just got pushed back for the third time to next week. That means if it does close, we went almost a month past the contract date. This is supposedly due to the mortgage company employees having issues working from home.
The second was supposed to close today. It was a full-price offer, with minor closing costs. We got through due diligence and did some pretty impressive fixes — like replumbing the house. But all was good, and we were ready to get it sold.
Like I said, we were supposed to close that house today. But I just got off the phone with my selling agent, who was calling let me know that our buyers couldn’t get a mortgage and were terminating the contract.
I don’t think we have ever had someone terminate the contract on the day of closing. And it has been a while since we’ve had someone terminate the contract due to financing issues, especially after they had passed their financial contingency.
If you don’t know, the financial contingency is the part of the contract that allows the buyer a certain amount of time to apply for a mortgage and terminate the contract if they can’t qualify. Having that date keeps the buyer and the mortgage company motivated to get things done in a timely fashion and make sure the sale of the property is not hindered by someone who can’t actually purchase it.
This one fell all the way through, and now we get to go back on market at a time where people are getting laid off and furloughed for at least a month and possibly two.
That thought brings on a sinking feeling.
The good news is that that house appraised well. So, once we get it back under contract with someone who can get a mortgage, we know appraisal will not be an issue. We will also get the $500 earnest money deposit since the buyers went beyond the time allotted in their financial contingency before they terminated. But that money doesn’t even pay for half the interest we incurred on our loan for the property while we were under contract. So that money is nothing to get excited about.
Looking forward to May, we will need to touch base with our tenants just like we did for April. The shelter in place order caused many of them to be out of work this month, so May’s collection rate could possibly drop. That’s why now is the time to be even more proactive.
And that’s what we are seeing.
Joe and Ashley English buy houses and mobile homes in Northwest Georgia. For more information or to ask a question, go to www.cashflowwithjoe.com or call Joe at 678-986-6813.