Nobody Knows What Will Happen When the Rent Comes Due on April 1

Mar 30, 2020

From landlords to economists to Wall Street traders, a lot of folks are fretting over what’s going to happen on April 1.

That question is hanging over the U.S. real estate industry as $81 billion in rent payments come due. Renters are warning they won’t pay, prompting property owners to have delicate conversations with their lenders. And regulators are racing to keep the wheels of finance turning in the middle of a global health crisis.

Few in the industry are certain how things will play out. Most agree that laid-off renters and shuttered retailers are suffering and that the pain is going to spread as long as the economy is locked down.

“The hardest thing right now is that nobody actually knows how bad it’s going to get,” said Willy Walker, chief executive officer at commercial real estate lender Walker & Dunlop Inc. “That’s driving everybody crazy.”

After a long economic boom in which tight housing inventory gave apartment landlords unprecedented power to raise rents, the shoe is on the other foot as the calendar turns toward April. Many local governments have placed temporary bans on evictions, and there’s a growing sense that even tenants who can afford to pay will skip rent.

Apartment owners collect more than $22 billion in rent in a typical month, roughly a quarter of the total landlords take in across major types of commercial property, according to CoStar Group Inc. In an extreme scenario, more than 25% of the households that rent in the U.S. may need help making payments because of the coronavirus, requiring up to $12 billion a month in government support, according to research from Amherst Holdings.

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Residential landlords aren’t the only ones worried. Retail owners have little leverage, since a quarantine is a bad time to find new tenants. Rental debt typically must be paid eventually, but uncertainty about the economic impact from the virus makes it hard to anticipate when people and businesses will be able to make up missed payments.

“If tenants stop paying rent, then at some point landlords can’t pay utilities,” said Scott Rechler, chief executive officer at RXR Realty, a New York-based owner of offices, apartments, and other properties. “The municipalities don’t get their property taxes or mortgages aren’t paid and the banks get a spike in defaulting loans.”

Across credit markets, regulators are racing to prepare for missed rent to turn into late loan payments. The apartment industry alone has more than $1.5 trillion in outstanding debt, said Dave Borsos, vice president of capital markets at the National Multifamily Housing Council. Last week, the Federal Housing Finance Agency said it would allow apartment owners who financed their properties through Fannie Mae and Freddie Mac to delay mortgage payments.

Real estate investor Tom Barrack argued in a series of tweets on Saturday that offering forbearance on interest owed by real estate owners and mortgage investors is central to providing relief to U.S. businesses – and that the U.S. Treasury could help stabilize debt markets by purchasing certain commercial mortgage backed securities.

American renters, meanwhile, are making their own calculations. Kansas Wade, a 28-year-old recruiter for tech companies in Austin, sent an anxious email to her landlord after social-distancing efforts cost her girlfriend her job as a hairdresser. Their property manager dismissed a request to reduce or defer part of the monthly $1,400 payment, leaving Wade to worry she’ll have to use her credit card to make rent.

While the stimulus package passed by Congress should eventually put cash in the pockets of consumers and make emergency loans available to small business owners, the economic carnage is still unfolding. Jobless claims are spiking, with economists estimating that 3.3 million Americans filed for unemployment last week.

“I’m less worried about April,” said Bruce McNeilage, CEO of Kinloch Partners, which operates single-family rental homes. “I’m more worried about May 1. Once people miss three or four paychecks, that’s when things get bad.”

— With assistance by Noah Buhayar, and Natalie Wong

By Bruce McNeilage 14 Dec, 2023
In my interview with Seana Smith & Brad Smith from Yahoo Finance today we discussed single-familiy rental rates and my thoughts on mortgage rates going into 2024.
By Bruce McNeilage 14 Dec, 2023
Owner's equivalent rental prices rose 0.5% in November , a pervasive factor in US inflation as limited housing inventory continues to squeeze homebuyers out of tightened real estate markets. Kinloch Partners CEO Bruce McNeilage joins Yahoo Finance Live to weigh in on the outlook for renters and home purchases in 2024. Home prices are "not going to go down, that's for sure. And mortgage rates might go down, but if the cost of a house goes up $10-20,000, it's a wash," McNeilage states. For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live. 
By Bruce McNeilage 08 Nov, 2023
Original Story can be found here: https://www.tennessean.com/story/money/real-estate/2023/11/08/renters-seek-new-options-in-nashvilles-tight-housing-market/70652968007/ Charlene and Timothy Stratton traded in their 4-acre Illinois ranch for a rental home in the Nashville suburb of Spring Hill and, so far, they love the new low-maintenance lifestyle. Like a growing contingent of Americans, they chose to rent a single-family house rather than buy a home or rent in multifamily apartment buildings. "We lived in the country all of our lives with horses and cows," said Timothy Stratton, a retired airline mechanic. "But we wanted to rent because we’re looking at our age. We did a lot of research and decided this will work out for the time being." Families like the Strattons increasingly want the mobility and limited commitment of a rental, with the privacy and space of a single-family home. Meanwhile, many families are also being pushed out of the tight housing market. Housing affordability plummeted to historic lows this year, with only 23% of U.S. listings in April considered affordable to households earning $75,000 or less, according to the National Association of Realtors. In response, real estate investors are betting heavily on new rental properties and, increasingly, on standalone units — especially in the South. More than 61,000 fully and semi-detached single-family rental units are under construction in Southern states as of September. In comparison, 28,000 units are in production in the Western U.S., the next-busiest region, according to RealPage Market Analytics. Those units include single-family homes, townhomes, rowhomes, quadruplexes and duplexes. Single-family rental communities are increasingly concentrated in subdivisions with on-site maintenance, rather than in homes nestled in for-sale housing neighborhoods. The Nashville market has the ninth-highest number of in-construction, build-to-rent homes with 2,745 units in the pipeline. Phoenix tops the list with 21,676 units underway, a RealPage analysis in August found. "Construction isn't going fast enough in Nashville. If they built four or five new build-to-rent communities, they would fill them up immediately," said Doug Ressler, the business intelligence director of Yardi Matrix, a real estate data firm. "We really expect Nashville to continue to see growth here." Rent vs. own: 'More house for your money' Charlene Stratton filled the three-bedroom house with festive seasonal crafts and artwork she creates in her home studio. Renting isn't perfect, but there are real perks — like, when the air conditioner stalled on a Saturday afternoon in the middle of summer, the landlord offered to put them in a hotel until maintenance could fix it that Monday. "When something goes wrong, we just call them," Charlene Stratton said. "It's great." The Strattons live at DerryBerry Estates, one of the first of its kind, built in 2019 by Kinloch Parners. The 34-home community sits on former pastures with views of Spring Hill's rolling green landscape and rose bushes in the front yard. Local development companies like Kinloch Partners of Nashville and Franklin-based Chartwell Residential and Barlow Builders have made stakes in the industry. "In 2008, I had no competition. Now there are six or seven players in the market," said Kinloch Partners Co-founder Bruce McNeilage, who sold much of his inventory to American Homes 4 Rent and expanded to South Carolina. "We're 99% leased out." McNeilage said he prioritizes creating a calm, supportive community with competitive prices. Rents at DerryBerry Estates ranged from $2,300 to $2,600 for homes with three to five bedrooms in September. "People are starting families later in life and COVID-19 has allowed people to work out of their houses so people are moving farther out," McNeilage added. "Housing prices are going up and interest prices just doubled. You can get more house for your money if you get farther out." Housing in Nashville area: 'Can't build them fast enough' Chartwell Residential, a local real estate firm specializing in multifamily apartments, is now building out its first single-family rental home community. https://www.tennessean.com/story/money/real-estate/2023/11/08/renters-seek-new-options-in-nashvilles-tight-housing-market/70652968007/ https://www.tennessean.com/story/money/real-estate/2023/11/08/renters-seek-new-options-in-nashvilles-tight-housing-market/70652968007/ https://www.tennessean.com/story/money/real-estate/2023/11/08/renters-seek-new-options-in-nashvilles-tight-housing-market/70652968007/ https://www.tennessean.com/story/money/real-estate/2023/11/08/renters-seek-new-options-in-nashvilles-tight-housing-market/70652968007/ https://www.tennessean.com/story/money/real-estate/2023/11/08/renters-seek-new-options-in-nashvilles-tight-housing-market/70652968007/ https://www.tennessean.com/story/money/real-estate/2023/11/08/renters-seek-new-options-in-nashvilles-tight-housing-market/70652968007/
By Bruce McNeilage 15 Jul, 2023
NASHVILLE, Tenn. (WKRN) — High prices and high-interest rates have kept many from buying a single-family home in a quiet suburban neighborhood. But what if you could rent one? Developers say they are seeing a big demand for build-to-rent communities. Upon first glance at the DerryBerry Estates subdivision, you might assume the single-family homes are for sale, but they are not—each one is a rental. “People are very happy with what we are providing,” said Bruce McNeilage, CEO/co-founder, Kinloch Partners. Bruce McNeilage built DerryBerry Estates in Spring Hill a few years ago. He saw some families struggling to afford a single-family home in the suburbs, but still craving that lifestyle. “Their kids are getting older, they want to be in good schools, you want to ride a bike around, and you just can’t do that in an apartment complex.” No sharing walls at DerryBerry Estates, or Fairview Station, the other rental home community Kinloch Partners built in western Williamson County. DerryBerry Estates subdivision has 41 single-family homes with 3 and 4 bedrooms and rents in the $2,300 to $2,500 range; and all the trappings of the suburban lifestyle. “They have front porches, they have covered back porches, two-car garage. They have all the amenities and appointments on the interior that one would want in a house for sale, but these are available for rent.” Who would be interested in an all-rental community? McNeilage said his tenants are often folks new to town testing out the neighborhood, young families who can’t afford just yet to buy, those looking for a low-maintenance lifestyle, and senior citizens, which make up 10% of his tenants. “They don’t want to live in an apartment and share walls with someone. They want to live in a single-family home in the suburbs to probably be real close to their grandchildren.” McNeilage has a couple of rental communities in Middle Tennessee, as well as out of state. And with housing prices staying high, he sees the popularity of rental communities sticking around “I could build 100 houses. I could build another 100 houses. I really have a demand that I can’t keep up with.” McNeilage said that his tenant turnover is lower than an apartment complex. People will stay in his homes 3-4 years on average, but for apartment complexes, it’s 1.5 years. 
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