COVID-19 Vacation Rentals / Hospitality Industry Update March 29, 2020 – Long Term Rentals
How to handle your long term rentals in this crisis! March 29, 2020 Updates on COVID-19 / Corona Virus updates for the Vacation Rentals / Hospitality from Micah Berg Founder & CEO of https://www.thevru.com/ and Justin Jones Founder and CEO of https://imegonline.com/ In this update we we talk about ideas to help with your long term rentals during the market landscape changes with the COVID-19 outbreak.
You can get FREE access to https://www.thevru.com/ by using discount code covid19 at checkout.
Micah Berg 0:06
Hey everyone, welcome back. Justin with internet marketing expert group and Micah here with real joy vacations and vacation rental University doing another daily update about the coven, and vacation rentals. However, today is a little bit different. And so today we wanted to talk about long term rentals like residential type rentals and real estate sales. Because it occurred to me after I was looking at my own business and talking to a couple others that most of us sell real estate, or have teams that do that and little side companies or sections of our business that are residential real estate like long term rentals. So it’s been easy in the big cluster that we call vacation rentals and the phone calls and the chargebacks and all this stuff that we’re dealing with to forget about those two businesses. So
Today, we wanted to cover that and just kind of have a conversation. make you aware, Justin, I know you own several long term rentals yourself. And so you have direct kind of feeling on some of this. And
Justin Jones 1:14
you look nice as this, then that was awesome. Actually, I’m more worried about it then then than any of the other businesses right now. Yeah, totally, for good reason. I mean, for good reason. Like,
Micah Berg 1:25
I mean, if if vacation rentals are going sideways, and all of our people and all of our areas are unemployed, and you own or manage property in the same area have vacation rentals, the logic that maybe we’re not thinking about right now is how many people are going to be paying their rent.
Justin Jones 1:42
So yeah, we covered this and kind of the update on March 26. Talking about ways to save cash flow. If you haven’t watched that video, go back and watch it The March 26. One about and it goes on for about an hour about how to save cash flow and generate cash flows. We
Won’t dig deep into that. But deferring is an absolute right now to get prepared. Kind of what was a I haven’t read the updated one day so this may be a little off and of course, everything’s changing by the hour anything we say right now maybe 100% accurate in two hours be totally inaccurate.
Micah Berg 2:17
At least we’re cute. So yeah, hang with us anyway. So 124 doors, a multi family. All you have to do is affirm that you need help, like just basically say, I need help, and they have to help you and that’s for your mortgage, right? Yep, 120 day deferment, okay, if it’s five doors or more multi family, you have to have documented proof that you need help. So you kind of gotta wait through April to be able to say, you know, did I have a 70% 60% collection rate, which made me $10,000 short on cash flow to pay my mortgage this okay? But single family all that is pretty much still just a
Justin Jones 3:01
It has to be a government backed loan, which is about 98%. Yeah, that’s most of them. That’s most every loan, your hard money guy Guido, that you borrowed money from at 25% to buy the deal, he might not have it for
Micah Berg 3:15
you does, it’s called a baseball bat. He’s gonna defer that right out of, you know, problems. So a look at those, but that’s kind of how I read it yesterday.
Justin Jones 3:25
So you do have some great opportunities. When we talked about yesterday, I thought it wasn’t going to be very easy to do. You said it is and I did it. And it was Yeah, most banks are very eager to help and they’re happy to do it. So definitely the perfect cash flow. The second thing is the three things I was concerned about was, you know, Trump saying that we’re going to for mortgages and people go, oh, people gonna defer rent to the government is going to come in and make them do it. Well, they haven’t. Yeah. The so there’s a perception with tenants that I can defer my insurance.
can defer. Why couldn’t I defer my rent? So we’ve been eagerly sending letters out saying, here’s how we can help being flat. We didn’t take credit cards before we do now. We didn’t have a deferment plan where you could roll this out over the next 10 months is our plan. We didn’t have plans in place like that some flexibility, but being very clear by sending a letter every week for the past three weeks of your rip do. Yeah, for sure. Got in a very nice way. The government’s not helping you your rents do where you’re only helped communicate with us if you can’t pay. And here’s a vast amount of options for you. Rent still do. Yeah. So if you haven’t done that, do it quickly, because the perception may be that I don’t have to pay and by the time you’re ready to victim but you can’t because courts are closed. They may have already spent all their cash. Mm hmm. Yeah. So letting them know up front would be my kind of short version of that. Well, you
Micah Berg 4:55
touched on a couple things. One, you can’t evict them and they know So typically what I’ve found is people paying 1200 dollars a month or less are typically better attorneys than attorneys are. Because they know those laws, at least in real estate, you know, tenant law, so they know you can’t evict them and they’re going to beat up on that doesn’t mean that rents not do doesn’t mean in the future, you won’t be able to collect or it won’t be due or you can evict them. It’s could get tense now. So just be aware of that and talk them through that. The neat thing, like you said, the credit cards, you know, taking a payment on credit card, you tell them like hey, pay us on a credit card because your rents do and then you can call your credit card company and defer it and we’ll you know, work with you on that. And so you’re kind of helping them understand how to pay rent. Also, as of yesterday, if you didn’t see our podcast, it was about all the unemployment benefits being rolled out by states and the Fed there. It’s if they had a job before they’re about to potentially get a pay raise, and so on. They and then there’s not going to be a hold on it. So they literally will have no reason not to pay you they’re going to be making dude. Like I it occurred to me the other day or after our podcast yesterday like somebody at, say Waffle House or something that was making 11 bucks an hour in Florida full time gets laid off, gets $15 an hour from the state. And then or no $15 an hour from the Fed and then the equivalent of, I don’t know, another couple bucks or whatever. So they go from 10 to $22 an hour. I mean, how does Waffle House come back from that
Justin Jones 6:34
you don’t have to be looking for work. Could you not just be like, at Waffle House work and making 1011 bucks an hour and Say Bye, guys.
Micah Berg 6:43
Unknown Speaker 6:44
I mean, now you’re 22 sitting at home?
Micah Berg 6:47
Yeah, I think because I don’t know that they’re gonna require you to show that you got like laid off or fired or whatever, or,
Justin Jones 6:53
or is it only like you have to have proof you got laid off? Hopefully that’s the case.
Micah Berg 6:56
Yeah, I think I think you’re gonna have to prove it or it’ll be an electronic system. or something but to me that was just funny when not to go back and watch that if you didn’t watch that the unemployment one was good but anyways they’re gonna get that money so you need to walk them through like Hey, I know you’re telling me you’re unemployed bs like I know the laws I know you can go get unemployment here’s and so we talked to to you in that unemployment one about walking your employees through how to file do that for your tenants go ahead now and say hey, I know you might be confused and maybe you haven’t gotten laid off but if you do, here’s some information you need to follow. They can also defer their utility bills or credit card bills, their car payments, etc. So walk them through that and make sure they know that one bill they have to pay his rent, we can evict you now it will come to we will evict you it will go on your credit like we will make sure you can ever use us as a reference and we put this on your credit you know forever so and and a lot of them understand even if they know how to milk the system. They know at some point they’ll have to pay you or they will get that eviction on their plate. And they understand that it’s pretty easy and cheap now to do a credit check and an eviction check, and so they don’t want to go down that road. So I think those will protect you a little bit in that world. And then if you have property owners, same deal, call them and tell them just remind them because they’ve forgotten about this guaranteed. They’re, you know, worried about getting sick, their jobs may be at risk all this the last thing they’re thinking about is their investment property. And, you know, Florida, Tennessee, California, you know, Texas, wherever you’re managing them. So, remind them, hey, you’ve got this property. Here’s what the Fed said, you have a federally backed loan, most likely. So call and get a deferral on your mortgage, just get it get on top of that, we’re going to go ahead and try to collect rent, we’re going to submit that to you, as we always do, should be businesses normal, here’s what we’re doing with our renters to protect you as our client and you know, make yourself look good in this scenario. You just saved them a pile of money, and that helped them and you’re going to collect rent, and you’re Doing all these great things to manage their tenants if this is the time where you earn your commission for the rest of the relationship, and so do that and communicate that and don’t be shy, get on top of it.
Justin Jones 9:10
The I don’t know how this works and I don’t. I’ve never worked with this company. I’m not promoting them. This is not some paid sponsorship. I’m going to meet with them next week. I got a meeting with them. But I was just doing some research. How might I prevent this in the future? There’s a company called sure Vester. Have you heard of it?
Micah Berg 9:27
Justin Jones 9:29
It’s it. It’s insurance for rental income. And they cover they have an insurance plan for malicious damage, eviction, cost and loss of rent. I don’t know if it may be one of those things like you can’t make it going forward. But going forward, I’m looking at you know, okay, maybe I can’t execute that now because it wouldn’t cover it. But in the future, it will cover all these expenses when people don’t pay. And a couple people I’ve talked to that have a lot of rentals, use it and say they love it. Cool, though. No, I haven’t personally used it but The listeners may want to check it out and see if it’s the right fit for them. That’s kind of interesting. There was even insurance to cover those things. Now ditch your investor calm, and it’s backed by Lloyds of London, it looks like
Micah Berg 10:14
okay, so take school, take some notes on that. And then we can cover what you find in one of these podcasts. Again,
Justin Jones 10:21
it may be I talked to a guy in California that has some rentals, and he said, Yeah, and I’ve used it for years. It’s great. But also nothing at all against California got a lot of people I know and love there. But, uh, you know, things that work in California may not work where we’re at,
Micah Berg 10:36
right? Yeah, the numbers numbers are a little different in some of your data.
Justin Jones 10:40
Yeah. So but that may be something to look at, but definitely look at because, you know, if you don’t own the properties, you could defer the rent, you may end up having more cash flow than you normally do just because of all the money being injected. Yeah, definitely prepared for that.
Micah Berg 10:55
Just as a little levity. Side note here, I listened to Grant Cardone. Okay. He’s big in multifamily one his things is like, you’re not gonna want to take a phone call from somebody who’s only paying you 1200 dollars a month or something. I’m like, Bro, I love 1200 dollar a month houses in my part of Florida and he’s from Miami. And so like, of course, you know his deals 1200 dollars, not a lot. He’s in the 2000 Plus, but like, Man 1200 bucks. That’s a great property to me. I mean that
Justin Jones 11:24
Oh, it is we’re where I’m at two for sure. I mean, most of our I mean, I want I don’t really want properties where I’m at over 1200 because it gets in the spectrum of economic crisis. People go down. Yeah. So yeah, but yeah, for sure.
Micah Berg 11:40
Yeah, anyways, I just wanted a little bit of levity there it’s just kind of funny like how different the worlds are I’m sure that sure Vester Is that what it’s called, they’re, they’re probably percentage based, you know, yeah, I would imagine I think
Justin Jones 11:52
it is, I would have to imagine
Micah Berg 11:55
the last thing I want to cover, or the second thing or however we phrase that unedited videos, you gotta love it. So his real estate closings, and I don’t think people are paying attention to that. But, you know, if you have a real estate closing coming up for a second home, that’s a vacation rental, that now the owner is unsure of the bank’s unsure of. I mean, there’s so many unknowns that could happen between now and whatever that closing date is, if you haven’t been paying attention to that, because some of these are 3045 60 days out, you know, those sort of things. If you haven’t been paying attention, I mean, you may want to start having conversations with the buyers, the mortgage company, the title company, whoever, really kind of figure out how those are going to go down. Now, I think a lot of a lot of buyers are either going to postpone or just not care maybe I mean, you know, that’s kind of like a good chunk of the second home vacation rental buyers are there. They’re fairly wealthy like they can They believe this is going to come back and have faith. But, you know, smart money says if you don’t know Wait, and many of them may wait, some of them may just go ahead and walk on their $5,000. md, earnest money deposit, if you’re not familiar, they may walk on the whole deal just because they don’t know and five grands cheaper than having to foreclose on it or sell it or figure it out later. So, you know, there’s not a ton of advice there other than start the conversations, talk to the mortgage company, can they close, and then defer immediately to further mortgage for 120 days, if they’re due to close in the next week or two? That’s a good question to be asking the mortgage company who’s about to close on that and talking your buyers through that and talking the other agents through it and in figuring all this stuff out because just sitting there hoping you know, which is easy to do is not going to get that deal closed. So you know, we jump on that if you’ve been in a little bit of a lull here or confused. Those are just some action steps. Just start talking And that that one I literally came up with off the top of my head. If I come up with more, we’ll post them or we’ll do another follow up. But, you know, I think the easiest way to save some of these is, you know, working on contract extensions, and just saying, hey, let’s everybody Wait, because the seller guaranteed can defer his mortgage or her mortgage, right during this process. So if they’re deferring and there’s no costs, then it doesn’t cost anybody to wait and or talk to the buyers mortgage company that’s going to write the mortgage and ask if they can close and then defer the mortgage immediately. Or how that works. Probably we’re going to look at real estate transactions, just pausing across the board until something’s known. And then you know, your buyers, tell them hey, don’t walk from the end. If you’re going to walk from it. It makes sense to delay now and just walk later, right? But don’t, you know, don’t close that down now. Out of emotion or fear or whatever. Don’t throw your hands up and walk away. Let’s just pause this thing. You can check it out in 60 days or something, and we’ll see if you’re still uncomfortable and you want to walk. That’s your choice then but don’t walk today. And so try to preserve some of these deals, and then keep selling, right, Justin, I mean, that, to me is a no brainer. You’re a marketing guy, but I wouldn’t stop selling properties. If they’re vacant, don’t stop necessarily showing them.
Justin Jones 15:21
Here’s an opportunity. I think several of these have popped up, where people have money in the stock market, they pulled it out, and people that have money don’t want idle cash. So they’re wanting to put it into the market. So I’ve had several realtors tell me that I’m like, Man, you’re selling a ton right now what’s going on is like oh, I had a couple of investors who cashed out of the stock market and wants to put it real estate. And in the interest rates are great. property values are not you know, drastically going down yet or I don’t even know that they will Exactly. I think the market maybe need a little reset anyway of 10 to 15% to be back Closer to equanimity. But banks last week didn’t have any change on anything this week. They’re in a holding period. From what I’ve seen where I’m okay in a holding period, but not because they’re scared yet more of their like, I might be able to, like, get money for nothing unless, yeah, right. So it’s more of they’re looking at what what’s the government going to give us kind of thing? while also I think there’s a little bit of caution, but this isn’t what I’ve seen in the real estate or the banking world and Oh, 708 type thing at all. Okay. And especially with the stocks rebounding the way they did yesterday, Yeah, a little bit off topic, but we’d covered this on the march 26 update on the stocks after the unemployment where they really rebounded Well, after three, Thursday. Yeah. The 26th whatnot. Yeah. Yeah. Yeah. Um, what have you seen with the stocks today? Have you had a chance to look is it
Micah Berg 16:59
Friday Friday they were mixed basically thing I don’t I have
Justin Jones 17:05
not a drastic that inflection points holding.
Micah Berg 17:08
You know, let me pull it up real quick since I mean this is not edited so pardon me guys, but might as well get the information.
Justin Jones 17:15
Yeah, no, I was just curious because, um,
Micah Berg 17:20
so they closed Friday down 900 Okay, so they’re still above 21 six which I think I’d have to go look at the charts but I think that’s north of the bear market. So I think it’s still in bull market territory, what see how the rest of the weekend goes and what drops and all that kind of thing to see how next week goes, but you know, news has been good the stimulus package got voted on improve right before the close and trimmed off I think like half of the losses for the day. And so that was good and then they closed and I don’t want to get into what futures instead. There’s too much unknown through the weekend, but it looked good and mean that that’s a positive thing. And so anytime the market goes up 2200 points the next day, you know, you expect a little bit of a dip, the fact that it was, you know, it didn’t completely retreat and it’s still on the upward trend is a good sign. So that feels pretty good.
Justin Jones 18:17
I believe still people looking to invest is the point.
Micah Berg 18:20
Yes, definitely. And like you said, in real estate, and who cares really like, what real estate values do if the cash flows are going to be good? I mean, long term, that’s really why you buy real estate anyway, if you’re buying it for the cash flow, and for the ROI, it doesn’t always matter what the real estate values do on a year over year basis, or even ever. I mean, I have clients that literally own property for 20 years, they don’t care. It just doesn’t matter. It’s there. They just don’t care. They’re it’s all about the cash flow. All right. So that’s all I got for today. A couple of tips there. And then just another mention. So we keep this going in case you you’ve missed. It is it And Justin are paying for the monthly subscription fees for for anybody who wants to sign up for vru. So it’s www.tevq.com or DVR u.com go to the Masters monthly and when you sign up the coupon code is coded 19 co v ID one nine and that’ll give you free access to a Masters monthly for the next three, four months we’ll we’ll figure that out. But, you know, while you got time learn, send it to people who are, you know, either furloughed or unemployed, your employees, whoever if it’s free, you’ll get in there and learn and use this as an opportunity to fix your processes. Increase your game. We teach everything from how to get new owners sales tactics to owners. Marketing Justin actually does some marketing stuff in there alongside with us rates, reviews reservations operations, a full blown cleaning and inspection guidelines. All The templates that you can just take and swipe and deploy, you know, take them right from our library, all that stuff’s there. It’s everything that I built my business around, and then some best practices and stuff that other larger companies and good companies that I respect have done. So all that’s in there, and now it’s free. Thank you, Justin and I mag for doing that. And you guys be safe out there. We will check up with you tomorrow with another update. Not sure what we’re going to talk about, I kind of want to talk about leadership. Because we’re all leaders through this. So maybe tomorrow we’ll talk about leadership. It hit us a like and a subscribe, you know, turn notifications on we’re coming every day. We’ll post it everywhere. We can send you emails. But you know, go and like and subscribe and leave us comments. If you want to hear about something you want us to talk about something. Want to make fun of. You know us about something, you know, whatever. Maybe there was something weird on my face this whole time. But anyways, leave us comment. We’d love to hear from you. I’ll be safe. Have a good day. We’ll see you More