Written by Diane Kennedy via The Organic Prepper blog,
Family and family owners, defined as real estate investors who own 10 properties or less, own about half of all rental housing across the country. And, according to CoreLogic, a real estate data company, the number of small investors is increasing. In 2018, they were responsible for 60% of all purchases, compared to 48% in 2013.
Let's be clear who is the target of the House's latest bill, "Taking responsibility for workers and families" will be, at least as far as homeowners are concerned.
It's the mother and the pop at home.
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These are the people who have often invested their life savings in a few properties in the hopes of increasing their assets or creating retirement income to supplement their lackluster social security benefits.
And now the owners of mom and dad are under attack.
First, there was emergency rental and mortgage cancellation legislation.
It all started with a title other than a title, like an archery called "Emergency Legislation for Cancellation of Rentals and Mortgages" sponsored by Representative Ilham Omar. You can read this bill here.
This bill first raised the idea of a Congressionally mandated cancellation of payment for all rentals from April 2020 and for the duration of the emergency. national. During this period, no one could be evicted for non-payment of rent. You cannot accumulate interest or late payments.
Homeowners can ask for help with payments, as they now bear most of the costs of maintaining a property, including mortgage interest, property taxes, insurance, HOA fees , repairs, etc.
But there is a catch.
Under the "Mortgage Cancellation and Emergency Rent Act", if the landlord receives assistance, he must accept certain conditions:
Requirements – Owners who receive relief funds under the HUD program must accept the following fair rental conditions for a period of 5 years:
I. a rent freeze;
ii) just cause evictions;
iii) compulsory documentation with any expulsion for a valid reason;
iv. no source of income discrimination;
v. Coordination with local housing authorities to make new vacant positions eligible for voucher holders;
seen. Providing 10% capital to tenants; and,
vii. without admission restrictions based on:
identity or sexual orientation,
gender identity or expression,
conviction or arrest file,
credit history, or
Immigration status.
If you are a mother and owner, congratulations! You have just received a new partner! It is your tenant who has not put a penny on the property and has lived there for free for months.
This bill did not go much further, but unfortunately, some ideas are back.
Now there is the law "Take responsibility for workers and families"
A new bill was tabled on 12/5/2020, the "Workers and Families Liability Act". You can read this invoice here.
There are over 1,400 pages in the law and it would take a lot longer than this article to carefully analyze each piece. So let's focus on the part that affects the owner of mom and dad.
Start with rental. If you own a subsidized home, the tenants are not required to pay, but it seems that the owner can get help with the payments.
There are also a few small amounts set aside for the regions with the worst unemployment rates. But this is not a lot of money and the rules are not very clear. Without clear guidelines, it looks like money never ends where it is intended.
If you have regular rentals, be prepared to subsidize your tenants.
Unfortunately, there is much less help if you have regular rentals. The following provisions apply to all properties, called “covered accommodation” in the law:
"The term" covered accommodation "means accommodation occupied by a tenant: (A) under a residential lease; or (B) without a lease or with a lease that can be canceled at will under the law. State ". (see page 531)
Fundamentally all Residential rental buildings fall into this category.
Here is what is said:
The owner of covered accommodation may not file or have filed with the competent court a legal action to repossess the covered accommodation of the tenant, whatever the cause, except when a tenant commits a serious crime which threatens the health, life or safety of other tenants, owners or employees of the property on which the covered dwelling is located.
(see page 531)
The period to be covered extends from the date of issue of the invoice up to 6 months. after the end of the emergency declared on March 13, 2020 (page 526).
This means that the landlord cannot evict a tenant who does not pay. It also means that the landlord cannot evict a tenant who destroys property, rips out all appliances, equipment, furniture and flooring or threatens other tenants. It also means that you cannot be deported for minor crimes. You can only evict if there is a serious crime which threatens your life or that of other tenants.
It & # 39; sa fairly wide window.
This is what it means for the owner.
But consider what this means for the owner of mom and dad. Not only did you save for the deposit, giving up the luxury you would have liked, but also on weekends and nights to keep the property.
According to data from the National Apartment Association, Real Capital Analytics, and the Institute of Real Estate Administration, for each dollar of rent received, the following are attributed:
-
39 cents go to mortgage
-
14 cents goes to property tax,
-
27 cents go to ongoing maintenance,
-
10 cents goes to major improvements, and
-
Only 9 cents go to the owner.
There is a promise of tolerance on the invoice. However, it is not as comprehensive as one would expect. It only concerns single-family homes (defined as properties of 1 to 4 units) and mobile homes. The tolerance period would be essentially the same as the rental period. However, the amount of the tolerance must be reimbursed. There are certain guidelines for extending the loan period or reducing the rent.
So while the tenant can avoid paying and cause physical damage to the property, the landlord will still have to pay property tax, insurance, HOA fees, repairs, etc. And you will have to catch up with the payments one way or another at the end. There is no obligation for the tenant to pay late payments, unpaid utilities or damages.
If you have a multi-family unit (defined as 5 units or more), your tenants have the same rights not to pay you and not to be evicted, but you have an even shorter time limit to pay the mortgage payments late.
Then there is this problem for investors.
There is another caveat in the real estate section. This concerns investors in the secondary real estate market. They really make the market work. When you, as a home buyer, purchase a home with a loan from your local bank, the local bank should package and sell that loan as soon as possible. The local bank earns money by making loans, not by keeping loans. The market works by insuring mortgages.
Congress is warning us that home loans may not be a good investment. Starting on page 565, "Investors in mortgage securitizations are or should be aware of managers' small capitalization, liquidity expectations which the terms of the service contracts will be enforceable in the event of a national financial crisis
Since small Mom and Pop property investors often rely on mortgages for their small investments, this could be another blow as investors are warned of the investment. by law of Congress, Not less.
To date, this is only a bill. Some or none of this can happen to the law. However, this is something to watch out for as things change quickly.
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