Asset Class & Market Risk With Coronavirus

[Russell Brazil]

Obviously we are still out a week from April 1, when most tenants rents are due for the first time since the coronavirus crisis has started, but Im curious of who believes that they will have issues, and who seems to be ok.

Like many landlords, when the crisis started, I was, as I am sure many still are, anxious about whether their tenants will be paying rent.  I took the initiative to reach out to my tenants to see who might have an issue paying the rent.  I have 13 tenants currently, and 1 expressed they might have an issue, while 12 of them are pretty good. Id describe the majority of my rentals as sort of B+ quality rentals in A- locations/markets, with a few of my rentals as A quality in B class areas.  The majorioty of my rentals are in DC suburbs, while I have some in the Charlotte suburbs. 

So Id love to get a sense across asset classes, markets types, different markets what people are experiencing.  

This isnt either a post looking to shame or promote asset classes or markets......but rather for us to pool information to get an understanding of what other people in similar asset classes and markets are experiencing.  If you see that a bunch of people are in the same asset class as you, and things dont seem so bad, maybe you can breath a sigh of relief. If other people in the same asset class as you are having problems, maybe you know keeping cash on hand then is pretty important.  Lets try to pool this information so we know how best we can each prepare. 

[Account Closed]

I self-manage 5 rentals (single units), mostly B class. I bought them during the downturn. I reached out to my tenants last week with this text message “Hi ______, hope you and your family stay safe and healthy during this coronavirus fiasco. Let me know if you need any help. Minh” - All said they’re doing great and no help is needed. One tenant said he will need help as he hasn’t been working the whole week. 

This tenant has been with me since 2009. He’s the former owner of the house where I bought it as a short sale in 2009 for $215k. I refinanced it last year. Appraisal came in at $770k.

A few months after I bought this $215k house, the tenant asked me if I could lend him $10k so he could buy a catering truck. Since I got a great deal on the house and could afford to lose $10k, I lent him the money. He’s married with 5 small kids. He paid me back over the next 12 months with 3% interest. 

I bumped into his oldest son last month. The kid just graduated from Stanford University. How cool is that? I texted my tenant and said Congratulations. He was so proud and replied with a big thank you. I am not too worry about this tenant. I am 100% sure he will make me whole. 

My partner and I own over 80 doors (all multifamily) in downtown San Jose. They’re probably class B- to B+. We got all March rents. April will be interesting. We have a property manager so we’ll find out soon.

I stress-tested our multifamily portfolio. We can sustain 20% in loss rent indefinitely. Anything more than 20%, and it will start to hurt. Hope this coronavirus calamity doesn’t drag out too long. 🤞