The Prime Minister’s announcement of a moratorium on evictions for tenants affected by COVID-19 was greeted by a collective cheer from tenants and a collective groan from landlords.
It’s important to look at both sides of the picture here because we’re all in this together, right?
For most of us, our two biggest expenses are our rent or our mortgage repayments. Sometimes landlords have both. They may own an investment property but still be renting a home to live in, so they could be hit twice as hard if their income has taken a hit.
In a normal world, an investor secures a mortgage to buy an investment property. The tenant pays some or all of that mortgage off by paying rent each week or month. If the tenant stops paying the rent, the mortgage won’t be paid or the investor will have to find another way to pay the mortgage – which could result in financial hardship for the property owner, which could result in foreclosure or sale of the property. Neither party wins.
The key here, for both parties, is communication and negotiation.
If you’re genuinely affected by COVID-19 or soon to be affected, the first thing you must do (if you haven’t already) is to contact Centrelink. The Federal Government have released a COVID-19 stimulus package and there are options available to gain financial support plus you may also be eligible for rent relief. Find out what assistance is available to you and apply for it.
Next, put together a spending plan and figure out ways to reduce your spending. Talk to your utility suppliers to see about getting on the cheapest plan, talk to your bank to see if you can switch to the lowest interest credit card and lowest (or no) fee account, talk to your health insurer – talk to everyone you pay and find ways to reduce your expenses.
Finally, notify your landlord or property manager of the change in your income and discuss your options and timeframes. Ensure that you have evidence of how you’ve been affected by the pandemic. Ask your employer for a termination letter or written confirmation of the reduction in your hours. If you’re self employed, your accountant may be able to provide a letter confirming the change to your income.
Come to an agreement of what you can pay and how you can repay the shortfall once things return to normal.
Don’t assume that the first person to claim rent relief from should be your landlord. Their mortgage repayments won’t be waived, so you shouldn’t expect your rent to be waived.
The goal should be to come through this with a good relationship with your property manager and landlord without massive debt and with a good rental history.
Just like I’ve recommended for tenants, if your income is affected by COVID-19, talk to Centrelink and find out what government assistance you may be eligible for as part of the COVID-19 Federal Stimulus Package. Then figure out how you can reduce your spending.
If I’m your mortgage broker, speak to me and find out what your options are to either hold or reduce your mortgage repayments. You may be able to switch to interest only for a short period, you may be able to reduce your interest rate or you may need to suspend payments. Whichever option you take, make sure you know the full ramifications of your decision.
Also, if your tenant is claiming financial hardship, talk to your insurer and discuss your options under your Landlord’s Insurance policy.
Whichever side of the fence you’re on, we need to remember to play nice because we’re all in this together.