How landlords can survive the coronavirus crisis
Published 11:52 pm 7 Apr 2020
From falling rental income to a possible glut in rental properties, the COVID-19 crisis spells bad news for landlords. But by keeping up to date with the latest news and moving to protect your wealth, you can survive the crisis and be prepared for the eventual bounce-back, writes DG Institute Founder and CEO Dominique Grubisa.
The coronavirus crisis has had a devastating effect on Australian business. From the aviation and tourism sectors through to retail and hospitality, thousands of companies have been forced to close their operations and lay off staff.
With the recent release of the Government’s COVID-19 code of conduct for commercial leasing, there are now clear rules around tenants receiving rental reductions or deferrals due to suffering financial difficulty.
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Now, the effects of the crisis are filtering out through the wider business community, with landlords of both residential and commercial properties facing major hits. With one million Australian jobs lost and commercial clients unable to make lease payments, rental income is rapidly drying up.
The Government has also just released their COVID-19 code of conduct for commercial leasing. There are now clear rules around tenants receiving rental reductions or deferrals due to suffering financial difficulty. Although this supplies some relief to tenants, it represents a devastating blow to landlords, many of whom depend on this revenue source to not only pay their mortgage but meet day-to-day living costs. With no clear end to the coronavirus crisis in sight, the situation has the potential to send many property owners bust.
So what can landlords do to survive the crisis? The following three tips can help.
3 Tips For Landlords To Help Survive The Coronavirus Crisis
1. Investigate subsidies for you and your tenants
With unemployment now widespread, the government has moved fast to prop up people’s incomes. Make sure your residential and commercial tenants are aware of the JobKeeper allowance which pays $1500 fortnightly to those who have lost their jobs due to the coronavirus. It’s money that could mean the difference between whether they can pay rent or not. Individuals who don’t qualify for the JobKeeper allowance can still access the JobSeeker allowance which has now been beefed up with a coronavirus supplement. If you use a company to run your rental properties and your income has been affected by the corona situation, you may be able to access the JobKeeper allowance yourself. Meanwhile, there’s a raft of smaller state and federal government schemes aimed at reducing pressure on COVID-19 affected companies, such as fee waivers, tax assistance, and loan guarantees. Investigate these online and keep abreast of coronavirus news.
2. Negotiate with your tenants and bank
Federal and state governments are working together to implement a six-month no-evictions policy during the coronavirus crisis. However, the implication is that any missed rental payments would be payable at the end of the crisis period. While it’s tempting to grab the cash, it may be smarter to look at the long-term game and consider offering long-term tenants a rent reduction or, if you can bear it, a temporary rent holiday. Insisting on full rent throughout the crisis may be enough to send them to the wall – meaning you face an extended period of no income plus the hassle of finding new tenants in a saturated market post-Corona.
Also be sure to talk to your bank about mortgage relief. The nation’s major banks have announced landlords can defer their mortgage repayments by six months provided they don’t terminate the lease on tenants affected by COVID-19. Depending on your situation and any financial distress you are experiencing, you may be able to negotiate an even better deal with your own bank.
3. Protect your assets
With a recession and possibly a depression looming, this is a risky time for people with major investments in property. Property values are set for a major fall, the drying up of Airbnb business means thousands of holiday rentals are flooding onto the domestic rental market, and remote working could see countless thousands abandon commercial premises going forward. In the event of a personal financial crisis, such as an inability to pay bills, property ownership is easy to trace and one of the first things liquidators and insolvency professionals will chase.
DG Institute’s Master Wealth Control service provides landlords and other property owners with a means to lock their assets away against certain creditors. Relying on the so-called ‘man-of-straw’ strategy famously employed by Britain’s Vestey family, the Vestey Trust provides an iron-clad vault to protect assets. Clients find this strategy particularly effective in situations such as divorces, legal disputes and litigation.
So, remember, while the coronavirus situation is serious, there is light at the end of the tunnel. Landlords who keep informed and take proactive steps to protect their livelihoods stand the best chance of emerging from this period in a solid financial situation.
Lawyer, Asset Protection Specialist and Property Educator
Dominique Grubisa is a practising legal practitioner with over 22 years of legal and commercial experience. She is a property investor and developer, an entrepreneur with businesses in Australia and Southeast Asia, a speaker, educator, writer and published author. You may contact Dominique at firstname.lastname@example.org
This column has been written for general information purposes only. It is not intended as legal, financial or investment advice and should not be construed or relied on as such.