Happy New Year to our clients, residents, staff, friends, family and our entire JWB network! 2020 certainly was a year like no other. Now that we are wrapping up the year, we thought it would be a great opportunity to take a deep breath, look at the effects of COVID on rental property investing, and share some insights into where we see things heading in 2021.
One of the best things about being a part of JWB is that we are truly right beside our investors when it comes to what we sell. As a company, we have been investing in single-family rental properties in the same Jacksonville neighborhoods as our clients. This is important because when we started to fully understand the impact that COVID would have on our way of life and our economy, we were able to dedicate our full energy to understanding the unique challenges we would face in our specific neighborhoods, come up with solutions, and also set appropriate expectations for clients and residents.
Before we dive into the specifics on performance from JWB’s perspective, let’s take a step back to March 2020 when, as a country, we first started to fully comprehend the effects COVID would have on our way of life. Investors in all asset classes were understandably concerned and shellshocked when we started to extrapolate those concerns onto our US economy.
The stock market responded by dropping roughly 26% in just four trading days in March. While the stock market has since recovered, the sudden plunge left many investors, who saw much of their wealth hang in the balance, searching for a better, more consistent alternative. However, due to the lowest interest rates in history, bond yields dropped below acceptable levels for most investors. This has paved the way for investors to rush to rental property investing.
Rental properties provide the monthly positive cash flow that bond investors seek while also providing significant upside that typically attracts the equities (stocks) investor. Access to debt with incredibly low-interest rates has increased the estimated returns on investment for rental properties in markets across the country, including Jacksonville, FL. Many investors and analysts agree that single-family rental properties, particularly those located in the southeast region of the US, have performed as well or better than most investing alternatives. Now, let’s take a closer look inside the walls of JWB to see how our clients have performed throughout the pandemic.
JWB’S RENT COLLECTION & EVICTION/EARLY MOVE-OUTS RATES REMAIN STRONG
When the federal government imposed an eviction moratorium in March of 2020, many investors wondered if residents would continue to pay rent. However, rent collection during COVID has remained incredibly strong. As you can see on the chart below, JWB has collected 98% of rents through the first three quarters of 2020. This is in line with our historical average of rent collection. Compared to a non-COVID world in 2019, JWB’s rent collection is just .7% lower in 2020. This reflects the consistent nature of our asset class as well as an incredible effort by the JWB Property Management team in overcoming obstacles and building lasting relationships with our residents.
The data regarding evictions and early move-outs is also reflecting normalcy in terms of JWB performance. As of the time this article was written, the government’s moratorium on evictions is set to expire on December 31, 2020. Even before the anticipated expiration of the moratorium, landlords have been able to file evictions for non-payment to start the court process here in Jacksonville. The resident then has to meet certain requirements in order to qualify for the eviction moratorium. Navigating this space to show both compassion for the resident who may be struggling, as well as focus on hitting our return expectations for our clients, has certainly been challenging. However, we always believed there was a way to do both and our numbers are reflecting this.
Because we have been able to start the eviction process for those who are not paying rent, we are now able to have a better indication of how eviction and early moveout performance compares to non-COVID times. JWB currently has 3,466 active leases under management. As you can see in the graph below, only 41 residents are currently in an eviction process (1.2% of all leases) while 54 are in a stipulation agreement (1.6%.) A stipulation agreement is a payment plan authorized by the court that temporarily halts the eviction so long as the resident continues to make the payments on the dates scheduled.
This means over 97% of JWB residents are current on their rent payments. For those who are in the stipulation agreement process, the vast majority have small balances owed. This means that either they did not fall behind many months of rent, or they have been actively paying off the back rent quickly. Out of the 54 residents currently in a stipulation agreement, 48 have balances owed of $3,000 or less.
The key takeaway from these numbers is that JWB’s rent collection and eviction/ early move-out numbers have remained strong throughout the pandemic. Residents who miss a month of rent payments are treated with compassion while the courts also allow JWB to start the eviction filing process to protect our owners. As those residents work through payment options, including stipulation agreements, our overall percentage of evictions and early move-outs should fall right in line with these rates in a non-COVID world as we move into 2021.