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  • Rick Martin

THE FALSE SENSE OF REALITY THAT THE STIMULUS PACKAGE HAS CREATED

This article is not political, and let me also say that I am not a very political guy. Still, at the risk of sounding political – America is getting its first taste of socialism, and some Americans might be finding it tastes pretty good. Put yourself in your workforce housing renter’s shoes. He's at home enjoying another episode of Jerry Springer or Oprah, and his former boss calls: "Hey, we have a gig. I need you to dig a ditch, and then lay a brick wall for me." The renter does not sit up in his recliner. Instead, he quickly does the math and realizes he is making more from his Lazy Boy than from accumulating calluses on his fingers and hands doing the hard labor he had been doing before the pandemic.

Are cable bills forgiven with the stimulus?

Or perhaps another renter waits tables at a restaurant that is going to reopen its doors this week. She recalls some disrespectful clientele who treated her like a servant, only to stiff her on the gratuity. Both of these renters are pulling in as much or more with the extra $600/week combined with the stimulus check. They think to themselves, "I could get used to this.


On the flip side, what are some of the property managers and syndicators thinking out there? Gee, you know what – In April, we were over 93% in rent collections, and in May, we are still above 90%. Maybe this whole virus thing isn't as bad as we thought. Perhaps we will ramp up those renovations after all, and we will start bumping those rents up in highly rentable June and July. What happens next Fall and Winter, after the stimulus money has dried up, and those not-so-rentable months come? The Fed has done what it had to do. It had no choice. You cannot demand that people stay at home, cripple the economy, and then supply them with nothing (man this is sounding political. It's not!). But by providing this temporary nest egg - this paid staycation - I fear that tenants and landlords alike are feeling a false sense of reality; Paychecks are coming, rent is getting paid. The truth is that there is still so much uncertainty, and we all need to be on guard. The stimulus funding isn't forever.


Fortress Federation had two excellent deals on the table just before the crisis. Once the virus hit, nobody – in their right mind - could take investor money or put in their own money for that matter. We took an investor poll right at the peak in mid-March, and investor morale was understandingly low. We didn’t want to take their money, and they didn’t want to give it. Large sums of earnest funds were lost. But think of the amount of investor dollars that were – potentially - saved (I say potentially because we still don’t know the outcome of those deals), not to mention syndicator reputations.

What we have to keep an eye on now is the timing and the "life" of this stimulus package. Healthy portions of society may be choosing not to go back to work and milk their unemployment compensation. Those healthy portions of society might be feeling a healthy dose of reality in four to six months, when their checks have run out, and then will face no other option other than to find work. Will work be available? Many apartment buyers have been granted unprecedented four to six-month extensions on their closings, but this may be fools gold. Four to six months from now could be when the stuff hits the fan. It is crucial to keep an eye on markets that may be more impacted by this event, and meticulously assess the employer base of your tenant.


Is the sky falling? Probably not, but it is essential not to fall victim to the here and now of the Stimulus Package, and take heed of what will occur once it has run its course. The Coronavirus has caused the Fed to take necessary action. While it has helped millions, it has created a false sense of reality, or as my young son likes to call it, a “Corona-cation" (can the school year-end already so that I can finish with homeschooling? I need a summer vacation). Tenants and landlords need to leap-frog these “fake” months in their minds and leave behind the false sense of reality and prepare for, just, reality.