Managing Director at Birge & Held Asset Management. Learn more @ kentritter.com.
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Covid-19 didn’t just trigger a pandemic — it triggered a recession and the worst global economic crisis since the Great Depression. But despite the odds, our real estate investment firm has maintained its strong portfolio through above-average rent collection rates. Success like this during a global crisis, we found, can be achieved by focusing not just on our own survival and success, but by prioritizing the survival and success of our residents as well, through a proactive and uniquely human-centric approach. Here’s how:
First, A Look At The Numbers
You likely already know that the pandemic devastated the economy and many Americans’ lives. But just how widespread was that impact? In April of last year, just one month into the global pandemic, unemployment rates were at levels unseen since the 1930s, at a staggering 14.7%.
Low- and moderate-income workers were hit three times harder than those in high-paying jobs, and the ripple effect was seen on B- and C-Class assets, impacting the effectiveness of landlords’ ability to collect rent in full. As of April 2021, 1 in 7 renters reported not being caught up on rent payments, with renters of color facing the greatest hardship.
As building owners and landlords, we weren’t just worried about our bottom line — we were worried about how our communities were faring and the role we could play to help. Our portfolio has consistently beaten the national average month-to-month by about a percentage point, with just over 95% of our residents able to pay rent in full over the last year. The national average, determined by the National Multifamily Housing Council’s Rent Payment Tracker, dipped as low as 93% during the midst of the pandemic.
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Emphasis On Affordability
We were able to maintain these consistently above-average rent collection rates not by luck, but by careful, strategic planning. First and foremost, our firm is dedicated to buying high-quality, durable properties in ideal areas, which feature growing career opportunities and ample access to local amenities. In the acquisition process, we focus on B-Class properties so that we strike the perfect balance between affordability and quality of the property.
The operative strategy here is the balance between high-quality and affordable living. On the affordability side, we maintain a rent-to-income ratio in the low 20% across our portfolio. This ratio is crucial, especially during a time of hardship as the pandemic has been, because, according to the U.S. Department of Housing and Urban Development (HUD), anyone paying over 30% in that ratio is considered rent-burdened. Owners can and should strive to remove that burden.
Never Compromise On Quality
Meanwhile, when it comes to quality, don’t just invest in buildings from a dollars and cents point of view — it pays to also invest in creating safer, more convenient and more comfortable communities for residents through a tech-centric amenity stack. Residents can see the investment being made in their homes and take pride in that quality, helping develop a strong and loyal resident base overall.
And when you’re invested in residents’ overall ability to thrive, you become positioned as a go-to resource and ally. For instance, during the pandemic, we’ve provided immediate and consistent communication regarding resident resources for rental assistance from our internal management team and advocated for residents with local, city, county, state and federal resources to find additional support.
When you look beyond your own bottom line and create strategies built on collective success for all parties involved — both landlord and renter — that authenticity makes all the difference. It doesn’t just provide solutions for the problems of today, but also builds foundations for trusting relationships that will help be part of the solution for the problems of tomorrow, too. In Part 2, we’ll discuss maintaining a strong portfolio by not just protecting existing residents, but by continuing to grow your tenant base as well.
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