The COVID-19 pandemic has been difficult on property management operations and resident relations, but its true economic impact may not be known for months.
One thing that has been made glaringly apparent through the crisis has been the industry’s urgent need to move fully into digital payments. After stay at home orders forced the closure of leasing offices in March, paralyzing the industry operationally, there was an immediate spike in demand from property owners looking to transition to paperless transactions for the April rent cycle.
What we learned
Many property operators acted swiftly, using online payment methods and lifting some fee requirements to ensure the receipt of April payments. Here’s what we learned from the April rent cycle:
- Comparing rent payment data across Domuso properties on April (1st to 5th) vs. March (1st to 5th), there was a 15 percent reduction in rent payment volume.
- Our data also showed a 60 percent increase in credit card payments.
- More than 40 percent of property management companies plan to change their eviction policy in response to new local and state regulations prohibiting evictions, according to National Real Estate Investor. Of those companies, 10 percent are voluntarily pausing evictions, while 29 percent more say they are considering such measures.
While the industry continues to shift to the new normal of “contactless” payments, the April rent cycle provided early insight into how to prepare for future rent cycles.
Protect your bottom line in May and beyond
Based on data we tracked at the start of April and our analysis of other industry economic and financial indicators, here are some recommendations for property owners to ensure they are operationally and financially prepared for the May rent cycle and beyond.
#1: Embrace alternative digital payments.
Typically 82 percent of rent is collected between the 1st and 5th of each month, and while in April this dropped to 75 percent, these numbers will be challenged again in May and June. The US is experiencing a huge spike in unemployment directly impacting more residents’ ability to pay rent. Now is the time to increase the options for residents to pay online using ACH or credit card payments to ensure full or partial rent payments are made. We observed 40 percent of our management company partners working with residents during the April rent cycle to absorb credit card transaction fees, and all offered some form of economic hardship accommodations.
Our industry partners who used digital certified payment options, such as Domuso’s Online Certified and Mobile Check Pay products, were prepared in advance to allow more residents to pay while also reducing risk to keep properly ledgers balanced. As credit card payments increase, it becomes even more important that vendors offer chargeback protection for instances where residents may dispute charges.
#2: Be on the lookout for federal assistance.
As detailed by the NMHC in late-March, after federal lawmakers signed the COVID-19 stimulus package (CARES Act) into law, Congress gave multifamily property owners the opportunity to receive a 90-day mortgage forbearance if negatively impacted by the pandemic. Although this relief can only be provided to owners with federally backed mortgages, i.e. Federal Housing Administration (FHA), Fannie Mae and Freddie Mac, this federal protection may extend to other types of mortgages.
Expect the pandemic to continue its grip on the economy into May, potentially affecting the June and July rent cycles. There has been speculation more provisions are in consideration to stimulate small to mid-sized businesses.
Regardless of the size of your business tier, start positioning your portfolio to accept the most benefits offered and keep a pulse on market news through resources that can help guide next steps for your stakeholders as events continue to unfold.
#3: Think ahead to tax season - yes, now.
Many property management companies are working with residents by waiving late charges and absorbing credit card fees to encourage immediate payment. In the Domuso platform, for example, fees are hidden from residents so it appears the payment is free of additional charges.
It's important to record all of the expenses incurred during this national crisis. Many of our partners have created specific COVID-19 charge codes to track extraordinary expenses like cleaning supplies, protective equipment and overtime. Having everything tracked to one code will help ensure you are prepared to take advantage of any tax relief that may become available. Check with your accountant to be sure.
With free-to-low-cost solutions like Domuso, there has never been a more prudent time to capitalize on the need for contactless payments between managers and residents.
Get in touch with a member of our team to learn how Domuso can help your property expedite contactless payment processing for free today.