Covid-19 Lending, Tenancy and Selling Update

This page is a list of resources and news regarding the Covid-19 pandemic and how various responses affect you and your tenants. 

Last update date: April 5, 2020

Buying and Selling

With the country in lockdown, moving houses has been deemed a non-essential activity so many transactions have had their settlement pushed out unless both transactions agree to settle and it is possible to settle without breaking lockdown rules. Here is a guide from the Settled website on what you can and cannot do.

Tenancy: Freeze on Rent Increases and Terminations

A number of tenancy changes were immediately brought in that landlords must be aware of. 

On March 24 the government announced a freeze on rents and tenancy terminations. >> LINK

The above link gives a lot of detail. If you had a termination already due, it is now frozen irrespective of the reason for that termination. A lot of owners who were in the process of moving a tenant out of the property due to damages or not paying rent have now had that stopped for 60 days. 

Tenancy services has a write-up of the changes that have been made with regards to tenancies during the Covid-19 crisis >> LINK

Rent increases and tenants moving (for any reason) are all frozen currently. Read the official release from Megan Woods for details on this. Rent increases are frozen but there is certainly no freeze on rents being payable. 

Tenancy: Helping Your Tenants

A lot has been printed in the media (often in near hysterical tones) about what property owners should and shouldn't do to help their tenants in a crisis. 

First and foremost... this is a business relationship between you and your customers. Not you and the media or you and any advocacy group, nor you and people on social media. If you need to work out something with your tenants then find an option that works for both parties and don't feel like you need to justify it to the world.

Some people are offering heavily discounted rent, others would lose their properties (and their tenants homes) if they tried that, so just relax and do what you can.

What I saw from proactive property managers - and I am more grateful now than ever to have experienced operators interpreting the changes and helping communicate with my tenants - was that they contacted tenants immediately as the scale of the government response to Covid-19 became apparent.

When requested by a tenant for some form of financial support, here are the steps good operators are working through...

• Step 1: Ask for clarification of the financial impact on them. 
• Step 2: Help them work out what government support options are available and make sure they have applied what they are eligible for. 
• Step 4: If their tenants require help on top of that then have a discussion one-on-one and work out what the shortfall is. I have heard of owners temporarily lowering rents, with some of the discount to be paid back later (one example).
• Step 5: They are documenting every conversation and agreement in an email that is sent afterwards. If things do turn pear-shaped then a written paper trail will be essential later. 

Finance: Lending and Financial Support

The first thing I did as the virus broke was ask my broker to maximise my revolving credit lines and get my pre-approvals all updated. That wasn't with any detailed strategy in mind, I just wanted to have more "just in case" funds available for two scenarios:

1. I might find myself in a pinch
2. I might find a great deal

Extra cash helps in either situation. Whether this is the right strategy for you is something you should discuss with your broker. If you do not have a relationship with a broker and would like some strategic advice independent of any bank please get in touch with me and I will make an introduction.

Here are some of the developments that have came through to date. 

Mortgage "Holidays"

At the start of the lockdown the Government announced the very unfortunately worded scheme of a "mortgage holiday", where property owners could hit pause on all principal and interest payments. This instantly created a massive headache for landlords and property managers, who fielded dozens of calls from tenants who thought that meant they should receive a rent holiday.

Nobody is getting a holiday. Thankfully wording has been changed to clarify that it is a) a deferral, b) interest accrues on the deferred amount and c) you have to pay it all back later, on top of your regular payments at that date. It is closer to a GFC-era sub-prime loan than any kind of holiday!

Here is a good article that breaks it down in more detail, including what it would cost you to take a "holiday" >> LINK

It is clear that this should only be used as a last resort.

Other (better) options (which can be used in combination with each other).

Please consult with a mortgage advisor/broker to work through what is best in your situation.

• You can request to have your loans moved to interest only. Many borrowers were frustrated when they contacted banks about this last week, banks were still on old processes and a lot of paperwork came back the other way. As of the start of this week banks seem to have rolled out new processes and I have heard from multiple investors that they made the change quickly and over the phone.
• If you have been paying over the limit on any mortgage you can ask to change to the bare minimum.
• You can request your bank set up or maximise a revolving credit facility that you can use to cover short term costs.
• There may be others, such as drawing down already repaid funds. Again please speak with a qualified advisor to work out the best options for you. 

What is iFindProperty doing to help buyers and sellers?

We have been a "virtual" business - working remotely with online tools to support buyers, seller and our team - for more than 10 years, so sharing information and facilitating deals when access is limited is nothing new for us. During lockdown we've helped buyers put offers on property that we had seen prior to level-4 and would otherwise have been considered "stuck".

To sellers...

We built our business during the GFC, when sellers did not want to disrupt their tenants during a sale and risk a vacancy. Vendors liked being able to reassure their tenant that the buyer was an investor and visitors would be limited to our agent, a property manager, the buyer if they chose to visit (many of our buyers do not), a building inspector and perhaps a valuer. As the market improved we added other ways to make deals happen, but this mode of a transaction is still our core competency as an agency.

We feel the more discreet model will be essential in the next 12-18 months and we are equipped to help investors to buy and sell properties in this fashion.

So if you wish to sell a property, we can run a sale for you without caravans of agents, big signs, streams of potential buyers through the property and your tenant assuming they will need to leave (and acting accordingly). There are close to 9,000 other investors on this newsletter now and the model that worked back when we had a much smaller audience will certainly work now. Get in touch for a chat if you would like to explore this.

To buyers...

The same applies. We already offer a hands-off buying service where our team facilitates everything for you, including helping arrange property management, building inspections, renovations quotes and help and more. This lets us help you buy from anywhere, irrespective of whether you can visit the property or not. We have built a business based around getting you access to good deals and the information you need to make a good buying decision from anywhere in New Zealand or the world.

There are going to be a lot of opportunity for prepared buyers with pre-approvals in place and your annual costs as an investor have already plummeted. I am not certain we will see large price drops - during the GFC prices dropped 10% in New Zealand and that was coming out of a period of riskier lending with very high interest rates and a banking system not equipped to quickly adjust - however I do think the flood of buyers "buying anything" will dry up so discerning buyers will have more choice and more time.

We strongly encourage our clients to get finance in place. You don't have to use it but when a good deal comes up you may wish that you had prepared.

Nick Gentle
Business Owner & Operations Manager
nick@ifindproperty.co.nz
027 358 3855