How Unemployment Benefits and Stimulus Checks Impact Real Estate Investing
Since the COVID-19 pandemic was declared a national emergency in March of 2020, the federal government has been looking for ways to ensure that the United States didn’t fall into another Great Depression like the one that ravaged the country in the early 1900s. The most common methods that policymakers have relied on extended unemployment benefits and multiple stimulus packages that were designed to keep money flowing through the economy. As a real estate investor, it’s important that you understand how these policies and programs will impact the real estate market going forward. Some of the impacts will be positive while others could be negative but understanding the likelihood of each is crucial for your success as a real estate investor.
Protecting for Renters and Landlords
As of this writing, two different presidential administrations have issued a combined three stimulus packages. While these checks, the most recent of which provided $1,400 to all eligible recipients isn’t enough to go out and purchase a property, they have certainly made it possible for tenants to continue to pay rent to their landlords. Additionally, the unemployment benefits which have been extended and increased multiple times have helped ensure that people have the funds necessary to continue to pay rent. While there was a temporary ban on evictions at the dawn of the COVID-19 pandemic, those bans have now been lifted, which means that tenants have no choice but to pay rent or face losing their homes.
Obviously, when tenants are able to pay rent, existing real estate investors have more reason to continue to trust their investments. However, the promise of tenants being able to pay rent is also appealing for would-be investors who are considering getting into the rental market.
Legislation has also been approved that provides $25 billion to the US Treasury Department that will be used to create an Emergency Renter Assistance Program. This renter assistance program is designed to provide up to 12 months of rental assistance for tenants. Additionally, there are provisions in place to provide up to three additional months of rental assistance. In order to protect real estate investors, there are steps that can be taken to ensure that the funds can be paid directly to the landlord.
Possible Assistance for Investors
President Joe Biden has often discussed his multilayered plan that is designed to help small businesses, as well as state and local governments who have been reeling from the loss in revenues due to people who weren’t able to pay property taxes in 2020. As part of this government sponsored plan, President Biden said he was prepared to issue $440 billion to state and local governments. Within this same plan, President Biden introduced the possibility of some grants that would be open to small businesses. Obviously, grants have certain qualifications and requirements, but if you meet them, there is a chance that your real estate investing business could be eligible to receive federal funding that was part of the most recent stimulus proposal.
The Risk of Inflation
As is always the case, there are negatives that will need to be considered in addition to the positives associated with the stimulus packages and unemployment benefits for real estate investors. For instance, many people have decided to live off the extended unemployment and stimulus packages instead of returning to work. This has made it significantly more difficult to find maintenance staff and other personnel that are necessary to be a successful investor. However, the most glaring potential negative is found in the risk of inflation. In order to issue the stimulus checks and unemployment benefits, the government has had to print more money, which has led to an increase in the consumer price index (CPI). This risk of inflation, which is the natural response of more money being circulated, is a major risk for investors, as they will have to raise rent in order to combat the impact of inflation.
The economic risks associated with the pandemic will be felt for years to come for everyone, including real estate investors. Being informed about the way that the response packages will impact your personal investments is a crucial aspect of sustaining success as the nation’s economy looks to rebound.