How has the Covid-19 Pandemic impacted Excalibur Homes, LLC?
Our broker has been a real estate licensee since 1977 and Excalibur Homes has been in business since 1985. All that experience has taught us how to plan wisely for the unforeseen downturns. The impact of Covid-19 on property management has made us adapt and change the way we do business. While we had no idea there would be a Covid-19 pandemic, and that many businesses would be forced to close their doors, we were ready for trouble.
Excalibur has had the ability for people to work remotely for over 20 years. Our investment in technology made it easy for us to modify our procedures and techniques in order to continue to effectively manage property with minimal person to person contact.
At the end of each calendar year we establish a budget and forecast for the upcoming year. Our original forecast had estimated that we would lease 50 houses in March, 50 houses in April, and 60 houses in May. As it turned out we leased 113 houses in March, 107 houses in April, and we expect to lease 150 houses in May. Our Covid-19 adjustments are working.
While most of our competitors immediately filled out applications seeking funds to continue operations Excalibur has not borrowed from any of those sources. We do not need to. We have been financially prepared for surprise down turns. Every landlord needs to be prepared for these surprises. The same philosophies we implement day by day in our own business, and in our own investing, are used as we advise clients regarding their investment properties. While we cannot accurately forecast what is going to go wrong, or when it is going to happen, we can say with absolute certainty that something is highly likely to go wrong and it will not be at a convenient time. This is why we recommend that our clients maintain a reserve for their rentals. While they have the option of having Excalibur establish and maintain a reserve within our trust account (optional, not required) our recommended technique for our clients is to:
- Buy a property with a cash flow greater than the monthly PITI payment
- Establish a separate interest bearing checking account for their rental houses. Fund that an account with an initial deposit equal to one month’s rent for each rental house owned.
- Deposit all of the monthly cash flows into this account and pay the mortgage payments from this account.
- Let the positive difference accumulate. Your “reserve” grows.
- As issues occur, such as tenants moving out, major HVAC repairs, or the roof needs to be replaced, you already have the cash set aside to cover these expenses so that the rental property does not interfere with your household budget.
- If you plan to continue to invest in more rental houses you can deposit some amount each month into this interest bearing bank account. As your reserve grows to a more significant amount you now have your down payment set aside for your next purchase.
This is a simple but effective technique to separate your rental home funds from your household spending. The last thing you want is to have to cancel your vacation plans because the HVAC system died and must be replaced. Remember that Murphy’s Laws apply to rental houses too. Contact us for more information on how we are fighting the impacts of Covid-19 on property management.