The Passive Real Estate Investor’s Guide To The COVID-19 Pandemic

I always thought that someday I would teach my 3-year-old to use Zoom. I just never thought it would be while he was still 3 years old. Around the world, many families are facing new realities that they’d never expected, Zoom-schooling included. 

These days, you have to stand in line in grocery store parking lots before being admitted into the actual store, the stock market has become the scariest thrill ride around, and toilet paper futures are looking pretty darn strong. Strange times, indeed. 

But amid all this chaos, what’s happening with your passive real estate investments? You remember, those multifamily syndications you’d invested in a while back, those value-add apartments complexes whose residents might be losing their jobs as we speak and who might not be able to pay rent come the first of the month. What’s happening with those investments, what should you keep your eye out for, and more importantly, what can you do as a passive real estate investor?  

What You Should Do As A Passive Real Estate Investor During The COVID-19 Pandemic

The thing is, as a passive real estate investor, you signed up to be just that – passive. That means that, on the positive side, you don’t have to worry about doing anything for your investments during these crazy times.  

Just as before the COVID-19 pandemic, you don’t have to worry about the hassles of being a landlord. You don’t have to trouble yourself with sending letters to your tenants, putting measures in place to slow the spread within the apartment communities, or dealing with maintenance requests in the midst of social distancing restrictions. 

On the flip side, however, just as before the COVID-19 outbreak, you must put your trust into the sponsors that you partnered with. They are the ones doing the heavy lifting on your behalf during these uncertain times, making strategic decisions for the properties, planning for what’s ahead, and managing the property manager, whose staff members are on the front lines. 

In moments of doubt, remember that you already did your due diligence on this sponsor/operator partner. When you invested in the deal, you took time to look into their track record, ask them your questions, and vet them.  You invested your money with them because you trusted them to do the right thing by your investment. Well, now is the time to see that in action.  

It’s true that there’s not much you can do in the way of actively managing your passive investments during this COVID-19 pandemic as a passive real estate investor. However, you can watch the actions and decisions of the sponsor/operator partners you’ve invested with, to see how they truly operate in times of uncertainty.  

What you discover may help you decide whether or not you want to continue investing with them down the road. Let’s talk about a few things you should watch for from your sponsor/operator partners during this time.  

What Are Sponsor Partners Doing To Be Proactive With Residents During The COVID-19 Pandemic?

The first thing that sponsor/operators should be prioritizing during the COVID-19 pandemic is the health and safety of all the residents, as well as any staff members. There’s a time and a place for maximizing returns and being a stickler about late fees, but during a crisis of this magnitude, health and safety should be the top priority. 

What are your sponsor/operator partners doing to help ensure the health and safety of the residents in the communities you’ve invested in?  Are they proactively reaching out to help prevent the spread of the disease, and are they working with local and state officials to do everything they can to share the most accurate and up-to-date information with residents?

How are they responding to resident requests and questions? Some of the things that you might see your sponsor/operator partners doing to slow the spread of COVID-19 and to ensure the health and safety of residents might include: 

• Closing communal areas within the apartment complex, like gyms and pools
• Postponing community events and/or moving them online
• Updating HVAC systems as needed
• Ensuring all maintenance workers have proper PPE (personal protective equipment)
• Providing residents information about filing for unemployment and other assistance programs
• Proactively reaching out to residents to offer to work together to create a plan if they need to defer their rent

Here are some examples of communications that we and our partners have sent out to residents in the communities we’ve invested in: 

• COVID-19 Resident Letter #1
• COVID-19 Resident Letter #2

 For more information on things that apartment community managers should be doing or thinking about during the COVID-19 crisis, check out this Apartment Building Manager’s Guide to COVID-19.

What Are Sponsor Partners Doing To Be Proactive With YOU And Your Investment During The COVID-19 Pandemic?

Once you’re assured that the sponsor/operator is doing everything they can to protect and ensure the health and safety of the residents, it’s time to take a look at what they are doing to proactively communicate with you as a passive real estate investor in the property. 

The actions of the sponsor team (or lack thereof) can speak volumes as to their preparedness for a situation like this, the systems they’ve set up to operate and protect your investment in times of crisis, and their integrity. 

Are your sponsor/operator partners proactively reaching out to you to communicate what’s going on at the property, as well as their plans for everything that’s currently happening and might happen down the road? Or are there only crickets, until YOU reach out to THEM for a status update? 

What are they doing to show you that they are doing everything in their power to protect the community, as well as your investment? Some of the things that you might see your sponsor partners doing to proactively reach out to you as a passive investor during the COVID-19 pandemic include: 

• Proactively updating passive investors about the state of affairs at the property
• Proactively responding to passive investor questions about possible worst-case scenarios, backup plans, and FAQs
• Proactively mitigating potential risk for the investment, through things like slowing down or halting unnecessary renovations
• Proactively slowing down or halting investor distributions until things stabilize, in order to build up and maintain reserves

If your sponsor/operator partners have not yet proactively reached out to communicate with you about what’s going on at the property, start by giving them the benefit of the doubt. After all, they have a LOT going on. 

Then, if you don’t hear anything from the sponsor team, give them a gentle nudge to check in and make sure that things are going as smoothly as can be expected, given the circumstances.  Remember that you invested with them for a reason, because you trust them to manage the asset on your behalf in situations exactly like this. So trust them. Trust, but also verify.