What is the risk?
There are a number of new risks for your business because of COVID-19. Here is a list to consider:
1) Increased arrears
2) Increase in vacant properties
3) Inability to complete maintenance and repairs
4) Increase in accidental damage and wear and tear
5) The risk of insurance claims not being accepted due to a lack of inspections
6) reduction in fees and no fees due to rent holidays
There are probably a number more however, the primary risk that we need to assess is the risk of arrears. The change in legislation allowing up to 60 days in arrears before termination could have a serious impact on rent rolls at this time.
How do we assess the risk?
One way to measure the risk is to go through your tenant list in your property management software and label them by the risk of arrears: HIGH, MED, LOW. The categories might look like this:
High – works in tourism, hospitality, importing or exporting business, in an airline or airport-related job
Medium – works in all other sectors
Low – works in the health, food, courier, beneficiary
Each property management software will do it slightly differently but most will have a way to tag or label your tenants so that you can create a report on them. For example, PropertyMe use labels. By labelling your tenants you can assess firstly, how many of your tenants are high risk versus low and medium and then that can be factored into your continuity plan.
What do we do with this risk assessment?
Your risk exposure should drive your strategy for the coming 24 months. If you have 25% of tenants labelled as high risk then you should probably adjust your budget for the coming year to manage the potentially worst case scenario. On the other hand if you have 95% low risk then you may want to take an aggressive growth strategy to take advantage of your strong position versus your competitors.
