More than one in 10 Americans moved over the course of the pandemic, according to Business Insider, as the country witnessed the hottest housing market since before the 2008 crash. Most of these moves came from densely packed coastal cities to more affordable neighboring towns or states. In this, Covid-19 accelerated pre-existing trends, such as more millennials buying homes and Baby Boomers downsizing in preparation for retirement.
Under normal circumstances, most of these migrating homeowners would have sold their previous residences. But life’s uncertainty amid the pandemic has made some wary about putting their homes on the market. Others — eyeing a red-hot housing market that has led to bidding wars — feel this price appreciation will continue and want to hold onto their old properties.
In fact, after a year of soaring home prices and record-low interest rates, real estate has become Americans’ top choice for investment over the long-term, according to a survey by Bankrate, and the demand for single-family rental homes has surged.
But success as a landlord entails more than just filling vacancies. First-time landlords must navigate a dizzying array of challenges — including researching their market and pricing their rental correctly, attracting and screening tenants, complying with local regulations and managing their property — all in a real estate environment that has been radically transformed by the pandemic.
From my perch at Bungalow, a real estate marketplace that partners with homeowners to rent their properties to several roommates at once, here are a few rental trends that newbie landlords should know.
Back To The City
After a year of speculation about the future of cities post-Covid-19, the 2020 Census results are in, and I believe cities are officially back.
About 80% of metropolitan areas saw population gains over the past decade, with the top 10 largest cities in the country all surpassing 1 million people for the first time, according to USA Today. Sun Belt cities such as Phoenix and Dallas are ballooning. New York City grew by 629,000 people, Chicago added 50,000, and Cincinnati reversed a 70-year run of population loss.
This influx of new residents is putting yet more pressure on low inventory levels. With the national housing market short of nearly 5.5 million homes, the number of homes available to rent is low. That surging demand has sent rents rocketing to new highs. Zillow’s rent index jumped 7.1% in June, marking the biggest annual increase since 2015.
Technology Driving Renters’ Expectations
This high demand, coupled with scarce supply, might make it seem like all a landlord needs to do is simply list an available property to land a tenant. But the pandemic has changed renters’ expectations, and savvy landlords need to adapt to maximize value in their property.
Pre-pandemic, touring a rental property meant calling the owner, nailing down an appointment and then traveling to actually see the property. But once the pandemic made many in-person viewings all but impossible, property owners and managers turned to technology to allow would-be renters to “tour” online.
Remote tours are becoming increasingly sophisticated and can include 3D floorplans and even virtual reality. I’ve seen some industry analysts say they expect virtual tours to become standard, and there are benefits for landlords, too. Not only can remote tours reduce the risk of viral transmission but also help drive traffic to listings and save time. One analysis of 162 single-family rentals found that 3D tours increased property leads by 25% and decreased days on the market by 23%. With virtual staging, landlords can also save on the cost of renting furniture to show their vacant properties.
Other contactless technologies are catching on as well, and I recommend landlords consider how they might leverage them. For example, 65% of renters said they would prefer to pay their rent online, a survey by Zillow found. I’ve also observed more renters expect to apply for a property online or to sign leases electronically. Furthermore, solutions such as keyless entry mean tenants will never be locked out of their homes, and landlords can save money on rekeying locks.
Home-Sharing On The Rise
Renters want the rental process to be as seamless as possible. But after a year of social distancing, I’m finding they also want community — real-life, meaningful engagement with other human beings.
This yearning for community, along with high housing costs, has made co-living arrangements an attractive option, especially for young professionals headed to a new city. Through my company’s roommate-matching services, I’ve seen that home-sharing can transform strangers with similar living preferences into considerate housemates and foster human connections that may have been lacking amid the pandemic. Rooms are also often move-in ready, complete with furnishings and appliances, many of which may be better than what some renters would have been able to afford on their own. Thanks to this combination of convenience and sociability, roommate-living spaces weathered the pandemic better than expected, with occupancy rates set to “hit the high 90s” this fall, according to Curbed.
However, while offering a roommate-living space can help distinguish a property from competitors, keep in mind it does mean more prep work. This includes managing individual tenants, maintaining a property with heavier use and replacing residents.
As cities re-open, the market for single-family rentals is in overdrive, and first-time landlords are ready to jump in. Renting can be lucrative for homeowners, even as it offers young renters a chance to live more harmonious lives.