Archives for posts with tag: rental market


It is no secret that the state of the economy in the United States has changed the way virtually everyone thinks about their money. But a new article from Bloomberg suggests that more than anyone, the spending habits of recent college graduates and other young adults have been severely impacted. Whereas previous generations quickly followed their college diplomas with a new car or even a mortgage, today this is rarely the case. Rather, young people have begun to delay or even eliminate these kinds of major purchases from their immediate future plans.

Reduce, Reuse, Recycle

The fact is that college graduates and young people today have begun to expect and live with less. Their average salary is lower and they have more student loan debt than any previous generation. For many of them, big spending is just not in the cards. This generation has had to make hard decisions about whether they really need a car payment when they could ride a bike or whether they need a new refrigerator when they could get one on Craigslist, or even rent one. Buying used and spending less have become ingrained in many people’s mind. And buying a house means spending A LOT, which is scary and oftentimes impossible.

Flexibility is Key

Even as the economy begins to recover, it is still difficult to enter or re-enter the workforce. Not only does this threat of longterm unemployment mean that many renters simply do not have the capital to consider buying a home, it also means that when they find a job it may not necessarily be in the zip code, or even the state, where they currently live. This is certainly a major factor in what seems to be a generation of renters. After all, it is much easier to break the lease on an apartment, even if that means a financial penalty, than it is to sell a house. This is why the rental market will mostly likely continue to do business with members of this generation that need both the savings and the flexibility that it offers.

What This Means for Landlords

You may be wondering as a landlord or property owner, how to best go about catering to this vast, educated market, many of whom have the potential to be great tenants. In order to attract this younger generation, it may be important to make a few changes to your property and your process. First, this generation is virtually obsessed with technology. Any way that you can make your property technology-friendly, whether that is online rental applications, free WiFi by the pool, or paying rent via PayPal, will be an attractive feature. The youngest of the generation who are coming straight from college also often tend to want a sense of community, like they may have been used to at the dorms. Community areas like rec rooms or courtyards are good for fostering this kind of feeling. Finally, be amenable to the flexbility that they may need. Of course, you do not want every tenant running off for a job across the country every few months, but you can still be flexible. Being a good landlord to good tenants will see them telling their friends about you and ultimately keep your building full.

Although the economy is on the upswing, it most likely be quite a while until this “recession generation” feels stable enough to plunge into the real estate market en masse. In the meantime, property owners should make an effort to be millennial-friendly whenever possible because they are not going anywhere — except maybe their parents’ basements.

Image courtesy of Curbed.com

When you spend as much time keeping tabs on the real estate industry and rental market as we do, you can’t help but notice some trends.  And one thing that seems to pop up each and every week is a story about a celebrity (or a former pairing of celebrities, in some instances) selling his or her home.  Not that it’s in this blogger’s budget, but it got us at Rocket Lease thinking: what would it be like to buy a house that used to have a high profile owner?  Would you do it?  Let’s take a second to think about the pros and cons of buying a celebrity home.

Pro

Readily Available Aerial Photos

Gene Hackman's (Former) Estate

If you’re lucky enough to buy a home that was featured in celebrity arrest, the likelihood of finding pictures of it online that were shot from a helicopter are extremely high.  These types of photos can come in handy when trying to arrange furniture or figure out the best escape routes should those cops ever come for you.

Con

Mistakenly Receiving Their Mail & Unsolicited Scripts

It’s always annoying to get someone else’s mail after you move in to a new home, but it’s even more annoying when that mail consists of autograph requests and scripts for the next great indie comedy that you will definitely love if you just read it!  You could consider the endless supply of scrap paper to be a pro, but you probably don’t.

Toss Up

Celebrity Neighbors

Unless they’re the weird kind of celebrity that prefers to hole up in Wyoming when they’re not on set, most celebrities live in close proximity to their celebrity brethren.  This might be great if you like hobnobbing and namedropping, but it might be awful if you have to cope with TMZ photogs and Lindsey Lohan walks of shame.  Plus your neighborly disputes might end up somewhere a little more visible than the neighborhood ledger.

But What About the Money?

Most people do agree that the celebrity factor can help a house fetch a higher price.  While this isn’t necessarily a selling point when you’re looking to buy, it’s always something you could mention if you decide to rent the house out, like Meg Ryan did with her home, for something like $40,000 A MONTH.  We can only  imagine that those renters went through a credit check or two.

What do you think?  Would you buy or rent a house where a celebrity used to lay her head?

It’s no secret to readers of this blog or basically anyone that’s picked up a newspaper in the last 10 years, that the housing market we’re currently facing in the U.S. is virtually unprecedented.  After the housing collapse, many Americans found themselves forced to move out of foreclosed upon homes and, even as the market improves, with credit that is simply not good enough to buy a new home.  This has lead, of course, to a boom in the rental market, which has in turn lead to some surprising investment moves by companies who want to take advantage of this climate.

For instance, a recent article in the New York Times describes Waypoint Real Estate Group, who has a number of offices and inspectors with the sole focus of buying homes that are in foreclosure, fixing them up and marketing them as rental properties.  But Waypoint isn’t doing this in the way that an individual would go about becoming a landlord.  Instead, they’re purchasing homes on a massive scale, with their current operation snapping up five to seven homes every day, mainly through bank auctions.  The homes are bought only after putting some numbers into their proprietary algorithm to determine if the place is actually worth the investment at which point they are bid on and renovated to bring them up to a rentable state.  Waypoint even offers current occupants, the victims of foreclosure, the opportunity to stay in the house and rent it from them once the renovations are complete.

Real Estate experts and economist have mixed feelings about the future of this kind of project, but the fact remains that Waypoint is committed to seeing returns on these properties.  Regardless of what this may mean for local communities (where it could see property values go up initially as fewer homes stand vacant), it does mean that there are going to be a number of new property managers and landlords coming into the game with the aim of earning around an 8% return on their investment in just the first year.

While we can’t say for certain yet whether this influx of new rental property will be a good or bad thing, we can say that Waypoint and other companies like them are going to need to go beyond a real estate estimating system once they become landlords.  Having a great rental property, with new appliances and attractive landscaping, is just one piece of the puzzle.  What they’ll need next is an effective and efficient way to manage the rental applications and leases at all of those properties.  The company plans to buy between 10,000 and 15,000 new properties by the end of next year and must have a plan in place for managing them once all the renovations are complete.  An online rental application coupled with an online leasing system, like that offered oh-so-awesomely by the team here at Rocket Lease, would be a great start for Waypoint and their brethren.  We know that Rocket Lease is a great tool for an individual landlord, but there’s no reason that it can’t help out the real estate fat cats, too!  By allowing themselves to easily track their rental applications and have all their leases in one easy to access place, these companies will be able to better serve their tenants and the communities where their properties exist.

Here on the Rocket Lease blog, we’ve already devoted a little bit of time talking about the overall economy and its effects on the rental market.  But new figures that were recently released by Reis show that the market for apartment rentals may be even more robust that originally thought.  In fact, MarketWatch is predicting that the apartment vacancy rate will fall to 4.6% nationwide by the end of next year.  Up to now, occupancy rates like these have been largely unheard of except in the most competitive markets.  Today, in the notoriously competitive rental market that is New York City, vacancies have fallen this year to a paltry 2.4%.

As with any market trend, there are a lot of factors that contribute to numbers like these.  But probably the most important factor in today’s rental market is the fact that the housing market and the individual finances of most US citizens have simply not recovered to the point where homeownership is once again an option.  In fact, according to an informal survey conducted by apartments.com, an astonishing 33% of people who are looking for rentals on that site are former homeowners.  Clearly, when people are unable to afford the purchase or upkeep of their own home, they will most often find themselves turning to the rental market.

But what do these low vacancy rates mean for property owners and landlords?  Obviously, this kind of rental market – one that works strongly in favor of the landlords – can be a boon to property owners.  Indeed, one of the worst scenarios for a landlord is to find themselves with many vacancies which represent a loss of potential income.  However, that doesn’t mean that in a landlord’s market is a time to rest on your laurels and let the rental applications take care of themselves.  In fact, as the rental market becomes more competitive, it will be more of a challenge and necessity to find the very best tenants among the applicants.  Using an online  rental application system, of course, can be helpful in keeping track of all the applicants that come in and can also insist in quickly sorting and denying applications from those who are not qualified.  This can save you a tremendous amount of time that will be precious when trying to rent an apartment in a competitive market.

Furthermore, during these booming times, it may be a good idea to consider making improvements to your property.  Since you will no doubt have low vacancy rates and therefore be comfortably collecting monthly rents, using this income to make your building more attractive can help to prepare you for the times when business is not quite so quick.  Sure, with a 4% vacancy rate you may not have to offer the best amenities or even the best prices in order to attract tenants.  However, there will come a time when vacancy rates go back up and if you have done your due diligence in upkeep and improvement during the good times, you will more easily be able to weather the bad.

The economy of any entity, be it a college, a family or a city, is a complicated thing. So you can imagine how much more complicated it gets when you start to consider the economy of an entire country or even the whole planet.  I’m not going to aim for an economics lesson here for a lot of reasons (mainly I’m totally unqualified) but there are a few tidbits, facts and predictions that are particular relevant to our customers, namely landlords who are renting property in the United States, about the current economy and its affects on the rental market in this country that you may find interesting and helpful.  These are the tastes of information that I’m going to focus on because let’s face it, if I’d studied economics I probably wouldn’t be blogging right now.  But I digress.

When the housing bubble first burst a few years ago, the entire country suffered its consequences in many ways.  One of the truly devastating effects was the skyrocketing foreclosure rate among American homeowners.  Putting aside the emotional nature of that particular economic event, let’s look at how that astronomical foreclosure rate affected the U.S. rental market.  Some experts believed that it would have a generally positive effect on U.S. rental properties because the homeowners that were forced to leave their houses would find themselves new additions to the renter pool.

However, that actually did not end up being the case, as the Atlantic pointed out in 2009.  Instead, many of those former homeowners ended up moving in with friends or family rather than entering the rental market.  Conversely, those condos and homes that agents or banks were now unable to sell, did enter the rental market as rentable properties.  Unfortunately for landlords, the housing market collapse actually had a negative effect on the rental market as well because there was more rentable property but no additional renters, which of course means that rents go down.

Today, slowly but surely, we find that the U.S. economy is improving, which is certainly great news all around as unemployment drops and different sectors recover at their own rates.  Fortunately for property owners and landlords, this recovery is beginning to include the U.S. rental market.  Indeed, real estate research site Zillow found that in January 2012, the median rental rates rose by 3% since that same time last year, which is certainly good news if you are a landlord with property to rent.  Although during that same period, home values actually fell, experts expect that will not be a continuing trend.  Instead, it may be an indication that this is a good time to invest in a rental property before home values begin to increase again, while the rental market recovers first.  As the economy continues to grow more stable and robust, we can expect that rental rates will do the same.

This trend of rising rents and dropping home values has some analysts concerned that we are in the midst of a “rent bubble,” but as we look at the data further, that does not seem to be quite the right term.  Of course, as you plan your rental property investments, you will want to keep in mind that there isn’t an upward trend that lasts forever.  However, it is unlikely that the bottom will fall out of the rental market in exactly the same way it did for so many homeowners.  As more first time landlords invest in homes at these low prices, the number of rental homes will increase which naturally means the rise of rents will slow.  At some point, it is likely that these two trajectories, rents up and home values down, will reach some kind of equilibrium but how exactly that will shake out remains to be seen and is certainly worth keeping an eye on.

Still, it is important to not get lazy with your property ownership as the rental market improves.  Instead, stay ahead of the curve by investing in or trying out new technologies like online rental applications and efficient background checks to make sure that you attracting the best tenants, no matter what the economy looks like.