Landlords have a lot to keep in mind — from making sure renters are keeping up with payments to figuring out exciting new ways to advertise their available listings. However, landlords are also effective business owners, which means they need to keep an eye on the trends and changes that are shaping the landscape of their industry.
There are a few key trends heading into the 2020s that landlords must keep in mind if they want to stay ahead of the curve and remain competitive. We’ve outlined 5 of the most important trends that landlords need to know, and explained what you can do to take advantage of them. Check it out.
Increase in demand in coastal hubs
One of the biggest trends that all landlords, property managers, and developers must keep in mind is the massive increase in demand in coastal hub cities — that’s cities like Portland, San Diego, Boston, and Baltimore. These cities have large up-and-coming industries, with thousands upon thousands of recent college grads flocking in to take advantage of the new opportunities available there.
One of the biggest changes driving this shirt is a growing distaste for the classic suburban house with a big yard and a picket fence. While previous generations, especially Baby Boomers and Gen X, prized the suburban home as the hallmark of success, Millennials and Gen Z kids find suburbs dry, repetitive, and lonely.
Instead, they’re moving en masse to high-density urban centers, featuring diverse dining and entertainment options along with a high concentration of career-boosting jobs. What should landlords keep in mind about this demographic? A few things:
- It’s smart to market to younger audiences, as these will be your most likely tenants.
- Because for many, it may be only their first or second time renting, and they will often be seeking employment, they may have trouble paying rent on time.
- Your turnover rate may be high to start, as young professionals are constantly on the move looking for the next big opportunity
Increase in supply
Another trend driving the rental industry is the increase in supply in large urban centers, which is brought about by the huge increase in demand. Where in the late 20th century and beginning of the 21st there was an increase in suburban building fueled by professionals wanting to get out of neglected inner cities, the trend has largely reversed, and developers have taken note.
Old and derelict buildings are being either renovated or torn down and replaced with huge new apartment buildings. One trend further fueling the building craze is the popularity of the 5-over-1 style building. You’ll find these popping up in urban centers all across the country, especially in cities hosting booming industries in finance, tech, and content.
5-over-1 buildings are generally characterized by having the first floor with shops, cafes, and restaurants, with the top 5 floors devoted to apartments. They can vary in level of luxury, and whether they are used as apartment buildings managed by a single property manager, or sold off as condos for mixed purposes. As a landlord, it may be worth considering investing in condos popping up in new 5-over-1s, as the increase in supply may soon lead to a drop in price, but there’s likely will be no decrease in demand as more and more college grads swarm to city hubs in search of work.
Soaring rent prices
The next trend driving the rental industry is the massive increase in rent prices seen over the past few years. This is related to the previous trend we discussed: as the increase in demand for inner-city housing continues to boom, rent prices have begun to soar. There are a few factors causing this trend:
- Increase in demand to live in big city hubs
- Larger salaries paid to many professionals in industries like tech and finance
- Small supply relative to demand
- Increase in property manager control over pricing
- Lack of rent control legislation (more on that in the next section)
This presents an opportunity for landlords who are hoping to cash in on the latest trends. You have the chance to potentially make a lot more money from rent than you did in past days. Especially for landlords who have held onto their properties for the last ten years or more, the opportunity to get some serious returns on that investment is significantly boosted during these boom times.
Rent control legislation
Of course, it’s not all good news for landlords. Because of soaring rent prices, increasing incidents of homelessness, and massive acceleration of wealth inequality, some politicians and other policy experts have considered implementing rent control in cities across the country — in some cases, politicians at the federal level have even suggested national rent control to deal with this crisis.
The political viability of these laws is, for now, pretty unclear. Depending on the way many local, state, and federal elections go later in 2020, there may be a significant cut to the profits of landlords who are looking to keep high rent prices on their units. While for the time being this remains an uncertainty, it’s definitely something you’ll want to stay aware of as you think about your future projections and investments. What are some things you can do to keep your rental business safe from policy changes? Try these:
- Price fairly to begin with, instead of looking to make a quick buck by inflating rent prices.
- Invest in run-of-the-mill apartments before looking to luxury units, as the latter may see a significant loss in demand if the economy begins to slide downhill.
- Be conservative in your investments and business practices. When things look like the market may not be favorable to sellers fairly soon, it’s a good idea to tighten your belt and go with safer options for future planning.
- Upgrade the curb appeal of your existing properties to refresh its look and attract new renters.
Increased pet ownership
Lastly, a fun trend: pet ownership is on the rise across the country. As Millennials and Gen Z wait longer to have kids — or decide against it entirely — they often choose to adopt a pet instead. Dogs, cats, and other exotic and interesting pets like teacup pigs are a common feature of city homes.
That means it’s a good idea to allow renters who have pets in your unit. Worried about damage to your property? There are steps you can take to mitigate that:
- Charge an extra pet security deposit when signing a new tenant.
- Limit pet ownership to a maximum of 1 or 2 animals.
- Use materials that can be more easily cleaned or replaced, like tile, hardwood, and vinyl.
Matthew Edstrom, Chief Marketing Officer for a home design supply company states, “Trends for rental properties change periodically. One of the biggest trends we’ve seen in recent years is a spike in pet ownership which changes the landscape of amenities and rules rental properties should consider. While taking steps to ensure your rental properties have clear cut guidelines for pet owners that comply with local laws, consider how this will affect your rental offerings. Consider including amenities such as doggy doors and functional flooring in your properties to help better attract pet owners.”
Looking toward the 2020s, there’s a lot to keep your eye on. Remember to stay on top of rental trends, and your business is sure to profit for the long haul!
Samantha Rupp holds a Bachelor of Science in Business Administration. She is the managing editor for 365businesstips.com as well as runs a personal blog, sjruppy.com. She lives in San Diego, California and enjoys spending time on the beach, reading up on current industry trends, and traveling.