While rent rates continue their slow climb, surprisingly, the vacancies in apartments are on the downswing. Reis reported a 3.2% rent increase in 2013, compared to the vacancy decline of 4.1%. That trend doesn’t seem to be changing, as it's similar to the statistics of 2012. More and more people are turning to renting despite rising costs. One would think that wouldn’t be the case, but it’s good news for real estate investors.
It’s valuable for real estate investors to understand the motivations behind the exodus from homeownership to the land of renting. While the answers are many, Apartments.com conducted their annual Moving Trends survey of around 1500 renters to figure out the "why" behind renting.
These insights can be valuable as investors work to attract new tenants for their investment properties.
Why are former homeowners turning to renting?
No matter how you slice it, homeowners are turning to renting largely due to the state of the economy. The New York Times recently published an article highlighting the fact that many cities are no longer affordable for the average renter, Rent Is Rising Out of Reach of Middle Class.
Looking back to the survey, here are some results:
21.5% can no longer afford homeownership. (14.2% in 2013.)
15% of the surveyed like the flexibility offered in renting. (15.7% in 2013)
13% lost their homes due to foreclosure or divorce. (11.2% in 2013)
12.4% were relocating for job opportunities. (13.3% in 2013)
10.4% rent because it’s more affordable. (22.2% in 2013)
While these are the top reasons behind why renters are renting, there’s a pretty even divide among former homeowners: 54% have renter’s remorse and wish they still owned a home, while 46% of new renters have found that they prefer it to homeownership.
The split is also close between renters who’ve never owned a home that prefer renting (51.2%) and those who’d like to own a home (48.8%).
Affordability concerns and the need to pursue or keep job security were big reasons for moving or staying put in 2014.
Out of the pros of renting former homeowners, in order, liked that there are/is:
No unexpected repairs.
No or low maintenance.
Flexibility to move.
What does that mean for real estate investors?
It means that good property management really matters when keeping renters around. One of the biggest perks to renting is the lack of repair and maintenance work for the tenants. Having quick and effective property management is one of the features that attracts former homeowners to renting. Good property management will mean that tenants stay for longer periods of time and actually extend leases for longer periods. When the management company performs, investors and tenants both win. That fact is a big asset to your investments!
Renters note enjoying being able to see video tours, personalize searches, and browse reviews through iPhone and/or Android apps. When searching for apartments, renters are also relying heavily on the opinions of others to make decisions — yet another reason to conduct your investing honestly and professionally. Your reputation matters.
Pay attention to what renters are looking for — what’s going to attract them to your rental property? The good neighborhood? The affordability? The top-notch property management? These are just some of the considerations to take into account as real estate investors. Get into the shoes of your renters to figure out the best way to meet their needs and market your rental properties to the growing pool of renters.
How have you seen moving trends shift this year? Tell us in the comments.
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