Last modified on December 16th, 2021
By Brittany Benz
2021 has been another year of change and opportunity for the residential real estate market. From record-high home prices to a surge in demand for single-family rentals and continued rent growth, we’ve seen numerous trends shape the industry. In this article, we take a closer look into these trends, along with some of the ongoing challenges property management businesses are facing. Read on to get the insights you need to stay at the forefront of the industry and to learn how you can use the findings to position your business for success in 2022.
Top 4 Trends in the Single-Family Rental Space
1.) Owners are Selling Properties
The real estate market took off in 2021 due to low mortgage rates and an increase in homebuyer demand. As a result, many single-family rental owners decided to sell their rental properties. In fact, according to Globe St. 65% of prospective sellers stated they are eager to enter the housing market within the next six months.
2.) Buyers are Not Renting
Those who are buying the single-family homes that were once rentals are choosing to live in them, rather than rent them out. Because of this, the single-family rental home inventory is shrinking. Based on Census Bureau data, owner-occupied housing in the U.S. increased by 7,609,000 units or 10% over the last five years. Additionally, today owner-occupied housing accounts for 58.4% of total housing.
3.) Institutional investment in SFR and Build-to-Rent Continues to Rise
Institutional investment firms are buying up single-family rental homes and also investing more capital in new build-to-rent infrastructure. John Burns Real Estate Consulting reports that there has been more than $30 billion in capital invested in the single-family home space, which has driven rent growth to a 35-year high. Not to mention, Globe St. states that investors snatched up 18% of all single-family homes purchased in Q3 of 2021.
Within the single-family rental market, investments in build-to-rent communities continue to rise, however there are some headwinds projected on the horizon due to material shortages. As Kori Covrigaru, Co-Founder and CEO of PlanOmatic explains in a recent Globe St. interview, “I see the single-family build-to-rent market continuing to grow in the near future, but I think the speed in which developers are able to build may be significantly impacted and slowed down by the current supply chain and labor shortage. I’m concerned about the supply chain shortage and labor shortage to get these BFR new construction projects off the ground, into the market and leased up by the industry.”
4.) Single-Family Rental Demand Remains High
As more and more Millennials begin to have families and seek more space, the demand for single-family homes continues to increase. However, many Millennials cannot afford to purchase a home because of rising costs and debts, so renting a home is their only option. As mentioned earlier, this demand has also led to a surge in single-family rent rates.
Molly Boesel, Economist at CoreLogic shares more thoughts on why this is happening, “Converging economic trends are driving a surge in single-family rent prices, and consumer confidence has driven an uptick in demand for both renters and buyers. The ongoing preference toward more living space — and slim for sale inventory — is forcing would-be buyers back into renting, putting significant strain on the single-family rental market.” (CNBC)
Ongoing Challenges for Property Management Businesses
Recruitment and employee turnover have historically been challenges for the industry. As pre-pandemic data from National Apartment Association shows, the property management industry was suffering from a turnover rate of 32.7%, a figure significantly higher than the average turnover rate across all other industries.
The pandemic-induced rethinking of work, workplace, and workforce has only exacerbated staffing and recruitment challenges. With rental demand at an all-time high and a stretched workforce, property management teams are fatigued from doing more with less. This sentiment has been evidenced by property managers across the country — in a recent NAA report sponsored by AppFolio, 74% of respondents selected HR, staffing, and recruitment as one of their top three business challenges, with 50% noting it as their primary challenge.
In addition to staffing and recruitment-related challenges, property management businesses continue to struggle to keep up with the consistent flow of new legislation and requirements regarding evictions. Combined with the slow and inconsistent disbursement of relief funds for their business, owners, and residents, it has been a long and hard road for many.
4 Ways You Can Position Your Business for Success
1.) Prioritize building strong owner relationships: Retaining owners isn’t always easy and requires a lot of time and effort. Free your team to focus on delivering great service by automating key workflows and implementing self-service tools. When all of your business-critical processes are online, it’s easier to share important documents, like customized reports, and to communicate with your owners, so they see the value you bring.
2.) Expand your network to meet new owners: Network with real estate agents or other local businesses, such as carpet installation companies or appliance stores, for possible leads on new owners. Many owners may only hear of management companies by word of mouth, so by partnering with a trusted business or agent they already work with, you can instantly increase your credibility.
3.) Focus on marketing: The majority of renters today look online first when they are searching for a new home. By marketing your property management business properly, you can attract more leads and make the most of demand. Make a good first impression by ensuring you have a professional, easy to navigate website that uses popular keywords and phrases. In addition, differentiate your business by speaking to your personalized renter experience and on-demand, mobile offerings.
4.) Put technology to work: Rather than doing things the old way, use technology to help ease the burden on your team and give them space for what matters. Technologies like automated workflows, online leases/applications, tenant screening, virtual showings, online portals for owners and renters, mobile communication tools, and more can make your employees’ lives easier and prevent burnout.
The single-family rental market has experienced some of the most drastic changes in the past two years, and heading into 2022, we’re likely to see more changes continue to have a big impact on everything from rent rates to inventory and demand. While these changes have brought new opportunities, they have also created new challenges for property management businesses and made it harder to retain single-family rental owners and keep employees happy.
By focusing your attention on building strong owner relationships and leaning on technology to deliver a better experience for both your customers and team members, you can overcome these challenges and stay successful in 2022 and beyond. To learn more about how you can pivot your business strategy, listen to this Top Floor podcast episode.