Is your rental market on fire?

[Nathan Gesner]

I have hardly been on BiggerPockets all summer because our market is on fire! I was busier than the proverbial one-legged man during COVID, had about two weeks of normalcy, and then the market exploded.

I manage 400 rentals and don't have any vacancies. I have to force vacancies to allow me time to inspect and clean/repair between renters. When I list a house for rent, I typically have it rented within a week and 3-6 weeks before it's even available. We're also experiencing a strong sales market with quick sales, all-cash purchases, and even competitive bidding. A large percentage of this is due to people moving from coastal cities to escape the craziness of 2020, high taxes, etc.

What are you seeing in your market?

[Justin Thorpe]

@Nathan G.

Thanks for sharing and very interesting trends.

This present economy is the hardest to decipher. Believe it or not, US retail sales were up 2% in July vs same time last year, this with 10% unemployment rate and a rise in Covid cases.

San Francisco set a new record in condo sales. This when headlines are saying we will turn into a new ghost town and everyone is migrating out.

So your statement about the increase in retirees likely falls in the same bracket. The headlines say that people are delaying retirement due to Covid.

The remote worker trends are the most intriguing. While I don’t discount the benefits you mention, some don’t apply like taxes we discussed or commute times if they are working remotely. Property taxes won’t matter if they are only renting. Cost of Living is interesting because they will benefit as long as they are “domiciled” in a higher paying state but will stop getting that “arbitrage” if their salaries get adjusted to local rates.

Of course with all due respect there are I am also 100% sure there very many trade offs of moving from say CA to WY as well like weather, the urban spark and the availability of high paying jobs.

Overall let’s say we live in the most interesting of times and for what it’s worth we have begun to see traffic Jams in the Bay Area!!! What I am noticing is the biggest divergence ever in what the news will tell you, which is often doom and gloom vs what we see on the ground.

[Nathan Gesner]

@Joseph Weisenbloom

Could it be that your rooms are sitting empty because students are learning from a distance, and other renters are upgrading to their own apartments?

I can't speak for the rest of the country but our area is doing very well for short-term vacation rentals. I did not open mine until July 1st and it's been booked solid all summer and is already booked halfway through September. My friend manages about 65 vacation rentals in the area with 6 years experience and she said this is the busiest she's ever seen it. She hasn't crunched the numbers yet but it's looking like as much as 50% higher than last year even though the tourist season is definitely down.

[Joseph Weisenbloom]

@Nathan Gesner Yes that is what is happening. The plush apartments downtown are being vacated by the students and they are subletting the units at 40% discount. Meanwhile the people that would be renting my units are taking the discounted units. Just posted this morning in a student group to get a feel on whats happening on campus. There are alot of people that signed leases in the spring for fall semester and now they are screwed.

Your vacation rentals are booked! How is that possible? Its basically illegal to travel right now with all the interstate travel restrictions. Don’t think there are many takers traveling to Texas, its a corona cesspool down here right now. Well good for you! 

[Adam Martin]

In the Northern Ky area there were record lows on inventory with the areas I invest in at one point having only 4 SFH we have about 20 now but on average we are closer to 35-60. We have slowed down for now but prices have seen a huge jump both for rentals and home sales. Fairly priced houses will rent within a couple weeks, there are some who may have been a big aggressive in their pricing and they just sit on the market. We have a publicly traded REIT in our area and as usual their houses rent but sit on the market longer than usual due to high pricing. I really don't understand their strategy where they price very high and lower the price monthly. It usually takes 1-3 months or more to rent many of them and vacancy has to be killing them. At least it helps drive up rents though when people look at comps and I'm assuming their size and volume help them absorb it.

[Justin Thorpe]

@Joseph Weisenbloom

@Nathan G.’s experiences do seem counter intuitive for sure. But this economy is a tough one to read.

For example, the CEO of Wyndham Hotels was on CNBC saying his occupancy levels are rising every week for the last 16 weeks and he is seeing business travel. When pressed he said it was lower end workers like construction workers, truckers etc. I personally doubt if they make enough of gap for him to get all excited but he did sound upbeat on national TV.

In the same vein, US retail sales are growing. One has got to wonder how when 10% of the workforce is not working and most retail places are closed.

San Francisco city realtors are the busiest they have been. One has to wonder again. How is that working if the headlines are telling you that people are looking to move out of cities etc etc etc.

[Henry Lazerow]

Yes, our market is also on fire. It seems everywhere is with the exception of NYC. 

[Joseph Weisenbloom]

@Justin Thorpe Yea its cool to see what other people are experiencing all over the country. I don’t really pay attention to the news, hell I dont even own a TV. 

I try to pay attention whats happening on the ground level and talk to locals about what they are experiencing. For my particular niche and location I am seeing a lot of vacancy but that doesn’t mean it can’t be the opposite for someone in a different city and different niche. 

[Justin Thorpe]

@Henry Lazerow

NYC has a huge migratory and transient population. Students, foreign workers, executives on assignment, newly minted job seekers, artists, models, people who work for the United Nations etc. I can see why that market might be impacted with limits on travel. But for what it’s worth, vehicle traffic is up and traffic has started to jam back up again on the tunnels. I think this one comes back very fast in the event we see curbs lifted on global travel.

[Nathan Gesner]

Originally posted by @Joseph Weisenbloom:

@Nathan Gesner Yes that is what is happening. The plush apartments downtown are being vacated by the students and they are subletting the units at 40% discount. Meanwhile the people that would be renting my units are taking the discounted units. Just posted this morning in a student group to get a feel on whats happening on campus. There are alot of people that signed leases in the spring for fall semester and now they are screwed.

Your vacation rentals are booked! How is that possible? Its basically illegal to travel right now with all the interstate travel restrictions. Don’t think there are many takers traveling to Texas, its a corona cesspool down here right now. Well good for you! 

Different states have different restrictions. Ours is pretty open. We only had a few stores that required masks and that was during the most recent "outbreak" which quickly dried up when people realized the number of positive cases were rising but deaths continued to drop.

I think there are more people taking vacations by car than by plane. I also think more people are renting vacation rentals instead of hotels because they want to stay away from other people. It's worked well for our market.

[Wayne Smith]

In Northern VA (1/2 hour from DC) we listed a single family rental 4/2 last month. It rented out within a week with several applications.

[Gary L Wallman]

I have 120+ doors. Not a single vacancy. Listed 2 SFR's in an A area that will be vacant at the end of the month. 14 applications on one and 10 on the other in less then 24 hours. Both leases signed within 3 days. My homes in B areas are even stronger, if that's even possible. Took occupancy of a newly acquired rental in a B area on August 6th. New tenant is already living in it.

[Doug Spence]

I own one SFH in Pensacola and two in Milwaukee and I've had no issues with tenants paying or anything so far this year (knock on wood). I even had one tenant's lease end at the end of May, and the PM had it rented two weeks before the previous lease ended! The rental market in Milwaukee is strong at least!

[Ken Krueger]

Definitely seeing the same thing in my area. Seems like everyone is looking to move. I have a unit that will be available soon, I just mentioned it on someone elses facebook post one time and have had a bunch of people messaging me about it already. I dont even have it ready enough for pictures yet and people are almost beating down the door to come take a look.

[David Avery]

Hot market here in Phoenix, crazy one day offers on almost any house that is somewhat clean.  Rents are high.

Hard to find a house to flip.  Prices are crazy.  

Money talks!

 Think interest rates are the factor, what a smart move.

Vote smart BP!

[Alvin Uy]

@Karl B.

I just rehabbed a house (in Los Angeles, SoCal) to flip at a new area outside of where all my rentals are. But I decided to test rent before I listed it as a rental and see if I can BRRRR it. I priced it $1200 over the highest rent in the area just for kicks. I was surprised to get 2 texts to see within 10mins...10 calls within 24hrs and 3 applications within a week. Get this... im currently in refi process and as it turns out my house appraised way higher over $100k more than i expected ...so now my all in cash is at 75% LTV. I guess i might just pull a BRRRRfect in SoCal. Plus, I will be cashflowing $850/mo net on this house.

Despite the migration out of Cali. Interestingly enough, there are still a lot of folks moving into Cali (especially SoCal) as well. I had 4 sets of folks who looked at the house that are moving from the midwest. The new tenant we ended up with is from Atlanta GA.

[Brian Ploszay]

The positive:   Few tenants are moving

Lucky:  I am getting most of the rents

The negative:  I have two small apartment vacancies.  No one is calling that qualifies.  

I don't think my local market is on fire.

[Judy Parker]

Sales and rental markets are on fire here in Bergen County, NJ.

[Marcus Auerbach]

The Milwaukee market is very hot, both for rent and for sale. Interest rates and Covid are factors, but the real reason is a supply and demand shift that has been developing over the last 10 years:

1.) Boomers are not selling, they age in place

2.) People live longer in general, so houses  don't become vacant

3.) Millennials (once known as forever renters) are now the largest group of first time buyers

4.) We have not bulit much new in 10 years 2008 -2018, need to catch up

5.) New construction is very expensive, typically over 500k

Covid further reduces inventory, interest rates further increase demand, but both are just amplifying a trend we already have seen for years.

[Jimmy O'Connor]

@Nathan G. Great post! I’ve been experiencing the same thing. Been way too busy to clear the backlogged notifications!

Our rental market has been crazy, although I am super cautious since the date to open eviction court has been getting extended time and time again.

From an agent/wholesale perspective, the need for already occupied cash flowing properties with solid tenants has become our new bread and butter as compared to full gut rehab flips. It seems like investors in my market are so worried about getting trapped in a massive project from another L&I shutdown/slowdown and which could get their funds tied up, or worse, eat interest and penalties on hard money loans.

[David Goodman]

@Nathan G.

Same in Nashville....

[Jay Hinrichs]

Originally posted by @Gary L Wallman:

I have 120+ doors. Not a single vacancy. Listed 2 SFR's in an A area that will be vacant at the end of the month. 14 applications on one and 10 on the other in less then 24 hours. Both leases signed within 3 days. My homes in B areas are even stronger, if that's even possible. Took occupancy of a newly acquired rental in a B area on August 6th. New tenant is already living in it.

Gary, are you raising rents a tad or just keeping well enough alone ?  Just curious and congrats this is not the case on the west coast.

there was a bigger apartment owner here in Portland who has close to 100% occupancy but 12 to 20% in some properties are not paying and have not paid since march.. he figures he is down over 1 million already. 

[Jay Hinrichs]

Originally posted by @Justin Thorpe:

@Nathan G.

Thanks for sharing and very interesting trends.

This present economy is the hardest to decipher. Believe it or not, US retail sales were up 2% in July vs same time last year, this with 10% unemployment rate and a rise in Covid cases.

San Francisco set a new record in condo sales. This when headlines are saying we will turn into a new ghost town and everyone is migrating out.

So your statement about the increase in retirees likely falls in the same bracket. The headlines say that people are delaying retirement due to Covid.

The remote worker trends are the most intriguing. While I don’t discount the benefits you mention, some don’t apply like taxes we discussed or commute times if they are working remotely. Property taxes won’t matter if they are only renting. Cost of Living is interesting because they will benefit as long as they are “domiciled” in a higher paying state but will stop getting that “arbitrage” if their salaries get adjusted to local rates.

Of course with all due respect there are I am also 100% sure there very many trade offs of moving from say CA to WY as well like weather, the urban spark and the availability of high paying jobs.

Overall let’s say we live in the most interesting of times and for what it’s worth we have begun to see traffic Jams in the Bay Area!!! What I am noticing is the biggest divergence ever in what the news will tell you, which is often doom and gloom vs what we see on the ground.

I was on a monthly mastermind zoom meeting and one of the members is a Broker in SF..  She said there was over 5,000 current listings which is a lot I guess historically for SF.. so if there is that much inventory it makes sense that there would be a lot of sales..  

[Gary L Wallman]

Originally posted by @Jay Hinrichs:

Originally posted by @Gary L Wallman:

I have 120+ doors. Not a single vacancy. Listed 2 SFR's in an A area that will be vacant at the end of the month. 14 applications on one and 10 on the other in less then 24 hours. Both leases signed within 3 days. My homes in B areas are even stronger, if that's even possible. Took occupancy of a newly acquired rental in a B area on August 6th. New tenant is already living in it.

Gary, are you raising rents a tad or just keeping well enough alone ?  Just curious and congrats this is not the case on the west coast.

there was a bigger apartment owner here in Portland who has close to 100% occupancy but 12 to 20% in some properties are not paying and have not paid since march.. he figures he is down over 1 million already. 

Jay,

I'm a firm believer in raising rents by a small amount each year if the market supports it. The tenants get used to it and don't complain. Say 25 bucks a month or so on a 900 - 1k rent. If i waited 4 years to get the same hundred many would move out and I would have lost the first three years of the smaller increase (about 1800 bucks!). Kind of like the frog in boiling water. Start him out low and he won't notice until it's too late. LOL.

Lately the rental market here in SW Ohio has been very tight and I have no idea why. We have lost tenants who have purchased homes but their vacancies are quickly filled. Rental rates are on the rise. A small SFR that was 800 bucks two years ago is now renting for about a grand. We do raise to market rents on turnover of course.

On the higher end, while prices have soared, rents are up less in pure dollar terms then the lower end stuff. Just listed a SFR in an A area for 1595. The same price as the tenant paid two years ago when they first rented.

[Jay Hinrichs]

and no collection issues other than maybe your normal stuff you would get with that size portfolio ? 

Out this way that seems to be the issue.. vacancy is close to 0  but collections now that's another matter.

in my years of doing business in the mid west rents have been pretty static and in areas of heavy section 8 that sets the bar and free market is usually less than section 8,

Either way its good to get data from actual owners  thank you.

[Account Closed]

Originally posted by @Jay Hinrichs:

One thing I have been thinking is that these moratoriums on evictions we are facing on the west coast and other rent controls etc.. are really going to hurt the renter that is NOT fully qualified to rent.. I think you will see a gap get wider and wider.. the landlords with the decent rentals are going to be uber cautious going forward the tenant that cant check all the box's is going to get forced to look as less quality housing were the landlords might be more lenient given the quality of their product. And or like in Portland you can just take virtually any SFR out of the rental pool and sell to a owner occ .

Thereby reducing the rental stock even further .. 

Amen! Tell it to the politicians!!