The rental market is certainly changing as an increasing number of people look for rentals and an increasing number of homes formerly for sale become rental properties. How will the surplus ‘shadow market’ of homes and condos affect traditional apartment rentals, and how can you benefit as a property owner?
What is the shadow market?
Though it sounds nefarious, “shadow market” actually refers to the inventory of unsold condos and houses competing with apartments to be filled by renters. The growing volume of these single-family rentals is cutting into the demand for traditional apartments, some experts say.
Quoting from Census Bureau data, the Web site Calculated Risk states that, since 2004, there are 3.6 million homes built for sale that are being utilized as rental properties. And as homes for sale continue to move slowly and owners look for a way to avoid foreclosure, those numbers will surely grow.
Why do single-family rental homes look attractive?
In some cases, owners of single-family rentals are not driven by profit as much as the desperate need to cover the costs of an unsold property that may have been on the market for months or years. Since rent prices for these homes will be extremely competitive, a family looking to rent will likely get the most square footage for the money by leasing a single-family home. And in many places, there are plenty of these properties to choose between.
As the renting of unsold homes and condos likely will continue to increase as income and overall home ownership levels fluctuate with the economy, it is important, as a rental professional, to be aware of this dynamic to help you cultivate prospects for your properties.
What is the impact on apartment rentals?
Any prediction of the overall impact shadow inventory will have on apartment rentals needs to take into account variables such as geographic location and the demographic mix in any given area. The two property types are not perfect substitutes for everyone. A young professional, for instance, who might like the idea of low rent for the square footage of a single-family dwelling may not be as interested in the other aspects of such a rental, opting instead for the convenience and amenities of apartment living. He may not want to care for a yard, for instance.
The lifestyle preference of the renter, then, could still determine the type of property he’ll choose. But for those tenants who are open-minded to different rental choices than what they may have originally envisioned, the surplus of shadow inventory and its competitive rents will definitely capture their attention and continue to impact the apartment vacancy rate.
Other factors creating an inventory of apartment units is the doubling up that many families have done to stretch their declining dollars: children moving back in with parents, parents moving in with children, and other combinations of friends and relations sharing housing.
How you can benefit
Consider that exposure on sites like Rentals.com can introduce your properties to a whole new community of qualified renters who are looking to replace the housing they lost in a foreclosure or to move to a larger rental with their newly “doubled-up” family. Those property managers who continue to invest in their properties with proper maintenance and landscaping will reap the rewards of eager renters who can no longer afford or see the advantages in owning that home themselves.