Although the real estate industry focuses primarily on sales, I believe that this year will change the conversation. Property managers and investors have faced COVID-19, among many other challenges in recent years.
Although the pandemic didn’t completely destroy the rental market, it did raise some questions. The most important being “How do you keep properties without income?”
Property managers had to navigate this territory, which was unfamiliar territory. They had to learn how they could help tenants get new government aid programs and assist investors with eviction moratoriums. It was a delicate balance act that required skill, and the conversation was focused only on the challenges facing investors.
The rental market was corrected as soon as the eviction moratoriums were lifted.
As landlords tried to replace lost revenue or improve cash flow, good tenants started to suffer from large rent increases. This was a relief for those landlords who were reluctant to let go of the market in 2005, but it also made the conversation more favorable to the “greedy landlords”.
The housing market started to boom and the rental market stabilized. All those landlords who were reluctant to rent their properties had an escape route. Portfolios began to shrink and new rental listings became difficult to find. Property managers found this very troubling.
We are heading into a year of property management growth
Today we are witnessing a slight decline in housing prices. I believe this is a good year for property management growth. Sellers are considering rental income as an alternative to the current “new normal” for most rental rate.
Recent conversations with active property managers were very positive. Many landlords are relieved that those who were on the fence about selling or re-renting now prefer the latter. They are also receiving more leads from agents and getting referrals from them — the best sign yet of a strong rental rebound.
The conversation about vacation rentals is changing
It seems that the Airbnb conversation is changing. COVID has brought vacation rentals to a new level. Buyers saw potential in offering a safe and peaceful place to vacation. As the spotlight began to shine on the benefits of vacation rentals for quiet neighborhoods, regulations and community rules started to oppose this type of activity.
The trend is towards a safer, 30-day-per-year rental. It is also quite costly to design a well-equipped vacation rental. With high start-up costs, and the expected vacancies, many buyers find it difficult to generate positive cash flow.
The challenges within
Long-standing property managers are now discussing the internal challenges. Agents who are not prepared for market shifts can find themselves in a losing situation and resort to property management to supplement their income. Property management is not for the inexperienced. The potential liability far outweighs the potential income.
This is not a side hustle.
Tenant protections will be a major issue for the industry. We don’t know the details of rental registries, whether protected income legislation will be passed or if a legal-council for tenants facing eviction will become a reality.
These topics and others will contribute to the ongoing conversation about the future of the rental sector. It is evident that education and skill will be key to investor friendliness.
Kathy Gaspari is Director, Property Management at Berkshire Hathaway HomeServices Florida Properties Group.