As social distancing guidelines get tighter in many metro areas, property management companies need to work with tenants and landlords a little differently.
There are questions on many landlords minds:
- What is the likelihood that tenants will move during this time when the economy has slowed down?
- How are we going to handle renewals when tenants’ income may be at risk?
- Will social distancing dry up the demand for showings?
We consulted property management companies and found data from various regions across the US and industry resources on the current market conditions. Here are their thoughts on today’s rental market and how they are handling vacancies and showings.
We spoke with Michael Day, Owner of Day Property Management LLC in Appleton, WI, and Justin Spaulding, Owner of Spaulding Group in Madison, WI, about the current state of the rental market in their areas and how their firms are making adjustments during this time.
According to Michael, vacancies in his properties appear to be unchanged from the last few months; one tenant just canceled their move-out. Showing requests are down but very minimally.
Justin said, “We have actually had a few tenants who were planning to move, now come back to us wanting to renew as they do not want to move in this time.” “We see demand. COVID may slow this down a bit, but so far, we still see typical, strong demand for our quality, workforce housing apartment homes.”
Whether good or bad remains to be seen, but vacancies are remaining normal or declining during this period of uncertainty.
How is Day Property handling upcoming renewals? Michael indicated that renewal notices are going out the way they have in the past. For income verifications with renewals, the firm assumes the tenant’s employment status hasn’t changed unless the tenant indicates otherwise.
The Spaulding Group has yet to see a drop off in lease renewals. Justin said, “About two years ago, we went completely electronic for signing new leases and lease renewals.” “We stay ahead with our renewals. Before leases expire, we reach out with renewal offers based on the operating budget that we set back in 2019 for 2020. For the leases expiring at the end of this month, renewals were sent out in early January.
We are currently sending out renewals for June/July and are beginning to work on August. Since we stay so far ahead, we are not sure what impact COVID will have on those summer lease renewals. I am guessing our renewal rates will increase due to COVID.”
Income Verification for New Tenants
For applications received in the last two weeks, Day Property Management has noticed an uptick in income verifications where employers state the tenant has been laid off temporarily. The firm continues to rely on the normal screening process to look for other red flags and hasn’t had to disqualify an application due to temporary layoffs. According to the Spaulding Group, “Nothing has changed for us here. We look for income that is at least three times the rent, credit score, outstanding balances on a credit report, and deny convicted felons. We will continue to operate this way going forward.”
Current Payment Issues
“Here in Wisconsin, we are coming upon the first month since the Governor’s “Stay-At-Home” went into place,” said Michael. “To date, we have not experienced payment issues, but we do expect some problems starting April 1, which we plan to address at that time.”
Handling Vacant Units
According to Multifamily Pro, the rental market across the U.S. has not slowed down. The trick for property managers will be to adopt standard practices – to keep people safe and innovate the showing process at the same time.
Michael said, “We had vacant units before the virus hit Wisconsin. The demand hasn’t changed much. If people were planning to move, that seems to be the plan still. We are still showing properties. However, the showings have dropped off a little bit, but we are still receiving a lot of calls and messages asking about available properties -nothing that would indicate that the rental market is slowing down much at all.”
The Spaulding Group handles vacancies a little differently due to their business model. They are in the process of fixing up units that needed updating. This causes them to have higher vacancies until those updates are complete, and the unit is re-rented. Justin said, “We always have more vacancy than what the market does for this reason. Once our apartments are fully or partially remodeled, we have no issues renting them out.”
The key to stability, according to both Michael, Justin, and Multifamily Pro, is to innovate and think outside the corporate office. Companies in other industries have moved to apps and online platforms to handle much of the interaction with clients. Think EatStreet and UberEats. Or bringing a premium product to the market, as the Spaulding Group has done.
Showing Vacant Property
At Day Properties, “we have implemented a no-contact process to stick with social distancing,” said Michael. “We schedule showings as normal, arrive early, and open the unit. We return to the property a short while after the scheduled time to wipe down the hard surfaces and door handles. We then lock up as normal and return to the office to call the potential tenants. So far, this process has worked without issue.”
Multifamily Pro reported that leasing managers are using more virtual tours and video conferencing to show apartments online instead of in-person. The Spaulding Group is taking a similar approach with professional pictures and virtual tours. They have experienced showings have dropped off slightly due to COVID.
Both are options for showing units effectively. In many cases, it won’t cost you any more than you’ve already paid for your smartphone. Consider doing a Facebook Live while you are in the property. Prospective tenants watching the Live session could contact you right away, comment on the video, or message you directly after watching the session later. Any video app on your phone will work to accomplish a quick video tour, which you can then share with all social platforms.
Some companies create 3D interactive presentations based on drawings and renderings. While 3D presentations are popular with real estate developers, most property management companies have not yet adopted the technology. This could be an option to explore during this market pivot to higher online activity. Hauzd.com is one company that offers the 3D interactive capability that could be an excellent tool in your marketing toolbox.
Michael said Day Properties continues to market vacant properties on the firm’s regular platforms – website, Facebook Marketplace, Craigslist, and signs in the yard. The Spaulding Group uses mainly online listing services.
Landlords are, however, starting to discuss possible concessions, so marketing messages will need to be updated. Many landlords have begun to discount monthly rates by $20-25 to fill vacant units; steeper discounts may be coming, as most landlords will not let a unit sit for more than three months without a tenant.
According to Michael, lower-end units will likely sit longer without a rent discount. If discounts are in the offing, he expects them to show up sooner for the higher-end units the firm manages.
Justin said, “Through winter months, as our remodels get completed, we have select properties where we will give a concession, such as half a month’s rent free. As we pickup into the spring and summer months, these typically go away. We are expecting the same situation this spring and summer.” Due to their business model, Justin said, “We are still pushing forward according to the 2020 budget that we drafted in 2019. We are still too early into COVID to have a feel for what adjustments we may have to make.”
Multifamily Pro reports that while social distancing is creating a workforce slowdown, it doesn’t so far seem to be affecting the US rental market overall.
Before taking drastic measures to discount rental rates for your property, Rentometer recommends doing a little research to see current ranges in your local area, and where you fall on that spectrum. You may be surprised to find that you were underpricing – or overpricing – your units based on past market trends.
This economic slowdown will pass, as patterns in other affected countries have shown. You don’t want to be stuck with rents at the extremes of the market due to a lack of research.
Visit Rentometer.com to run your free report today and gain assurance that you are pricing your rentals accurately.