The Covid-19 pandemic affected every aspect of the real estate business. At Real Estate IQ, we’ve been analyzing its impact during the last year, and now it’s time to look closer at the renting activity. For that reason, we invited Troy Espenlaub – the owner of Real Estate Property Management Avitus – to host the webinar “Landlording after the lockdown.”
As an expert in working with landlords, Espenlaub noticed that several things changed in 2020, and some of them are here to stay. These are the five massive items he listed:
- Month-to-month lease arrangements are more common but for a different reason than usual.
- Alternative showing methods are no longer an extra but are expected.
- Tenant priorities and wants have shifted to the desire for additional space.
- Prospective tenants are offering double deposits and upfront rent payments to cover several months.
- High rental prices and a very low supply of homes.
Before explaining each item on that list, it’s important to mention that Espenlaub observed that the past year wasn’t all bad for the renting activity. “The way I see it, it’s the tale of two landlords. For some, it’s never been so good: they kept their tenants and took advantage of higher renting rates,” he said. Meanwhile, others suffered a bit more, whether because they had trouble with their tenants or because their properties were located in areas deeply affected by the pandemic.
Now, let’s dive into the five significant changes and trends the Covid-19 has brought upon the renting activity.
1. Month-to-month lease arrangements
Until 2020, the main reason for landlords to use month-to-month lease arrangements was because of forgetfulness and fear of losing a tenant. However, the pandemic broadened the arguments. “My theory is that, in some cases, this strategy allowed landlords to evict tenants based on overstaying the lease. On the other hand, some landlords also like holding onto a low-risk tenant at a below-market rate, but do not want to commit to a longer-term in a period of rising prices,” the expert explained.
Either way, Espenlaub recommended carefully considering the pros and cons of going month-to-month and determining if it’s the best option in each case.
2. Alternative showing methods
When the pandemic started, showings stopped. It wasn’t safe anymore to physically go and see – or show – a property. Hence, virtual tools appeared. At first, it was videos, but suddenly, new virtual robotic tours appeared skyrocketing budgets.
On this matter, the specialist urged attendees to include videos in their listings but to do so in a coherent way with the property value. “Photos are important, but videos are more important than ever. And you can perfectly use the video camera on your phone,” he encouraged.
It might take a while to get the hang of it, but it’s essential to include them. “Videos and safety protocols changed how properties are shown. Some tenants do not feel safe visiting a property in person, and others are relocating from another area and don’t have time to check homes before moving. So, videos end up being a cost-effective way for prospective tenants to see a property with minimal effort or travel,” he completed.
Nonetheless, Espenlaub reminded attendees to respect the health protocol when doing in-person showings. Masks, disinfectant wipes, sanitized commonly touched surfaces like doorknobs, and social distancing, are all musts when it comes to it.
3. Changes in tenant priorities
“Tenants are looking for different things right now. It doesn’t come as a surprise to anyone that the two biggest things for them are a home office and a yard,” the expert mentioned. However, this doesn’t necessarily mean that places without these amenities are out of the table. What he meant was that these are aspects to upsell when listing properties.
A lot of prospective tenants are moving from apartments and into homes. They survived in an apartment long enough and required a breathing room. And people are still working from home, so even a small area that can be used as an office is a major plus. Furthermore, if children are involved, having a property with a backyard can make all the difference.
4. Double deposits and upfront rent payments
“One of the more unusual things I saw and I would not have anticipated is prospecting tenants offering double deposits and upfront payments,” Espenlaub revealed. From his point of view, several reasons can explain this behavior.
For once, the rental market is very competitive, so offering double deposits and several months of prepaid rent could be helpful to entice landlords and get a lease. Some prospecting tenants offer the additional upfront cash if they currently do not have employment but have savings, so the prepaid rent serves as a “bank” for some landlords.
In any case, the owner of Real Estate Property Management Avitus suggested caution when considering whether to accept upfront rent payments since that’s money not yet earned.
5. High rental prices and low supply
The last item on the list is the real estate market situation. As you surely know, the inventory has been low for quite a while, and prices are going up. “In Houston, according to HAR’s July report, the average rent of $2,162 was an all-time high. And the Fed informed the rental vacancy rate for Q2 2021 was at 6.2%, which is the lowest rate since the post-1985 low of 5.2% in Q2 2020,” Espenlaub exemplified.
So, what can landlords do?
Overall, the Covid-19 pandemic has brought uncertainty. We don’t know when it will end, what our situation would be at the time, nor how to cope with everything. However, we’ve also learned a lot during this time. Most of us kind of adapted to the new normal and tried to remain functional.
In an intent to bring some certainty – or at least guidance –, Espenlaub gathered learned lessons and enumerated some actions landlords can take to, at least, reduce financial risk during and after the pandemic:
- Establish strict and legal rental criteria before listing a property, and don’t forget to share the criteria with prospective tenants.
- Verify more and trust less during the screening process.
- Consider requiring newly approved tenants to make the security deposit payment and the first month’s rent payment by money order.
- Communicate regularly with your tenants to build trust.
- Know your rights as a landlord, and do not be afraid to exercise them in a consistent and timely manner.
- Remember to visit your rental properties at least every 3 to 6 months.
Disclaimer: The blog articles are intended for educational and informational purposes only. Nothing in the content is designed to be legal or financial advice.