How the Market Impacts Your Rental Property
Timing is everything when it comes to the real estate market, especially for rental properties. While it’s easy to understand what that means when listing a home for sale, how does market timing affect rental properties? Get a beginners’ guide to the rental real estate market to fully understand your options at this time.
Factors Affecting Rental Markets
Rental markets are highly localized. One city may be thriving while the neighboring community has flat rents. Factors that may affect rental markets include:
Rental market supply – Communities that are afloat with new construction luxury condos and pre-existing homes for rent have greater supply than demand. This limits the amount you can charge for rentals
Quality and quantity of homes for sale – If there’s a steady supply of starter homes for sale, some renters may upgrade to home ownership. But if the supply is low, they’ll remain renting for financial reasons. This means you can be choosier about your tenants
Institutions – Communities with institutions, such as local businesses or universities, tend to have more stable rent markets. This is largely due to the large pool of potential tenants, a boon for landlords
Economic indicators – Rental markets are affected by economic trends. These economic indicators include unemployment rates, the stock market, and interest rates.
By understanding the factors that affect rental markets you can evaluate your home’s potential.
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How to Stay Afloat in a Down Market
When the rental market is strong, you can command high rates for your rental while avoiding periods of vacancy. Tenants may be lining up to apply. When the market slows, things can be tough.
The smartest landlords plan ahead for down times by saving a portion of the rent income to use for repairs, vacancies, or other emergencies. If the rental market slows down and you have a pool of savings, consider using the slow period for a remodel. You can update that old kitchen and raise rental prices when you return the home to the market.
In some communities, short-term rentals are an option for earning income from a home during a down rent market. Short-term rentals require more hands-on time since you’ll be turning over the property in between tenants. You can always hire a cleaner to make things easier for you.
Your last option with a down market is to put the home up for sale. Depending on the home’s condition and remaining mortgage amount, you may be able to walk away from the deal with a tidy profit.
The one constant with the real estate market is change. If things are bad today, they may improve tomorrow. If the market is hot now, it won’t stay hot forever. By understanding the present landscape, you can decide what’s in your interest momentarily and over the long term.
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