Many agents will say that rentals are simply not worth their time—the traditional logic is that finding qualified leads for rental units is a lot of work for transactions that yield too little of a return. However, over a third of Americans, almost half of the U.S. adult population, rent rather than buy homes. These numbers suggest that rentals can, and should, be an integral part of an agents' business. Let's explore exactly what makes Americans rent and why agents should pay attention.
"It's the Economy, Stupid"
We all have to reckon with economic realities and the impact they have on our spending. Slow wage growth and a tight lending environment have shut aspiring homebuyers, especially younger ones, out of the sales market. For them, the solution is to become a renter. Don't wait for a more favorable environment for homeownership to materialize—follow recent trends and think about strategies to capture and work with rental clients.
Structural Demographic Changes
One in every 3 U.S. adults is a millennial, and they are three times more likely to rent than any prior generation. The paradigm of homeownership is changing, and commitment-wary millennials prefer renting everything from their homes to their clothing. It's possible, too, that the millennial preference for renting will bleed into later generations and continue to impact the type of housing members of Gen Z choose.
Rental Prices are Rising… People are Still Renting
Just because rental prices are rising, it doesn't mean that renters and would-be renters will stop renting. Renting is still less expensive for many, and is a great low-risk fit for both younger, mobile tenants saddled with students debt, and Americans seeking flexibility in their living arrangements. However, while the number of renters is on the rise, so, too, is their average income. High-income renters are the fastest-growing segment of renters—in the last decade, the number of renters looking for luxury apartments has increased by 175 percent. The upshot is that rental commissions are rising, and rentals are becoming more viable for agents' business plans.
Amenities Are Getting Better
Landlords are taking advantage of the demographic shift of renters by providing clients with luxury amenities to make their properties competitive. Renting is not only a practical solution to economic issues but now is attractive and appealing for potential clients. After all, who wouldn't want a home that comes with ready to use steel appliances, granite countertops and open floor plans? Luxury apartment complexes with slick exteriors, gorgeous club rooms, and immaculately staged apartments not only attract tenants but also give agents new confidence to show rental units.
A Shorter Time Frame of Transactions
The rental market moves much faster than the sales market. While selling a home might take months, rental transactions take days or weeks to complete. Operating in such a dynamic market does mean diligence, persistence and flexibility, but also offers the opportunity to earn commissions quickly and provide a consistent cash flow. For a new agent, this short time frame also means that you can start making money quickly and cut your teeth on the high volume of rental clients while trying to access homebuyers. For experienced agents, working with rentals allows you to modernize your business by tapping into a growing segment of the population, take advantage of rising rent prices, and ride out periods of slow home sales.
Pipeline to Buyers
Rental clients are likely to want to buy during some point in their life, and, of course, want an agent to guide them through the process. This transition can even begin during the first stages of your relationship with potential renters. While commitment-wary millennials might be set on renting, buying might make more sense for them. Educate them on the differences. Even if they don't walk out of your first meeting as a buyer, keeping a list of rental clients, and developing a strategic outreach plan, sets you up for a dependable stream of homebuyers.
Aleksia Silverman is the content strategist at Rental Beast. To learn more about the Rental Beast platform and how you can use rentals to sustainably grow your business, please visit rentalbeast.com.