Home Flips Increase But Profits Decline Across U.S. In 2021

 ATTOM, a leading curator of real estate data nationwide for land and property data, today released its year-end 2021 U.S. Home Flipping Report, which shows that 323,465 single-family homes and condos in the United States were flipped in 2021. That was up 26 percent from 2020, to the highest point since 2006.

The report reveals that the number of home flips in 2021 was up from 257,091 in 2020 to a total not seen since nearly 334,000 homes were flipped by investors in 2006. Last year’s flips represented 5.5 percent of all home sales in the nation during 2021, down from 5.8 percent in 2020 and 6.1 percent in 2019.

But even as quick-turnaround sales by investors shot up, gross profit margins on home flips in 2021 sank to their lowest level in more than a decade after dropping at the fastest pace in more than 15 years.

Homes flipped in 2021 typically generated a gross profit of $65,000 nationwide (the difference between the median sales price and the median amount originally paid by investors). That was down 3 percent from $67,000 in 2020 and translated into just a 31 percent return on investment compared to the original acquisition price – the lowest margin since 2008. The latest ROI (before accounting for mortgage interest, property taxes, renovation expenses and other holding costs) was down from 41.9 percent in 2020 and 40 percent in 2019. The decline in the ROI also marked the steepest drop since at least 2005, resulting in margins that were commonly down by 20 percentage points from the 51 percent peak over the past decade, hit in 2016.

U.S. Home Flipping Gross Profits & Returns Chart

“While gross profits were lower for fix-and-flip investors in 2021, there may have been offsets that protected net profits,” said Rick Sharga, ATTOM’s executive vice president of market intelligence. “Fewer flippers financed their purchases, so their cost of capital was lower. And it took less time to execute a flip, reducing holding costs, and suggesting that less extensive – and less expensive – repairs were needed to bring the properties to market. A lot of the mark-up on fix-and-flip properties historically has come from the value of those repairs, but so have a lot of the costs that reduce net profits.”

2021 Gross Flipping ROI by Price Range Chart

Investors saw their gross profit margins dip for the fourth time in five years as the median value of the homes they flipped rose more slowly than the median price they paid to purchase properties – 21.1 percent versus 31.3 percent. The decline in home-flipping profits may represent a rare crack in the foundation of the U.S. housing market, which otherwise boomed in 2021 both because of and in spite of the worldwide Coronavirus pandemic.

Throughout the two-year-old pandemic, a surge of buyers has flooded the market amid a confluence of key factors. Tops among them have been a combination of historically low mortgage rates and a desire of many households largely unscathed financially by the pandemic to trade densely populated virus-prone areas for the perceived safety and wider spaces offered by a single-family home and yard.

Home flipping rates down in slightly more than half of local markets; biggest drops in Northeast and West

Home flips as a portion of all home sales decreased from 2020 to 2021 in 110 of the 209 metropolitan statistical areas analyzed in the report (53 percent). Nine of the 10 biggest decreases in annual flipping rates among MSAs came in the Northeast and West, led by Honolulu, HI (rate down 83 percent); Atlantic City, NJ (down 73 percent); Manchester, NH (down 57.7 percent); Rochester, NY (down 48 percent) and Cedar Rapids, IA (down 47.8 percent). Metro areas qualified for the report if they had a population of at least 200,000 and at least 100 home flips in 2021.

Aside from Rochester, the biggest decreases in flipping rates in 2021 across MSAs with a population of 1 million or more were in Las Vegas, NV (rate down 37.2 percent); Minneapolis, MN (down 36.7 percent); Sacramento, CA (down 36.3 percent) and Philadelphia, PA (down 35.4 percent).

Home flipping rates increased from 2020 to 2021 in 99 metro areas with sufficient data to analyze (47 percent). The largest annual increases in 2021 in the home flipping rate came in Provo, UT (rate up 114.3 percent); Salt Lake City, UT (up 113.4 percent); Austin, TX (up 111.2 percent); College Station, TX (up 97.4 percent) and Ogden, UT (up 95 percent).

Aside from Salt Lake City and Austin, the biggest annual flipping-rate increases in MSAs with a population of 1 million or more were in San Antonio, TX (rate up 56.2 percent); Dallas, TX (up 34.4 percent) and Houston, TX (up 32.3 percent).

Share of home flips purchased with financing decreases to lowest level in three years

Nationally, the percentage of flipped homes purchased with financing decreased in 2021 to 38.7 percent, down from 41 percent in 2020 and from 39.9 percent in 2019. Meanwhile, 61.3 percent of homes flipped in 2021 were bought with all-cash, up from 59 percent in 2020 and from 60.1 percent two years earlier.

U.S. Home Flipping Acquisition Trends Chart

“In an environment where mortgage rates are rising as rapidly as they are today, investors buying with cash are at a distinct advantage over consumer homebuyers,” Sharga noted. “The combination of rising home prices, rising mortgage rates and rising inflation is undoubtedly creating affordability issues for many prospective buyers, so it’s possible that there will be less competition overall for the limited inventory of homes available for sale.”

U.S. Home Flipping Financing Trends Chart

Among metropolitan statistical areas with a population of 1 million or more and sufficient data to analyze, those with the highest percentage of flipped homes purchased by investors with financing in 2021 included Louisville, KY (55.6 percent); San Diego, CA (55.4 percent); Seattle, WA (52.6 percent); Portland, OR (48.6 percent) and San Francisco, CA (47.6 percent).

In that same group, the metro areas with a population of 200,000 or more that had the highest percentage of flips purchased with all cash included Tuscaloosa, AL (90.6 percent); Buffalo, NY (84.1 percent); Dayton, OH (82.8 percent); Detroit, MI (82.2 percent) and Canton, OH (82.1 percent).

Typical gross profits on home flips decline in 2021 after hitting 15-year high

Homes flipped in 2021 were sold for a median price nationwide of $275,000, with a gross flipping profit of $65,000 above the median original purchase price paid by investors of $210,000. That national gross-profit figure was down from a 15-year high of $67,000 in 2020 but still up from $60,000 in 2019.

Among the 53 metro areas in the U.S. with a population of 1 million or more, those with the largest gross-flipping profits in 2021 were San Jose, CA ($265,500); San Francisco, CA ($172,000); Seattle, WA ($149,950); San Diego, CA ($145,500) and Washington, DC ($139,555).

The lowest gross-flipping profits among metro areas with a population of at least 1 million in 2021 were in Kansas City, MO ($23,456); Houston, TX ($32,300); San Antonio, TX ($34,357); Dallas, TX ($40,800) and Atlanta, GA ($43,900).

Home flipping returns drop to 13-year low

With median resale prices on home flips rising more slowly in 2021 than they were when investors were buying properties, the gross profit margin on the typical flip in the U.S. last year fell to 31 percent – the lowest level since 2008. The 10.9 percentage-point drop from 2020 exceeded any decline since at least 2005.

Investment returns on median-priced home flips decreased from 2020 to 2021 in 186, or 89 percent, of the 209 metro areas analyzed.

Among metro areas with a population of 1 million or more, the biggest percentage-point decreases in profit margins in 2021 were in Cleveland, OH (ROI down from 101.5 percent in 2020 to 40 percent in 2021); Cincinnati, OH (down from 83.5 percent to 40 percent); St. Louis, MO (down from 71 percent to 39 percent); Columbus, OH (down from 70 percent to 40 percent) and Providence, RI (down 65.7 percent to 36.4 percent).

In that same group of markets with populations of at least 1 million, the only increases in returns on investment on the typical sales were in Buffalo, NY (ROI up from 92 percent in 2020 to 98.9 percent in 2021); Raleigh, NC (up from 14.5 percent to 19.8 percent); Nashville, TN (up from 33.3 percent to 36.8 percent); Boston, MA (up from 29.1 percent to 31.3 percent) and Phoenix, AZ (up from 20.8 percent to 21.3 percent).

Among metro areas with a population of at least 1 million, the biggest profit margins in 2021 were in Pittsburgh, PA (100.6 percent); Buffalo, NY (98.9 percent); Philadelphia, PA (92.3 percent); Baltimore, MD (81.3 percent) and Virginia Beach, VA (76.6 percent). The smallest were in Kansas City, MO (12.3 percent); Salt Lake City, UT (13.9 percent); Houston, TX (14 percent); Dallas, TX (16.1 percent) and San Antonio, TX (17 percent).

Average time to flip nationwide down to nine-year low

Home flippers who sold homes in 2021 took an average of 153 days to complete the flips, the lowest number since 2012. Last year’s average was down from 182 days for homes flipped in 2020 and 178 days in 2019.

Average Days to Flip By Year Chart

Percent of flipped homes sold to FHA buyers drops below 10 percent

Of the 323,465 U.S. homes flipped in 2021, just 8.2 percent were sold to buyers using a loan backed by the Federal Housing Administration (FHA). That marked the smallest percentage since 2007, and was down from 13.9 percent in 2020 and 14 percent in 2019.

Among the 209 metro areas with a population of at least 200,000 and at least 100 home flips in 2021, those with the highest percentage of flipped homes sold in 2021 to FHA buyers — typically first-time homebuyers — were Laredo, TX (26.5 percent); Yuma, AZ (22.5 percent); Visalia, CA (20.5 percent); New Haven, CT (19.9 percent) and Springfield, MA (18.9 percent).

Just 25 counties had a home flipping rate of at least 10 percent in 2021

Among 900 counties with at least 50 home flips in 2021, there were only 25 counties where home flips accounted for at least 10 percent of all home sales last year. The top five were McCurtain County, OK (northeast of Dallas, TX) (15 percent); Logan County, KY (north of Nashville, TN) (13 percent); Gilmer County, GA (north of Marietta) (12.4 percent); Fentress County, TN (northwest of Knoxville) (12.1 percent) and Greene County, GA (south of Athens) (11.7 percent).

Thirteen zip codes had a home flipping rate of at least 20 percent

Among 8,020 U.S. zip codes with a population of 5,000 or more and at least 10 home flips in 2021, there were 13 zip codes where flips accounted for at least 20 percent of all home sales, including six in Detroit, MI. The group with a flipping rate of at least 20 percent was led by 78701 in Travis County (Austin), TX (31.4 percent); 44730 in Stark County (Canton), OH (27.8 percent); 78705 in Travis County (Austin), TX (27.3 percent); 48205 in Wayne County (Detroit), MI (25.3 percent) and 48227 in Wayne County (Detroit), MI (23.1 percent).

High-level takeaways from fourth-quarter 2021 data:

• There were 96,773 home flips in the fourth quarter of 2021 which represented a flipping rate of 6.8 percent.
• The share of homes flipped in the fourth quarter of 2021 that were purchased by investors with financing represented 37 percent of all homes flipped in the quarter, down from 39.1 percent in the previous quarter and from 42.6 percent in the fourth quarter of 2020. The share purchased with cash rose to 63 percent, from 60.9 percent in the third quarter of 2021 and 57.4 percent in the fourth quarter of 2020.
• The median gross-flipping profit on home flips in the fourth quarter of 2021 was $65,000, which represented a typical 28.3 percent return on investment (percentage of original purchase price). That was down from 31.1 percent in the previous quarter and from 43.6 percent in the same period of 2020.
• Home flips completed in the fourth quarter of 2021 took an average of 154 days, down from 176 days in the fourth quarter of 2020.

Report methodology

ATTOM analyzed sales deed data for this report. A single-family home or condo flip was any arms-length transaction that occurred in the quarter where a previous arms-length transaction on the same property had occurred within the last 12 months. The average gross flipping profit is the difference between the purchase price and the flipped price (not including rehab costs and other expenses incurred, which flipping veterans estimate typically run between 20 percent and 33 percent of a property’s after repair value). Gross flipping return on investment was calculated by dividing the gross flipping profit by the first sale (purchase) price.

https://www.attomdata.com/news/home-flipping/attom-year-end-2021-u-s-home-flipping-report/

Trammell Crow's $600M Solar Deal Is Latest In Wave For Industrial Spaces

 

U.S. commercial real estate owners have historically been slow to pursue solar energy, but a new $600M deal is the latest sign priorities are shifting.

Trammell Crow has agreed to partner with Altus Power Inc. to install solar panels on 35M SF of Trammell's industrial portfolio by 2026, the Wall Street Journal reported.

It is the latest acknowledgment from an industrial real estate holder that solar has become an attractive amenity for its buildings as tenants and investors alike demand a focus on sustainability. 

The deal will create 300 megawatts of capacity and is Altus' largest to date. The Connecticut-based solar company merged with a CBRE-backed special-purpose acquisition company in December, allowing Altus to expand dramatically. Trammell Crow is also an independently operated subsidiary of CBRE.

Trammell Crow Chief Operating Officer Adam Weers told the Journal he thought of solar as a "client service," lowering the carbon footprint at properties to attract ESG-conscious businesses.

Once the solar panels are installed, Altus will sell the power to Trammell’s tenants at a rate discounted from the typical electrical grid price. Trammell Crow will also collect rent from Altus.

The discounted price of solar energy can provide certainty in a tenant’s costs at a time of rising energy prices, Tradepoint Atlantic Managing Director Kerry Doyle said at Bisnow’s Mid-Atlantic Industrial Summit in February.

Doyle said he could lock in 25-year power purchase agreements with tenants through a solar project, while the longest time frame an electrical company could commit to was three years.

That has driven Tradepoint, a 3,300-acre industrial park at the Port of Baltimore, to build out the infrastructure for solar arrays on the roofs of its spec industrial and build-to-suit spaces. It also encouraged tenant McCormick to invest in its own 10 MW solar array on its 1.8M SF Tradepoint facility, Doyle said.

“To provide that level of certainty to your customers through putting that solar array in, there’s all these other advantages and considerations to be thinking of, over and above how many cents per SF it increases your build cost,” Doyle said. “It’s not really a nice-to-have; it’s a must-have.”

Out of all U.S. commercial buildings with 10K SF of rooftop space, just over 4% have solar installations, according to data from energy consulting company Wood Mackenzie cited in the Journal. The company projects that percentage to grow to 11.1% by 2030.

Other industrial landlords have already acknowledged solar’s potential as energy-intensive e-commerce facilities have increasingly driven the need for electrical capacity.

Prologis, which the Solar Energy Industries Association ranks among the top 10 major brands and businesses with installed solar capacity in the United States, has committed to building out 400 MW of solar capacity on its roofs by 2025. The firm told Bisnow in January it was on track to complete its goal. 

On Monday, Prologis U.S. West Region President Kim Snyder told Bisnow that Prologis’ solar campaign was a good way to hedge against future energy and sustainability needs.

“One of the things that we've been working on as a company is recognizing that continuous growth in electrical consumption and electrification,” Snyder said.

Other landlords are also pursuing solar. STAG Industrial, a REIT with roughly 100M SF of rentable space, is looking to double its installed solar capacity to 50 MW over the next several years, according to its inaugural sustainability report.

Price Booker, managing director of business development for logistics landlord Realterm, said European investors were still ahead of the United States on supporting sustainability initiatives, but the market is quickly coming around.

Booker said the immediate return on investment can be low when pursuing sustainability initiatives in industrial spaces, but green credentials will increasingly make a difference for a building's back-end liquidity.

“Every investor meeting that I’m in now, they ask about sustainability,” Booker said at last month's Bisnow event. “If you don’t have some talking points on that, you’re in real trouble.”

https://www.bisnow.com/national/news/industrial/trammell-crows-600m-solar-deal-is-the-latest-in-a-wave-for-industrial-spaces-112446

Is Buying a Rehab Home Worth It?

 There is no clear line defining the difference between a rehab and a fixer upper. Generally, a fixer only needs some relatively inexpensive cosmetic improvements to increase the property value. Often a fixer involves repairing a few dinged walls, fresh paint, new carpet, or refinished floors. You start entering a grey area by replacing major appliances in the kitchen. It becomes a full rehab when water damage must be repaired, a new roof is needed, and/or kitchen appliances are relocated.

You can usually live in the home while doing fixer projects, but a rehab is often uninhabitable or difficult to live in for a period of time. Of course, the costs are also significantly different. Painting the entire interior of a typical house and replacing carpet can cost $15,000 or less. You can also fix up one room at a time to spread the cost out over time. According to HomeAdvisor, a typical rehab will cost anywhere from $18,000 to $79,000 or more. A rehab house can be uninhabitable as walls are ripped out and kitchens or bathrooms are completely demolished to begin again.

Pros and Cons of Buying Rehab

On the other hand, turnkey homes are ready to move in and these are what the vast number of homebuyers are looking for. They are also looking for the convenience of moving in over the weekend, putting the dishes in the cupboards, and going to work on Monday with minimal disruption to their lives. Compared to a rehab, homebuyers pay dearly for the convenience of a turnkey. That is why there is a strong market of investors that do the rehab in return for a substantial profit selling turnkey ready homes.

But you don’t have to be an investor to take on a rehab and turn it into your dream home. In fact, the FHA offers loans specifically targeting homebuyers that want to rehab a home to live in.

The biggest pro for buying a rehab is the cost. It’s not just the purchase price that will be lower, but a rehab also requires a smaller down payment to get started. Of course, this also brings the con of needing money to do the renovation. If you’re having trouble with the down payment, chances are that you will not have the money for the renovation anytime soon. That is something that makes the FHA 203k loan appealing because it includes the rehab money.

Another big pro is that there is less competition for rehab homes because most buyers are looking for turnkey. This improves your chances of finding an older house with good bones at a decent price that you can renovate into what you want. The con here is that the competition that you do face probably includes rehab investors that have more experience than you. Be careful before outbidding a professional rehabber that knows more about the costs and future value than you do.

Customizing your own home is one of the biggest pros of a rehab. Want a deck off the master bedroom? Build one. Want a walk-in shower? Build it. You have the freedom to do whatever you want. Once you do the cost analysis on the purchase and rehab costs, customizing the home the way you want becomes the biggest pro and it doesn’t really have any downside. Customization is such a benefit that many people choose to rehab the homes that they already live in rather than buying a more modern home. Quality control also falls within the scope of customization. You get to decide room sizes, materials, colors, contractors, and everything else.

However, there are a few other potential cons. It’s not unusual to spend more than you planned on a renovation. It could be because you discover an unexpected problem that needs repairing, or the cost of materials/labor goes up, or you change your mind about exactly what you want. It’s always good to budget at least 20% more than your estimate. Another possible con happens when the work takes longer than you plan for. You may become very disgruntled living in a construction zone or have the added cost of living somewhere else for longer than expected.

What to Consider Before Buying a Rehab

Do an honest assessment of what you want before looking at houses. You want to be sure the house you are looking at can be rehabbed into the house that you dream of. You should also evaluate the skills that you have and the amount of time you’ll be able to apply to the work. You’ll probably gain some skills as you go along but you’re not likely to go from being able to replace a light switch to changing out the main electrical panel with the help of professional electricians from Roswell, GA. Know what you can reasonably do yourself and what you’ll need to hire professionals for.

Before you make an offer, you should have your financing in place that includes the rehab costs. Having a backup plan for financing is always a good idea. You also want to assemble a team of contractors if you’ll be having work done by professionals. Time is money and you want to minimize the time that construction will be going on. On the day of closing, you want to be able to start your Fast Paced Rehabbing.

https://www.american-apartment-owners-association.org/property-management/is-buying-a-rehab-home-worth-it/

Build-to-Rent Homes the Next Big Thing?

 Real estate investors are always looking for the next developing trend, a new opportunity to expand their holdings and increase their profits. Many of these entrepreneurs have been exploring the increasingly popular concept of build-to-rent homes–attached or detached homes built specifically for long-term renters. 

How popular is this trend among investors? According to Real Estate Magazine, 50,000 build-to-rent homes were constructed from September 2019 to September 2020 in comparison to a 40-year average of 31,000 units per year. 

Build-to-rent ownership is usually larger in scale than the familiar single-family rental portfolio, a hybrid of multifamily and single-family investment properties ranging across income levels and geographies. Specifically built as rentals, several BFR homes are typically located in one tract or neighborhood. 

Who lives in build-to-rent homes? 

There are a growing number of renters who, for whatever reason, can’t or don’t want to purchase a single-family home but still want the amenities that are not available in an apartment or condominium situation. They are willing to forgo the equity they could acquire in their own home for convenience, more space and private yards. 

A build-to-rent property usually looks like a traditional, suburban family home without the homeowner having the responsibility for making their own repairs, doing their own maintenance and paying property taxes. Many of these communities are enhanced by security gates, swimming pools and other high-end amenities. 

As reported by Forbes, “Tenants at these kinds of developments span professional millennials, move-up families/life transition (i.e., divorce), and empty-nesters. Most renters are younger households tired of apartments but not ready or able to buy a home. In addition, there is significant demand from Boomer households who are downsizing from owned single family but don’t want apartment living… And the lock-and-leave convenience of renting is appealing to all generational groups, particularly the Baby Boomers whose kids have left the nest.” 

Yardi Matrix says this desire by families for more freedom and privacy without a mortgage “has prompted many institutional players to jump into the niche, with more than $10 billion allocated to the sector by institutions over the last few years,” according to corporate announcements and news reports. 

“Some 12 percent of new single-family construction in 2021 is being done for rentals,” according to John Burns Real Estate Consulting, a national company with offices throughout the U.S. 

Build to rent, often known as BTR, BFR or B2R. “enables investors to control the product from start to finish, to create a ‘brand’ as opposed to a random pool of assets, to concentrate a larger number of holdings in fewer locations, and possibly to improve liquidity by adding to the potential number of market participants” reported Paul Fiorilla, director of research, and Casey Cobb, senior analyst, with Yardi Matrix. “As such, build-to-rent is likely to flourish in the next economic cycle.”  

Build-to-rent communities offer tenants upscale amenities 

As an example, Curve Development is currently pre-leasing 72 single-family homes designed as rentals near South Mountain in Phoenix with attached two-car garages and fenced-in rear yards. The development is part of 3,500 rental homes the company has under development throughout 26 communities in several states, according to a recent release. 

Scheduled to be completed in the first quarter of 2022, Cyrene at South Mountain offers three- and four-bedroom floorplans as well as a private dog park, a ramada with barbecue, a multi-purpose event lawn, outdoor seating with fireplace and more. Rentals for the three-bedroom detached homes start at $2,400 a month and the four-bedroom units begin at $2,665. Along with SMART home technology and covered patios, each home even includes a doggie door. 

Other amenities found in build-to-rent neighborhoods, such as The Bungalows on Pine Cliff by St. Clair Holdings, include a leasing center, clubhouse, modern kitchen, fitness center and a dog washing station. Outdoor features include large gas firepits with seating areas, a bocce ball court, a dog park, barbecues and two electric car charging stations. 

Clean Living Communities™ of Florida, has recently been buying newly-built houses from builders throughout the southeast, Texas and Nevada and renting them for $1800 to $2500 a month. These homes are 15% to 20% larger than typical apartment units in the area and 60% of their renters are young families.  

“Demand is strong,” said Jordan Kavana, founder of Clean Living Communities™. “We are seeing 8% to 9% growth in rents within some of our communities; never less than 4%-5%.”  The company’s tenants sign 24-month leases and 80% renew when their lease ends. 

Investing in build-to-rent homes 

There are definitely financial benefits to building to rent. Renters tend to move into a single-family home on a longer-term basis than apartment renters, who are inclined to be more temporary. This stability results in less tenant turnover. As noted in a new survey by Zelman and Associates, “turnover rates have consistently remained in line with the low end of the 27%-34% range.” 

 In addition, rents increase at a faster rate for single-family homes than they do for multifamily proprieties. According to a CNBC investigation, rent payments for single-family properties have been growing by 4.5% annually, while rent payments for multifamily apartments are growing at an annual rate of only 3%. 

Major players currently entering the build-to-rent market include Toll Brothers, Lennar Homes, JMC Homes, AHV Communities and Camillo Properties. American Homes 4 Rent and Invitation Homes report that they enjoyed revenue and rent growth of 2.8% and 3.5% respectively in 2020. 

Interestingly, build-to-rent developments do not fall into the category of single-family financing. It is actually multifamily financing and is underwritten in the same manner as, for instance, an apartment building. A recent white paper by GlobeSt MULTIFAMILY indicates that “BFR investors and developers will find familiar terms in debt financing as well—examples include a 2+1 interest-only bridge loan at 3.75%, a 3+1+1 non-recourse construction loan or a 10-year Fannie Mae permanent fixed rate loan of 3.11%.” 

GlobeSt MULTIFAMILY also reports that “BFR has experienced an influx of capital on the equity side from large institutions, mid-market funds, family offices, smaller private equity firms, and high net worth individuals.” 

If you are intrigued by the build-to-rent concept but don’t have the time, money or experience to build a new community on your own, consider buying stock in a Residential REIT that specializes in new rental homes. Another good way to get started might be through one of the more reputable crowdfunding sites.  

The build-to-rent model offers a mixture of financial advantages to an investor as it provides a residual income, as well as the capital growth you get from owning a property. However you choose to ride the build-to-rent wave, it is good to remember that new construction in planned communities is attractive and rewarding for investors and renters alike. 

https://www.american-apartment-owners-association.org/property-management/why-are-build-to-rent-homes-the-next-big-thing/

Renter Behavior Has Shifted In All Sorts of Ways

 

Working from home is just one driver for new and interesting goings-on in multifamily living.

From actually using their ovens to searching for available apartments by laptop instead of smartphones, renter behavior has clearly changed over the course of the pandemic, according to panelists at NMHC’s 2022 Apartment Strategies Conference in Orlando.

NMHC’s Mark Obrinsky led a chat on the subject with panelists John Affleck, Senior Vice President, John Burns Real Estate Consulting; Laurie Baker, Chief Operating Officer & Executive Vice President, Camden; and Ashley Sinclair, Executive Vice President, Marketing and Brand Loyalty, Village Green.

Many of these trends come from the work-from-home renter contingent, Obrinsky said. He cited that 45% of residents in a newly released NMHC survey indicated that they worked from their apartments several times a week in 2021 – up from 19% in 2019.

He said that two-thirds of those working from home indicated that they would continue to do so in 2022.

The ‘Amenity Wars’ are Over

Baker said her communities are seeing this popularity and Camden is asking that her properties’ staff highlight as many ways that they can about how renters can work from their apartments.

Sinclair said apartment marketing typically focused on the glamorous amenities and beautiful common area images, but for now, “we’re seeing prospects more interested in images of the interiors of the actual apartment that they are considering.”

She said you also see that in social media posts such as TikTok, where renters are posting about what it’s like to live at their apartments. Prospects want to know, “What’s it really like to live there?”

Affleck joked that the long-standing, pre-pandemic “amenity wars” are finally over. “The best amenity you can offer prospects these days is an available unit,” he said.

Resident Prospects Chattier Than Ever

Sinclair added that, interestingly enough, “we’re getting more traffic to our site from searches on personal laptops than of mobile devices.” She said that is partly explained from prospects working from home, using their laptops, and not doing apartment searches on their smartphones while in their companies’ offices, as they did pre-pandemic.

Sinclair also said that prospects are perhaps in greater need of personal engagement, and are speaking to leasing professionals on the phone for 5 more minutes longer than before.

“They just want the chance to communicate with a person; they talk more about themselves and their lives, instead of just having short calls to get basic questions about the apartment answered,” she said.

Seeking More Space, Faster Service

Baker said maintenance requests are up because “a lot of residents are spending much more time in their apartments, staring at their walls, and looking for things that might need attention. And they expect immediate response from our teams to take care of things.”

Baker said her units’ kitchens are getting more use. “There were times [pre-pandemic] when a resident would move out and you could tell they never turned their ovens on,” she said.

The panel said smaller unit sizes typically have the greatest turnover, but now, residents who are moving out are more willing to stay in the property and lease a larger apartment as they prefer more storage space.

“They are talking to their neighbors more, making friends, and they are deciding it’s better to stay connected to those new friends than to completely move out of the property,” Sinclair said.

https://www.american-apartment-owners-association.org/property-management/renter-behavior-has-shifted-in-all-sorts-of-ways/