There was no such thing as gradual change in the pandemic real estate market. In fact, major consumer trends and preferences seemed to undergo a complete re-orientation almost overnight. Some of those shifts have endured to change and shape the new industry normal, and finally, with months of COVID-management and data analysis under our belts, we’re beginning to learn which is which.
One seemingly permanent change has been the overwhelming demand for flexible rentals. A preference for flexibility permeated every aspect of consumer considerations, and home has been no exception. The new-found capacity to work from anywhere has given professionals the space to explore secondary markets with more favorable living conditions without locking in to a long-term arrangement. Families can engage in a much-needed change of scenery while maintaining their freedom to explore other areas, or to relocate to an office-adjacent location if a return to in-person work becomes a reality.
Flexible Rentals and What It Means for Investors
Longer term rentals are subject to a number of challenging COVID-forces. The moratorium on evictions challenged owners in the long-term market, and securing tenants for traditional lease lengths has been a cost-intensive endeavor. Shorter term rentals have advantages in both of those categories, and they allow investors to quickly adapt their listings between tenants, optimizing pricing and stay lengths to keep up with the market.
But those advantages can put an intense demand on an investor’s time and energy. The need to manage more tenant turnovers, process more due diligence, and manage the property between stays more frequently makes the flexible rental strategy more hands-on than traditional real estate investing.
Fortunately, a number of solutions exist on the market to take a lot of that work off of an investor’s hands.
Hassle-Free Hosting: The Fundamentals
For prospective renters, the first opportunity to streamline rental operations comes when it’s time to choose a location. The National Multifamily Housing Council recently published a study regarding the amount of Airbnb rentals taking place in multifamily buildings; that number makes up 65% of the total demand for Airbnbs. And despite such a high level of interest from consumers, there remains a shortage of supply. Airbnb estimated that they’ll need ‘millions’ more hosts to satisfy the market demand—multifamily buildings could be a great choice for prospective investors.
In addition, secondary markets and drive-to, rural locales are offering investors particularly good margins. Favorable living conditions and the ability to have more space to work and live have resulted in a surge of short term rentals in these areas, and a drop-off of hosts throughout the COVID-related restrictions have created opportunities for each investor to capture higher revenues. Further, the purchase prices in these areas haven’t yet adjusted to their revenue potential as short term rentals, meaning investors have the chance to enter the rental market at prices that are lower than average.
The next priority for investors to turn their attention toward is automation. Whether they’re converting properties in their portfolios into flexible rentals, or entering the market for the first time, investors will quickly feel the mental and financial cost of being too hands on. Owner portals make a world of difference, helping investors manage their payments, streamline their contracts, and view all of their important metrics in one place. Establishing a workflow to assess, outsource, and log the property’s cleaning and maintenance needs is equally crucial.
Marketing and property listing can also be automated with the new tools that exist on the market, and though this is more often overlooked, it’s a great strategy for investors to capture the highest possible yield on their rental properties. The post-COVID market is dynamic, and prices change quickly. Properties with concurrent listings, offering different stay lengths at different price points, tend to have a higher likelihood of reaching prospective tenants. Automated marketing tools can help to assess the optimal price and stay length, giving owners the option to come in at that listing or change as they see fit. And recently, new tools have been developed to help investors understand the revenue potential of their property based on the performance of similar rentals in their area. With this kind of transparency, investors have a better chance of positioning themselves properly within their local markets.
Housing has always been a smart investment. That remains true in our post-COVID future, but demand in the housing market looks different. Through a year-long crisis management effort, people have learned that the ability to be flexible—in their work habits, their routines, and even sometimes in their priorities—has worked to their advantage. An adoption of that attitude across multiple aspects of our lives could lead to a more holistic, more fulfilling, more healthy way of living, and short-term rental investors will play an important part in making that way of living our new normal.
About Emir Dukic
Emir Dukic is the CEO of Rabbu, a frontier flexible rental asset management company that has a tool to help real estate investors see the potential for short-term rental income. With proprietary technology, Rabbu automates all aspects of asset management—from marketing to operations to tenant health and safety. Rabbu helps property managers supercharge their operations, eradicate contact and manage their assets across major rental platforms: Airbnb, Zillow, Booking.com and more.
