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3 rental market predictions for 2016

What investors can expect from the market next year
[Nat Kunes] byNat Kunes
[appfolio] [] Dec 10, 2015

Whether you’re a property manager, an owner who rents out your properties or someone who’s looking for a new place to call home, it’s no secret that the rental property market is changing.

With those changes, come some trends for 2016 and a few predictions that can be made. To be successful in any aspect of the rental market, it’s important to look ahead and have a good idea of the kinds of changes might occur so that you can be prepared.

The more you know, the more easily you can adapt to the trends that come along with the rental market and stay successful no matter what role you play.

1. The demand for rental housing will continue to rise

One of the biggest trends in rental housing is the increase in demand. Although plenty of people still buy homes to live in, a lot of other people are choosing to rent.

They might rent due to lack of a down payment or poor credit, but those are not the only reasons that the demand for rental housing is going up.

People choose to rent for all kinds of reasons, including a desire for a low-maintenance lifestyle, moving to a new location and traveling frequently. In some markets, it’s also less expensive to rent than it is to own a home, so people choose rentals.

With a significant number of people making that rental choice today, property owners and property management companies are finding that they need more properties to offer to people who are looking for their next place to call home.

Overall, the demand for rental properties is predicted to continue to rise, as the trend among millennials shifts toward a more simplistic lifestyle that doesn’t include homeownership.

Those who want to get involved in rental properties, whether owning or managing them, might want to move toward a focus on additional properties, so they can provide what people are looking for in the coming year.

One of the biggest trends in rental housing is the increase in demand.

2. Investors will need to pace with the demand in their area

With the rental market trending in a positive direction, property management companies might want to take a careful look at their staffing, software and other needs.

Although it’s important that these companies don’t overstaff or overbuy, they also want to make sure they are prepared for the influx of renters they will likely see throughout 2016.

Being aware of the growth in the rental market, and the trend for more millennials to choose to rent instead of own can help these companies prepare for the coming year.

Better preparation can mean better income, happier renters and more satisfied property owners, all of which are beneficial to any property management company.

Property owners who are considering investing in additional rental properties might also want to look carefully at their needs, profit margin and budget for buying more homes or apartment buildings.

If they are reasonably certain there will be enough demand to keep the houses or units full or nearly full, and the price of the property is right, this can be a good time to start purchasing more properties and building their real estate investment portfolio.

Rents are on the rise in a lot of areas, too, due to the increased demand, so the potential to build a strong level of income through investment properties or property management companies is very real going into 2016.

Property owners should look at their needs, profit margin and budget before expanding.

3. Single-family homes will hugely bypass multi-family options

For investors, where to put their money when they buy real estate to rent out is an important consideration. Looking at the trends for real estate in 2016, it’s predicted that apartment buildings and multi-family home options are going to be better choices than single-family homes.

The main reason for that is the millennials themselves. Many of them are just starting out, and they don’t have families and children. As such, they don’t need big houses and space for children and pets to roam.

Instead, they might want the convenience of living right downtown, in a building close to work. Or they might want to live in a loft above a coffee shop, where they can pursue their artistic interests.

These are the kinds of choices many millennials are making today, and those decisions will likely continue into 2016. With that to look forward to, investors might want to consider buying multi-family properties or multi-use (residential and commercial) properties, instead of purchasing houses in the suburbs.

A good mix of rental properties can be beneficial, but the areas that bring in substantial income are where investors should focus when buying new property.

Property management companies might also have an easier time marketing these properties and keeping them rented, which results in a better situation for both the property owner and the management company.

The areas with a substantial income are those where investors should focus.

Nat Kunes is the VP of product management at AppFolio. You can follow AppFolio on Twitter or Facebook.

Email Nat Kunes.

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