According to a recent study regarding real estate markets in the southwest U.S., the demand for rental properties has increased by 5% over the past year while the average monthly rent has risen nearly 9% during that same period. While these statistics may cause landlords and property investors to celebrate, other industry statistics might lead them to postpone their celebrating. Here are a few considerations to be aware of where this particular discussion is concerned.
To begin with, despite that 9% increase in average rental rates, that rate is climbing much quicker than many individual’s incomes. This implies that adjusting monthly rental rates to the demand could create an extremely limited amount of qualified prospective tenants. Research has clearly shown that 30% of the average American’s monthly income goes towards paying their rent. As a result, we are seeing increasingly fewer applicants who are able to qualify for rental properties.
Furthermore, national rental market trends clearly indicate that increasing numbers of renters are only a paycheck away from getting evicted. This forces them into a situation where they have to find roommates to share the rent with them in order to make ends meet, even if it means breaking their lease agreement. The downside is that this puts the landlord or property investor at risk because those roommates are not screened thoroughly and therefore not approved to reside there.
Fortunately for landlords and property investors in the Las Vegas area, these statistics aren’t as discouraging as they sound. Rent-to-income ratios have remained relatively stable which means taking extreme action is not always necessary. Nonetheless, the issue with evictions is evidence that suggests that landlords and property investors need to take this issue more seriously. There are two proven tactics that could lead to reduced eviction rates:
- Perform a rigorous, more in-depth screening of all applicants to ensure that their income to debt ratios will not hinder their ability to pay their rents on time.
- Re-evaluate the rental rates in the neighborhoods where your properties are located to ensure that they are priced competitively and will not deter renters from applying.
These two tactics may just lay the foundation for ensuring that your properties will stay occupied and your tenant retention rates improve. Just keep in mind that the best screening processes require a great deal of due diligence and legwork, unlike in the past, when income was all that mattered. In addition to the screening process becoming more time-consuming, the average number of phone calls regarding affordably priced vacancies has increased significantly.
There are many areas where individuals have begun to think in terms of smaller, more cost-effective properties to rent. This means that landlords and property investors who were struggling to find good quality renters at one time can be much more competitive.