What is the Rental ‘Shadow Market?’

By Jennifer from Rentals.com

The rental market is certainly changing as an increasing number of people look for rentals and an increasing number of homes formerly for sale become rental properties. How will the surplus ‘shadow market’ of homes and condos affect traditional apartment rentals, and how can you benefit as a property owner?

What is the shadow market?

Though it sounds nefarious, “shadow market” actually refers to the inventory of unsold condos and houses competing with apartments to be filled by renters. The growing volume of these single-family rentals is cutting into the demand for traditional apartments, some experts say.

Quoting from Census Bureau data, the Web site Calculated Risk states that, since 2004, there are 3.6 million homes built for sale that are being utilized as rental properties. And as homes for sale continue to move slowly and owners look for a way to avoid foreclosure, those numbers will surely grow.

Why do single-family rental homes look attractive?

In some cases, owners of single-family rentals are not driven by profit as much as the desperate need to cover the costs of an unsold property that may have been on the market for months or years. Since rent prices for these homes will be extremely competitive, a family looking to rent will likely get the most square footage for the money by leasing a single-family home. And in many places, there are plenty of these properties to choose between.

As the renting of unsold homes and condos likely will continue to increase as income and overall home ownership levels fluctuate with the economy, it is important, as a rental professional, to be aware of this dynamic to help you cultivate prospects for your properties.

What is the impact on apartment rentals?
Any prediction of the overall impact shadow inventory will have on apartment rentals needs to take into account variables such as geographic location and the demographic mix in any given area. The two property types are not perfect substitutes for everyone. A young professional, for instance, who might like the idea of low rent for the square footage of a single-family dwelling may not be as interested in the other aspects of such a rental, opting instead for the convenience and amenities of apartment living. He may not want to care for a yard, for instance.

The lifestyle preference of the renter, then, could still determine the type of property he’ll choose.  But for those tenants who are open-minded to different rental choices than what they may have originally envisioned, the surplus of shadow inventory and its competitive rents will definitely capture their attention and continue to impact the apartment vacancy rate.

Other factors creating an inventory of apartment units is the doubling up that many families have done to stretch their declining dollars: children moving back in with parents, parents moving in with children, and other combinations of friends and relations sharing housing.

How you can benefit
Consider that exposure on sites like Rentals.com can introduce your properties to a whole new community of qualified renters who are looking to replace the housing they lost in a foreclosure or to move to a larger rental with their newly “doubled-up” family. Those property managers who continue to invest in their properties with proper maintenance and landscaping will reap the rewards of eager renters who can no longer afford or see the advantages in owning that home themselves.

Basic House Hunting Tips

Basic House Hunting Tips

Allow Plenty of Time – While it may be tempting to try and visit as many properties as possible on a single day, “overbooking” won’t give you enough time to linger and fully tour each individual home. If you find a house you truly like, you will probably spend more time reviewing each room in greater detail. Assume that each house you view will hold your interest enough for a lengthy exploration.

Dress Comfortably – House hunting isn’t a job interview, so dress casually and comfortably for the season. Wear slip-on shoes and adequate socks – homes with new carpet or flooring will often include “please remove shoes” signs. You will be doing a lot of walking and taking trips up and down stairs, so supportive footwear is a must. Clothing should fit comfortably enough to accommodate reaching up or bending/crouching down to examine cupboards both high and low.

Carpool – Taking just one car is particularly convenient when viewing multiple properties on the same day. A one vehicle approach ensures that no one gets separated or lost. Also, by moving over to the passenger seat you’re free to consider the merits of each last house and pay attention to the neighborhood near each property, rather than focus your energy on squinting at street signs.

Pay Attention to the Surroundings – Speaking of the neighborhood; make sure you pay attention to the area close by each home on the way in. What kind of shopping opportunities and facilities are within a short distance? Are there appealing destinations within walking distance? What are the schools like nearby? How far will your commute be? Are many other homes for sale in the immediate area?

The idea is to have some feeling of whether or not the neighborhood is right for you before you ever set foot in the actual home. If you’re lucky enough to fall in love with the house itself, knowing the lay of the land ahead of time can give you the confidence to make an immediate offer.

Use Your Nose – Generally speaking, a bad (or unidentifiable) smell inside or outside the home is not a good sign. Likewise, be somewhat suspicious if the home is overpowered by the smell of potpourri or intense candles in every room, as this can be an attempt by the seller to mask problematic odors. Mildew and mold smells indicate much larger problems – mold removal can cost thousands of dollars, and locating/fixing moisture leaks can be a difficult task. Pet smells or smoke smells can be minimized with cleaning, but will likely take time to fully dissipate. If you are interested in a home with a strong smell, hire a qualified and experienced home inspector who will unmask the cause of the odor.

Happy Independence Day – Build your Legacy

As we celebrate this Independence Day with our family and friends, remember to thank the troops that fight for our freedom. Remember to celebrate our communities standing tall. Remember to share our successes with the people around us. It is a time of change for most Americans. It is a time to live in the present, not in the past. Remember, real estate is a cycle. But, even if it’s always up and down, the long-term trend is up. It’s time to build your legacy.