Navigating Denver's Renter's Market
Gone are the days of putting a property on the rental market and having 10 qualified applicants within the first hour
Cranes, oh so many cranes! No matter where you look, whether downtown, LoHi or Cherry Creek, you cannot help but notice the number of cranes dotting the landscape. While my position has always been pro-growth, I am beginning to see the effects this unprecedented development is having on the rental market and the real estate market in general. It's a "renter's market" in a way it has not been in recent years.
Renters can shop options and take their time.
Landlords and individual investors can no longer automatically expect instant tenants at record-breaking high rents – all due, in large part, to the new building across Denver and surrounding regions. Although many new apartment complexes are quite pricey, they also offer amenities that single family, townhomes and condos simply don’t have.
In today’s market, tenants are amenity-driven. The lure of a rooftop patio and pool, surrounded by luxurious chaise lounges, community bars and high-tech grills, with stunning views of the Colorado mountains and gorgeous sunsets are all the siren call that many find irresistible.
Gone are the days of putting a property on the rental market and having 10 qualified applicants within the first hour. Gone are the days of tenants trying to outbid every other tenant, offering more money and more security to the landlord. Tenants now have many options and can be more deliberate in their choices.
In speaking with a group of investors recently, I was surprised to find many are thinking of reducing their portfolio of properties and in some cases getting out of the investment property market altogether. I also own rental properties and while I sympathize and suffer the same effects of this unusual time, I have no plans to reduce my current inventory. I have adjusted my approach concerning my own properties and I have compiled a list of practical suggestions to all who are currently landlords, or those considering becoming a landlord for the first time. My suggestions follow:
- PLAN FOR MORE DAYS ON THE MARKET
In general, we are finding it takes six to eight weeks to secure a tenant.
- PRICE IT RIGHT THE FIRST TIME
Many landlords want to start at an unrealistically high number. In the past, this was not a bad strategy. But now, if you start high and keep lowering, you create the perception that there is something wrong with the property.
- CREATE A SPACE THAT’S INVITING, BUT GENERIC
New carpet and paint can go a long way, but if a house is too personal, it will have a negative effect. The purple princess bedroom that so enthralled your daughter 10 years ago will not have the same appeal to a potential family with all boys.
- CONSIDER CURB APPEAL
The first impression is the lasting impression. No matter if a tenant sees the property on the internet or as a drive by, a yard that is overgrown and not cared for will be an immediate turn-off. In one instance, we had potential tenants refuse to come in once they saw the yard, even though the inside was nicely updated. A landscape overhaul did the trick!
- COMPREHENSIVE TENANT SCREENING IS IMPORTANT
Keep in mind that these “luxury rentals” have a very tight screening process and not everyone can qualify. That means that tenants with questionable credit or background are looking elsewhere. A good property management company knows and understands the importance of tenant screening.
- CONSIDER OFFERING PERKS
Many tenants are willing to pay extra for such amenities as lawn care and snow removal. Landlords should also weigh the benefits of paying for water, sewer and trash. Again, a property management firm can advise you of the risks/rewards of these types of services.
- LOCATION, LOCATION, LOCATION
This speaks for itself and cannot be overstated. Look at the cranes around town and you will understand that there is a very good reason they are building in the most desirable areas.
While investors must remain nimble and aware of the many shifts in the market, consider the positive aspects. High-rise living is not for everyone, job growth is still strong and with the rising interest rates, the lease versus buy scenario should keep the rental market fairly robust.