The rental segment has been marked by strong demand and looks to continue on this trajectory given mortgage rates that continue to hover around 7% and record property prices across many U.S. regions. In spite of some slowdown, rents have continued to appreciate, being nearly 30% higher than prior to the pandemic, with February levels up 3.5% as compared to the previous year.
The strength of the U.S. rental sector has benefitted most landlords in this country, from larger multifamily investors to smaller mom-and-pop owners. Real estate investments have long been a key pathway to wealth in the U.S. About 90% of millionaires have built their fortunes in great part through the ownership and management of real estate, according to industry data. Among the variety of investment opportunities within the sector, rental properties have been in the spotlight as a steady income source.
In 2023, the total U.S. apartment rental segment was expected to reach about $251 billion, according to data by Statista. Individual investors own about 70% of rental properties in the U.S., according to U.S. Census data, serving around 44.1 million renting households.
Given rental demand in the U.S., in addition to intentional property investors, the number of so-called “accidental landlords” has also been increasing since 2018, according to research from TenantCloud. This group of property owners originally bought their assets due to circumstance and are renting out instead of selling; however, they don’t necessarily consider themselves real estate investors.
Challenges and harnessing the power of technology
The challenges any rental property owner most commonly faces include finding dependable tenants, ensuring regular rent payments, meeting the changing needs of today’s renters and managing their properties effectively and efficiently.
In order to tackle these challenges and respond to evolving market dynamics, one pivotal shift has been the integration of property technology (proptech) into management practices. Top-of-mind solutions for landlords include automated tenant screening and online rent collection, as well as smart home amenities.
Online tenant screening helps landlords identify qualified renters fast while safeguarding their information during the application process. Online rent collection helps automate an otherwise often clunky system that might include checks or payment services, and smart home amenities can help optimize energy use and increase security.
Given the continued high interest rate environment and soaring home prices that have made owning a home challenging at best, rentals are likely to remain a cornerstone of the U.S. housing market, generally offering more affordable options while providing investors with a stable income stream.
However, rising property costs, increased taxes and the risk of missed rent payments highlight the importance of financial management and effective tenant screening processes. Technology-based solutions, such as online rent collection platforms and smart home amenities, are becoming increasingly indispensable to streamline operations, enhance tenant satisfaction, and ensure long-term profitability.
Michael Lucarelli is the CEO and Co-Founder of RentSpree.
This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.
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