What does the rental market have in store for landlords and real estate investors across the nation and in North Carolina? According to rental market predictions from a host of real estate and property management news outlets, the nationwide trends point towards a strong rental property market. The rental market in the Triangle region of North Carolina mirrors national trends. In today’s property management article, we’ll share the reasons behind these predictions and provide a glimpse into what landlords can expect to see from 2016 rental trends in Durham, Raleigh and Chapel Hill.
Demand for Rental Housing Continues to Rise
One reason many property managers and real estate professionals are predicting an active national rental market is because the demand for rental housing continues to rise. There are at least three major contributors to rising rents according to these professionals. First, rising home prices in the residential real estate market are outpacing rising rents. Second, single family rental home supplies are dwindling as many landlords are putting their investment properties up for sale. Third, rental vacancy rates are the lowest they have been in decades.
Rising Rental Rates
With rental rates increasing, how much should landlords expect rents to increase? Based on answers provided by two-thirds of 500 property managers who responded to a national survey, Forbes magazine reports “rental rates could rise by an average of 8% through next year.”
Remember, as a landlord; you should not raise rents indiscriminately. Instead, you will want to understand what the market will bear. Red Door Company’s understanding of the local rental market enables us to successfully market your property at a monthly rent which maximizes rental rates, minimizes vacancies and attracts high-quality tenants.
Millennials Choose Renting over Buying
According to the U.S. Census Bureau and as reported by the Pew Research Center, “the ‘Millennial’ generation is projected to surpass the Baby Boomer generation as the nation’s largest living generation by 2015. Why is this valuable information for real estate investors who own rental property? The answer is simple: a property management survey from Forbes shows that “45% of property managers have noticed an increase in the number of millennial renters.”
Property management professionals believe millennials are choosing to rent instead of buying a home not only for the flexible lifestyle but also because of financial reasons. Millennials often have high student loan debt, face a limited job market and bring home lower salaries, which makes renting the more affordable option.
North Carolina Triangle Area Rental Trends
How do these national rental market predictions for 2016 compare to what is happening in the North Carolina rental property market and the Triangle region? Much of what has been predicted by industry experts is currently playing out here in Raleigh, Durham and Chapel Hill.
As we see a significant increase in home sale prices and as banks continue to make it difficult to obtain financing for home purchases (home buyers often need 10-20% down payment which translates into $20-40k on a $200k home), there has been a substantial increase in demand for rental units. This trend was predicted several years ago and further supported by the increase in the construction of apartment complexes around Triangle region.
Additionally, there is continued pressure on the rental market due to reduced supply of single family units available to rent. The limited supply of rental homes comes as the result of reluctant landlords who were forced into the rental market in the 2008-2010 financial crisis. Instead of continuing to rent, they are trying to capitalize on the new market trend and sell their assets while home prices are high. These homes are typically in the mid-market rental range of $1100-$2500/month, which also happens to be the ideal rental price range for attracting quality tenants.
Due to the limited supply, rental rates in the mid-market are up across the board with an emphasis on location and nearby amenities that are helping to drive desirability and price. At Red Door Company, we see a high demand for properties in this mid-market range. While the market is not quite at the bidding war stage, landlords could see this type of competition soon.
If you want to take advantage of the strong North Carolina rental market, contact us here at Red Door Company. It would be our pleasure to show you why our landlord clients say working with Red Door Company is The Right Way to Rent®.