Rental demand has been on the rise for the past few years. However, there’s one demand driver in particular that should be on professional property managers’ radar: Households earning six figures are still choosing to rent.
The recent spike in high-income renters may have a number of impacts on the housing market. For property management businesses, this trend may lead to great opportunity.
Understanding the wealthy renter phenomenon
A recent article by the Wall Street Journal indicated that the number of high-income renters in the United States is at an all-time high. There are now more than 3 million households earning $150,000 or more per year that are renting their homes. This number has grown 87% between 2016 and 2021, signaling a significant trend in the market.
There are a few reasons why these high-income households may be renting instead of purchasing their own homes. Despite earning a six-figure salary, some households can’t afford to buy a home, especially not in high-cost areas due to student debt, a lack of savings, high prices or interest rates. Other households don’t see a home as a good investment given current economic conditions. Others still simply don’t want to handle home maintenance.
Regardless of the reasons behind these trends, the rise of wealthy renters is poised to impact the property management industry for professional managers.
More people are renting out instead of selling
By opting out of buying, high-income renters are contributing to the overall slow of home sales, which are projected to be lower in 2023 than in 2022 and 2021. Hand in hand with this is the rise of people renting out their homes instead of selling them.
A Redfin report states that April 2023 continued an eight-month-long streak of declining U.S. home listings. Homeowners may be reluctant to give up their low mortgage in exchange for a higher one on a new home. Additionally, many homeowners are not getting the value they want on their homes for sale—potentially due to the spike in list prices and interest rates making buying less accessible. Instead of selling, more owners are choosing to rent out their homes and collect passive income through investment properties.
Rental demand remains high—with some unique needs
Wealthy residents remaining in the rental market also creates more demand for rental units. High demand often leads to higher rents, which is a positive for property owners. However, the high-income renter is a bit different from the middle- and low-income renter demographics. With more money at their disposal, these households are searching for rental properties that meet higher-end needs.
Wealthier renters may be more likely to rent a single-family home, rather than a multifamily apartment. They’re gravitating out to the suburbs, to family-friendly neighborhoods and to places with more space.
Renters earning six figures also expect a higher caliber of rental property. These households want yards without the landscaping burden, high-end finishes and services they might not otherwise get through homeownership. Houses with better upgrades and amenities come with higher rents, and wealthy renters-by-choice are prepared to pay for these luxuries.
Opportunity is out there for professional property managers
These trends signal exciting opportunities for property managers. Property owners who are choosing to rent out their homes often lack the experience required to source tenants, draw up leases and tend to renters’ needs over time. Turning to a professional management company will allow these owners to navigate the unfamiliar landscape of property management and generate profit from their rental homes.
There’s opportunity to be found in serving high-income renters, as well. Property managers can leverage their understanding of the market to determine rents that cater to this demographic and advise owners on upgrades or amenities that will make their properties more attractive and lucrative. Higher rental demand translates into demand for knowledgeable property managers who can handle tenant concerns and provide a top-quality experience to both renter and owner.
There’s never been a better time to join the property management industry. As more owners embrace rental properties and rental demand continues to climb, the need for professional property management gets greater.
Keyrenter Property Management helps aspiring and current property managers build a thriving portfolio using proven systems and technology. Our franchise model takes advantage of the industry’s growth and trends to allow you to build wealth through property management. Contact us to learn more about our franchise opportunity and get started!