This Rental Strategy May be the Biggest Opportunity In Real Estate Right Now
Here’s How Zillow Is Making It Easier to Double Your Cash-Flow
AirBNB birthed an entirely new way for property owners to monetize their homes and land. Prior to the Silicon Valley startup entering the real estate space, renting a home or an apartment meant a 12-month commitment; and short term stays were limited to hotels, hostels, and traditional bed and breakfast accommodations. But AirBNB paved the way for the ‘rent by the room movement’.
As interest rates have risen, leasing a home versus owning has become even more prevalent; especially amongst Gen Z and Millennials which make up more than half of the entire U.S. renter market.
As renting continues to evolve into more of the primary mode of housing, major platforms such as Zillow are coming after AirBNB in an attempt to capture a slice of the rent by the room market.
Zillow recently rolled out a brand new listing feature which gives property owners and mangers the option to market an entire rental unit, as well as a single bedroom within the unit; both at separate price points. This not only improves the listing’s visibility, but it also provides an opportunity for renters to reduce their overhead by sharing a space with a housemate.
The short list of homes for sale, coupled with high borrowing costs, has squeezed a large portion of home shoppers out of the market. Pushing more people into the renter pool, and in turn, increasing competition amongst those looking to relocate.
The overwhelming demand for the little inventory that’s available has driven rental prices through the roof. Since the pandemic, rents have risen roughly 30%, and more than 50% of renters are now deemed ‘cost burdened’; forced to exhaust more than a third of their income on rent and utilities.
Renting by the room may not be ideal for families and those that place personal space above everything else. But in a high interest rate environment where buying a house is unattainable, and renting a place all by yourself isn’t within reach either, leasing by the bedroom can be a relatively affordable alternative.
The ability to lease properties by the bedroom enables owners to optimize their listings and increase cash-flow. But it also provides the opportunity for tenants to split costs with a roommate; helping alleviate the largest financial burden within their budget.
If you’re a property owner that’d like to increase your rental revenue, we’d love to connect and share more about the strategies that we’re implementing across our portfolio.
In Other News
✺ AirBNB Beats Hotels: The tech pioneers of short-term stays have been under a ton of pressure as more cities roll out strict regulations on how owners can lease their homes. But AirBNB has managed to shake the turbulence. In their recent earnings call, they announced that last year’s $1.9B in revenue has increased 17% over the past 12 months. — Full Story
✺ Hotels Aren’t Going Away Without A Fight: Hotel development is at an all-time high. In 2023, the hotel sector closed the year with 5,964 projects in the pipeline; paving the way for 693,000+ new rooms. — Full Story
✺ Between 2015 - ‘20 It’s Estimated That $2.3 billion Was Laundered Through Real Estate: To combat illicit transactions in the space, the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a Notice of Proposed Rulemaking (NPRM). — Full Story
✺ Insurance Companies Are Killing Cash-Flow: The average insurance premium for multi-family real estate has risen 26% from 2022 - ‘23. In some instances, operators have reported a 300% - 400% spike in their insurance costs. — Full Story
✺ Investors Are Gobbling Up All of the Cheap Real Estate: In Q4 of ‘23, real estate investors purchased a record-high 26.1% of all low-priced U.S. homes; up from 24% the previous year. — Full Story