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Capturing the Market Share: Understanding Rental Supply and Demand


In a competitive rental market, landlords have to make every effort to gain the attention of prospective tenants. With capturing the market share as a goal, evaluating employment rates, neighborhood growth, along with rental supply and demand are all key factors to an investor’s success. Today we take a look at a few essentials to consider when evaluating a rental market. In addition, check out how to boost your current listings and limit vacancy time below.

How to Evaluate Rental Markets for Potential Investment

The rise in demand for available listings is growing as life returns to normal after the pandemic. A strong seller’s market has left many qualified buyers struggling to find and afford the listings currently flying off the market. Thus, many homebuyers are choosing to rent until the market improves. This increased demand is welcome news to landlords in especially competitive housing markets.

Investors know that everything comes down to the numbers. Whether an investment property will be profitable or worthwhile depends on a series of equations and factors. First, however, let’s review a few additional terms that can help investors choose the right rental market with the most potential.

How to Evaluate Rental Markets for Potential Investment

Market Balance

For landlords, areas with pent-up demand for housing offer a lot of opportunities. Typically, this is the result of area supply not keeping pace with growth and demand. Investors can see this when reviewing a location’s vacancy rates. Generally, a low vacancy rate is a positive sign, but investors must also consider how long units stay on the market.

Unit Distribution and New Development

Part of understanding rental market supply and whether there is enough demand to go around involves units on the market and new development. As an investor, take a look into any planned development projects in the area that may oversaturate the market and compete with your rental.

The Make-up of the Market

The best rental markets have a diverse and growing array of factors. To understand the demand in one area, it is important to realize the demand may not be the same across the entire population. For example, income and job growth do not occur evenly, and the need for rentals may not span every income level. So, if you have a luxury 4 bedroom rental, but the market supply is low in median affordable 2 bedroom housing – your rental may sit vacant, even in a popular area. Therefore, it is important to delve deep into your market analysis of an area before deciding where and what to invest in.

Vacancy Rates

Evaluating vacancy rates of a potential investment location is key. Moreover, evaluating the reasons behind the vacancy rate is even more important. For instance, high vacancy rates may indicate slow demand or an oversupply of units. Keep in mind that existing landlords may offer incentives or other means to beat out the competition. In addition, renters are not always willing to pay more for more luxurious housing. Therefore, gauging where your potential investment purchase fits into the current rental market is vital to your overall success. The ideal rental property focuses on quality and well-maintained features for a reasonable rate.

Understanding Rental Supply and Demand

The law of supply and demand describes the interaction between those with a resource and those that need that resource. In the rental market, as supply dwindles and demand rises, so do prices. However, when supply is up and demand not as high, more competitive pricing ensues.

Therefore, market prices are driven by the interaction of supply and demand in a given location. As local economies bounce back post-pandemic, this growth brings new jobs and more residents. However, this also brings higher demand and subsequently higher housing values whether you buy or rent.

Understanding Rental Supply and Demand

As rates fell during 2020, many homebuyers scrambled to scoop up the limited listings available and fulfill their dream of homeownership. However, such high demand and limited supply saw housing prices soar beyond reach for many. What happens in the real estate market also affects the rental industry. Some owners saw their chance to sell high and cash out, which takes one more potential rental option off the market.

All of this adds up, and the effects will no doubt be felt for some time. Strong economies tend to create a shortage, not an abundance, of affordable housing. That said, as rental rates increase in a location, it can draw the attention of new construction projects. Higher rates caused by increased demand means contractors may decide to build, which increases the number of units. So, generally, supply and demand as it pertains to the rental industry are very much cyclical.

How to Attract Tenants in a Competitive Rental Market

The rental industry is like any other business sector – it is driven by supply and demand. Whether the market is cold or hot, filling vacancies quickly is the goal of every investor. However, strategies will likely vary depending on the market climate. For the sake of this example, we will focus on ideas to beat out the competition in a hot rental market. While finding the right techniques that work for you is a process, doing everything is essential to operating a successful rental business. After all, the longer something sits vacant, the more it costs. So, check out these tips for getting the edge on competing properties in a competitive market.

  1. Keep the Décor Neutral
  2. Presentation is Everything
  3. Play Up Amenities Inside and Out
  4. Maximize Technology
  5. Prioritize Responsiveness

Keep the Décor Neutral

Rentals are essentially a blank slate for tenants to add their own personal touches. So, do not force your own style on the masses. Instead, keep the rental well-kept and neutral to appeal to the maximum amount of potential renters. The larger the tenant pool, the more likely you are to find a qualified tenant faster. If the property is dated, try to complete some simple cosmetic upgrades before hitting the market. This will help your listing better compete with other, possibly newer, ones in the area.

How to Attract Tenants in a Competitive Rental MarketPresentation is Everything

No tenant is going to look at photos of an overgrown, unkempt property and say to themselves – “that’s the one.” While your rental does not have to be the best or most luxurious, it needs to be the best it can be. Part of that requires landlords to present it in the best possible yet realistic light. To do so, consider the following –

  • Do not skimp on turnover repairs – Although it may cost a little more to repaint rather than yet another round of touchups, consider the benefits. A freshly painted property presents better and offers a clean and polished appearance as opposed to tired and worn.
  • Clean, clean, clean – It should be no surprise a clutter-free and clean home attracts more people. Consider partnering with a professional cleaning company that can ensure a sparkling result for a reasonable rate for rental properties.
  • A picture is worth a thousand words – Photos can either inspire a scrolling tenant to inquire further or graze on by. So, only use photos that are good quality, well lit, and showcase the property’s potential. If your budget allows, hire a professional photographer to take photos you can use year after year. When trying to beat out the competition, great photos can make all the difference.

Play Up Amenities Inside and Out

Tenants care about value, or in other words, what they are truly getting for the money. While most landlords know they must use interior amenities to see their listing, the ones outside are just as vital. Keep in mind; the renter is not just moving to the property; they are moving to the neighborhood or city. So, if your property is in an advantageous location, let them know! In addition to interior amenities such as a finished basement, fully fenced yard, rooftop deck, or gourmet kitchen, be sure to list any of the following that may apply –

  • Easy Access to Public Transit
  • Close to Restaurants, Shopping, and Nightlife
  • Just Minutes from Attractions (such as museums, theme parks, or landmarks)
  • Steps Away from Gym Facilities
  • Minutes to Local Parks, Hiking Trails, and Outdoor Activities
  • Local Neighborhood Farmers Market

Maximize TechnologyMaximize Technology

Technology plays a role in apartment hunting more than ever. In fact, more than 90% of renters turn to online listings to search for their next home. So what does this mean for landlords? First, if you are not maximizing listings online, you are missing a huge group of potential applicants.

During the pandemic, virtual tours took on a whole new meaning. What was once just a luxury aspect of high-end listings has now become the growing standard for any rental listing. So, for landlords trying to capture a tenant’s attention, use online rental sites, social media, and virtual tour options to reach as many eyes as possible.

Taking the time to market efficiently and effectively is well worth the effort to find the best quality tenant in the shortest amount of time.

Prioritize Responsiveness

With so many options to choose from, landlords are competing for the attention of qualified applicants. Thus, landlord responsiveness is more important than ever. If a tenant reaches out to inquire about your listing or ask for a showing, chances are you are not the only listing they are interested in. So, if the owner is slow to respond, they may get snapped up by another more eager landlord.

Therefore, successfully marketing in a competitive rental market requires owners to be on top of responding to leads and inquiries within the same business day. This, along with a friendly and professional attitude, will help you make a great first impression.

Maximize Potential with Bay Property Management Group

When it comes to maximizing a rental investment’s potential in any market, local knowledge is vital. Unfortunately, for new or out-of-town property owners, that is sometimes easier said than done. That said, hiring a professional management firm like Bay Property Management Group accomplishes more than just filling vacancies.

Our experienced leasing team creates a dynamic listing with professional quality photos and posts to all major rental sites as well as Craigslist and local outlets. This, along with our thorough screening process and diligent lead follow up helps owners secure a quality tenant in an average of fewer than 30 days. But the benefits of professional management do not end once the lease is signed. Your assigned property manager then handles all tenant communications, maintenance concerns, and daily operations, so you don’t have to! So give us a call today to learn more.