Large-scale quarantines, voluntary social isolation, supply chain disruptions, and the shuttering of American businesses for the duration of the COVID-19 epidemic and beyond has set the stage for a looming US recession. While anecdotal reports from around the country indicate that significant impacts on real estate listings and sales are not yet being felt, it’s time to recession-proof your real estate business.
While other real estate agents are chasing a dwindling supply of buyers and sellers, your best option is to build resilience into your business by increasing the scope of your services and marketing yourself to additional segments, including rentals. This will not only increase your ability to sustain your income during the next few months -- it will set you up for greater success once the market has recovered.
How is the potential 2020 recession different from 2008?
In 2008, much of the economic downturn was focused on a severely overvalued housing market with a simultaneous sub-prime mortgage meltdown, resulting in cascading foreclosures in markets around the country. For many, the assumption is that a 2020 recession would likely unfold in a similar way, with similar impacts.
The good news, however, is that there is not always a correlation between economic recessions and the US housing market. Note this graphic from the Federal Reserve, which tracks US home prices against historical periods of recession.
Home price index through previous recessions
You’ll note that in both the early ‘90s and early ‘00s recessions, home prices held fairly steady. Many analysts feel that this will be the case for our current economic contraction.
The danger, then, in the current housing market is not so much a meltdown in home values -- it’s the possibility of an extended period of disruption and the logistical difficulties associated with showing, marketing, and closing on a home under current conditions.
Assuming that market value will hold steady overall, how can you sustain your business during a slowdown and set yourself up for greater success once the economy returns to business-as-usual?
Why Rentals are a good way to supplement your income during a recession
The fact is, in the days to come most homeowners will have a choice as to whether or not they want to list their home for sale. Many buyers and sellers will hunker down and ride out the current recession and the COVID-19 market disruptions and wait for more favorable conditions before making a big move.
However, for a variety of reasons, the rental market is poised to strengthen during this time. Why?
- Current leases will end and new tenants will need to be found to fill empty rental units.
- Empty nesters who have downsized simply don’t have the room for returning college students and laid-off adult children in their smaller homes. They’ll be looking for rentals to accommodate their expanded households.
- As job losses mount, young workers will be forced to give up their current rentals or take in roommates to make ends meet. They’ll either need more affordable options or larger rentals to accommodate roommates.
- Turned off by the volatility in the stock market, many investors will be looking for investment properties as a place to park their money. They’ll need investor-savvy real estate professionals for acquisition, property management, and to facilitate rentals.
If your business has been based on working with buyers and sellers, you may not be entirely familiar with your local rental market. What are the advantages of working with rentals during this time?
- Instead of waiting months for a commission, you’ll get your rental commission much more quickly. This translates into improved cash flow during market adjustments.
- Transaction coordination for rentals is far more streamlined than the process for buying and selling, so you can facilitate a larger number of rentals each month.
- Working with rentals helps you make valuable connections with local real estate investors -- connections you can convert into potential acquisitions, sales, and portfolio management business.
- Growing your database of renters gives you a ready-made group of potential first-time homebuyers to market to once the housing market goes back to normal. They’ll appreciate your help with their rental needs -- and trust you to help them buy.
How can RentSpree help you develop your rental business?
In order to fast track your success as an agent specializing in rental properties, you need to bring the same high level of service and professionalism to your rental clients that you provide to your buyer and seller clients. That means creating efficiency and streamlining the rental process -- for the benefit of both renters and property owners.
RentSpree offers a suite of services designed to simplify and standardize the rental process. That makes you more efficient and effective on your clients’ behalf. With RentSpree you’ll be able to --
- Save time with streamlined tenant screening reporting that allows you to start the approval process within minutes of applicant submission.
- Limit liability by limiting the amount of document gathering and submission on your end. RentSpree collects and stores applicant information so you don’t have to.
- Provide owners with complete, comprehensive screening reports
It’s easy to get started with RentSpree; begin receiving an online rental application in just minutes. With a TransUnion credit report and score, background check, and eviction reports, you’ll have all of the information you need to share with your investor and owners.
In a time of uncertainty, your best strategy is diversifying your services and your client base. Smart pivots now can help you stay profitable both short term and long term -- and plan for whatever’s next.