Rental Prices on the Rise
Due to its amazing weather all year round, Los Angeles’s real estate has always been a hot commodity. With the Los Angeles population just over 4 million and growing, not only is traffic increasing, but so are rental prices. Using an online rental application and tenant verification service can help to capture this growing source of revenue.
According to Curbed LA, rent prices saw a steady increase for seven months in a row through August 2017. However, the rent prices finally leveled out in September, and October was the first month in recent history that saw Los Angeles rent prices decreasing. The decrease continued in November declining a total of 0.2% over the past two months. Even with the small decrease, Los Angeles median rent prices still stand at $1,350 for a one-bedroom apartment and $1,730 for a two-bedroom. Despite the decrease over the past two months, rent prices have nonetheless increased by 3.9% compared to 2016.
People are choosing Rentals Over Owning
In Los Angeles, it is more common to know someone who filled out an online rental application to rent instead of purchasing a home. According to Curbed LA, just over 53 percent of LA homes, condos, and apartments are rented, rather than owner-occupied. This could be due to many reasons such as flexibility, convenience, or lack of funds to purchase a home. In a previous blog we mentioned how fewer and fewer millennials are buying homes and are opting to undergo tenant verification to lease. However, it’s not only millennials steering away from ownership, according to a study done by Abodo, families occupy 60% of households being rented. With the new influx of renters, there are more and more qualified renters to choose from.
Is the small decrease from the past two months foreshadowing a rental prices downturn?
Not according to experts!
Based on a report done by UCLA Anderson School of Management, Los Angeles rent prices are predicted to continue to rise. Also, according to USC Lusk Center for Real Estate and Beacon Economics, Los Angeles rent prices are expected to increase by $136 per month for the next two years. That’s a total of a 6% increase by 2019. So although we saw a small decrease in October and November, that definitely doesn't seem like it's going to be the new trend.
What Does this Mean for Agents
So what does higher rent prices mean for agents?
It means more commission!!!
With the typically commission on a lease ranging from 5%-10% of the annual rent amount, agents can expect increased earnings from working with leasing compared to the past. So with available rental commission per lease for agents expected to be within the $1,500-$2,000 range during 2018, working with leases is an increasingly viable option to combat a slower sales market. As in many metropolitan areas, Los Angeles is a hot rental market with a relatively higher turnover rate than homes. With an average turnover rate for rentals at 54%, there will be more returning business for those agents using and online rental application and tenant verification service.
Agents Next Step
This trend is not going to end anywhere in the near future, it’s better to capitalize on rentals rather than letting relationships slip on by.
What do you do next..?
Start cultivating relationships with landlords, property managers, and renters. Once you build your clientele and start receiving applications, it is best to use an online rental application service, especially one that provides tenant verification. By using a tenant verification service, it will not only save time, but also reduce liability. By using these services, agents will be well-equipped to work with leasing transactions and grow their businesses.