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What's the Rental Market Looking Like These Days?

Many new investors reach out to us asking for market information. "What's the rental market looking like these days" is a very common question, and doing general market research is part of their due diligence in deciding where to buy properties. Had these investors come to us in May, we share a very different snapshot than what we would in, say, the holiday months of November or December. While there are some obvious lulls and other commonly known peaks, we can't overlook a relatively new trend that appears to be returning again this year with force. Unfortunately, August 2024 has proven to be very sluggish overall for rental search activities. Across all types of properties, whether big or small, loaded with amenities or an economy unit, all locations have seen quite a drop off in interest. In August of 2023, we saw a whopping 12% of vacancy across our entire portfolio. Thankfully, the volume is not as high currently (we're currently at 5% vacancy in our portfolio across both Ada and Canyon counties)- but we decided to dive a little deeper into the metrics this year.

Looking at the numbers: When we listed an average property for rent in mid June, we could expect an average of 9 solid leads within a 24 hour period. Similarly average properties are only seeing 3 leads within a 24 hour period in August. This 66% drop in volume presents quite the concern for landlords with vacancies. While our staff communicates with all leads, and shares video tours and the link to our free applications- many leads just go cold. Typically, we can expect up to one-fourth of folks to continue with our conversation and follow through to schedule a showing or tour. Of those prospects, somewhere in the range of half to 70% of people will actually show up to the tour. Effectively, this means that in June, of the 9 original leads in one day, 2-3 will continue to engage with us or schedule a tour. Of those folks, 1-2 may tour and continue further. However, with the overall funnel feed reduced to only 3, we're lucky if we can get one person to follow through to a tour and apply. As you can see, it becomes a numbers game to a certain degree. 

Strategy: So what do we do to be competitive and aggressively place our listings ahead of others? We need to capture and convert the most leads that we can. First and foremost, price is the biggest driving factor for any rental. Edging out competition by strategic pricing is step one. Our agents keep close tabs on competitor's listings. Another way we compete is by offering incentives. In some cases, we've seen listings stand out by offering some sort of promotion or tenant credit. Adding a move-in special with a tagline like, "$500 off first month's rent," can work wonders! Price point drives interest, but when push comes to shove- we can't overlook the power of real human interactions and instant answers. Our company answers the phone! We offer an immediate friendly voice, without a cumbersome phone tree to navigate or non-local answering service. We also have AI built in to set up immediate tours and send video tours of properties at the touch of a button. A lead won't go cold because of lack of communications from us!

What not to do: While having a vacancy during a softening season can be worrisome, it's best not to panic and just accept anyone. One thing we've learned in our dozen years of service, is that an ounce of prevention by using our consistent screening process, has never let us down. We've spoken about this in previous newsletters, but the fact remains that we've had ZERO evictions in a dozen years when we follow our publicly posted application requirements and screening process. The times that we've had to evict (7 times in 12 years) is due to an "inherited tenant" (one previously placed by other managers we took over from) or times where the owners asked us to bend the rules to accommodate a low credit score, etc. Don't compromise on tenant quality, just to fill a vacancy. 

Looking Forward:  What can we do to help minimize vacancies in shoulder seasons? One thing that we've done is create new policy around writing lease terms that favor peak season end dates. Currently listed properties will have lease terms written for 6-9 months, depending on tenant requests. Renewals were all stacked to come due in May, June or July of 2025. While previously we'd offered up to 3 month extensions on a month to month basis allowing tenants to have flexibility at the end of their leases, we've tightened that component up as well to limit the monthly option down to 1 or 2 months, never extending into August. 

In summary, our takeaway lesson from these seasonal trends is that- when we know better, we do better. We have pinpointed and recognize a newer pattern and seasonal depression, and reacted quickly to maintain quality. Boise TurnKey has positioned our attractive listings ahead of the competition, and has taken steps to avoid having vacancies this time of year going forward. We've renewed current tenants to an earlier, peak season time- and we're all hands on deck until these last lingering vacancies fill!