Industry Experts Speak to Current Trends in Rental Real Estate
Business Solutions These experts share insight into the pitfalls of the modern rental industry and how technology has changed the renter/tenant relationship.
What is the most common mistake or risk property managers face when it comes to tenant screening, renting out their vacation rental properties to guests, or developing their website? How can this be avoided?
Tony Melillo: Physical damage to the building and/or contents, and personal injury claims are common risks posed by vacation rental guests. Although it’s difficult to prevent accidental damage to property, owners can mitigate personal injury risks by ensuring that their home is free from common hazards, such as uneven sidewalks ad loose handrails.
Frank Jachetta: Typically, the mistakes that property managers, landlords and owners make are that they don’t complete their due diligence when making leasing decisions. The average cost of an eviction costs thousands of dollars and three months of lost rent, so using tenant screening solutions like MyRental™ from CoreLogic can help mitigate that risk. All MyRental reports include a SafeRent™ Score which is a consistent and objective method of reviewing relevant applicant information. It also predicts the relative financial risk of leasing to an applicant.
Mike Doherty: The biggest mistake property managers and landlords make is using anecdotal outcomes and intuition, rather than big data, to drive decisions. The choices made regarding investment and operational decisions can have a significant impact on the business’ bottom-line.
To make sure they are making the best data-driven decisions, property managers should use tenant screening providers that are using statistical tools and big data to power their recommendations.
Jason Hull: The biggest mistake a property manager can make when developing their website is to focus on trying to manipulate Google by focusing on SEO, instead of trying to build trust & attract customers. This is why we built a quiz to grade your property management website to see how effective it is at making money & attracting new owners to work with.
Note that according to Google Trends, search volume for Property Management has been on a decline since July of 2011 - yet SEO competition has increased dramatically, thanks to marketers. I believe this is hurting the industry by preventing them from being able to grow, which in turn hurts renters. Property Managers playing the game of advertising & cold lead marketing often find they spend money, make little to nothing in return, and then when cash flow is tight customer service sadly takes a backseat.
S. Philip Kennard: The biggest management mistake is thinking that doing things manually “adds the human touch.” Manually juggling bookings, communications, and listings doesn’t create unique guest experiences or better hospitality. Using instant bookings and automation technology helps managers spend less time on logistics and more time on delivering the personal touches that make each property and guest stay unique.
How is technology revolutionizing the real estate industry for both industry professionals and the renters?
FJ: Technology has empowered property managers to effectively manage applicant risk. The first step to profitability is creating a fiscally and physically safe portfolio. The SafeRent™ Score from CoreLogic® is a statistically validated score that predicts applicant risk. Property managers can use this score to help determine the best residents for their rentals—residents that are more likely to stay for longer periods of time and fulfill their leasing obligations.
MD: Modern technology is playing a role in helping both renters and property managers. On the one hand, it allows renters to more broadly search for rental properties. On the flip side, management can more efficiently optimize rental rates to make them more attractive, especially when they would like to have access to a bigger pool of applicants. As more customers choose to manage their entire rental experience online, it is imperative for property managers to beef up their technological capabilities so they may serve customers through the channels in which they want to be served. This can lead to improved retention over the long-term as property managers can once again set optimal renewal rates to target the right customers to renew their lease.
However, the shift to online doesn’t come without risks. The industry as a whole has seen an increase in the presence of fraud and determining whether or not an applicant is legitimate has become a growing issue. Fortunately, fraud detection tools are becoming more and more sophisticated. Improved identity verification experiences are making the process more seamless as to not deter low risk online applicants from applying. Big data is also helping to identify risks such as the likelihood of any applicant to pay – so property managers can set risk tolerances accordingly.
Landlords have consistently ranked payment problems as a pain point. In the market now, renters have continued to dedicate greater portions of their incomes to rent. In some areas, like San Francisco or New York City, a renter could spend as much as 2/3 of their income on rent – which can be quite risky for landlords. One small life event for a renter can put that month’s rent payment and beyond at risk.
With renters strained to afford housing costs, it is important to ensure potential renters can meet their rent obligations. For the small landlord, tools such as Income Insights can help resolve if more income checks are needed to determine if an applicant can afford the rent. It is designed to save time and effort for independent landlords, as well as reduce risk. With the Income Insights report, landlords receive an estimate of whether or not the applicant’s credit behavior aligns with their self-reported income and a recommendation to help landlords determine whether to ask for additional income verification. For the larger property owner, using a sophisticated scoring model that has factors like income, likelihood to pay and propensity to skip or be evicted built in is an objective approach to risk management.
JH: Managing property can be a lot of work and often yields very little profit margin. This makes it hard for property managers & landlords to provide good service. Technology has allowed those managing properties to create leverage, serve more people more quickly, and it has allowed renters to quickly get the support they need. Smart tools are helping to eliminate waste, create more clarity, collapse time, and lower the high costs of managing so that better, healthier businesses can thrive in managing property, which in turn benefits renters.
PK: From car rides, to flights, to vacation homes, today’s customer expects to book travel online -- with 92% preferring instant booking. Instant booking and online marketplaces have helped vacation rentals go mainstream, and participate in the on-demand economy. Next, through better tech and fairer regulation, the industry needs to ensure that today’s new property managers are properly equipped to keep up with business at real-time speed.
Barbara Corcoran: Real estate technology is booming and for good reason. It’s an industry ripe for innovation. New tools are helping brokerages and realtors move faster, more effectively, and with more efficiency … it’s a wave that’s taking off and if you’re not riding it, you’re being left behind.
Q: What is the number one challenge facing the renting industry today?
FJ: Identity fraud continues to be a major risk to property owners and managers. Knowing your applicants is critical to success in today’s rental marketplace. Based on client feedback, the average total cost for a fraud-related eviction is $7,000, which doesn’t include the cost and time associated with finding a new resident.
MD: Overall, this is a great time for the rental housing industry. We are experiencing high occupancy, healthy rents and there has been relatively low delinquency on renter payments. However, there are some consistent themes we see from both our larger multifamily customers and from independent landlords. With screening serving as the gateway to impacting the P&L, the number one challenge typically boils down to finding the right renter in the first place.
Our large customers tell us that finding good people, retaining residents, serving them well and then incentivizing them to stay are fundamental challenges of the industry. To address these issues, property managers need to be in the places where their target renters are looking. Selecting the right ones – not using anecdotal rules of thumb, but using the power of big data to come up with the best selection criteria – is the best bet for solving for this challenge from the beginning and preventing further issues. This can also help combat fraud, another major operational threat that has been emerging. The emergence of fraud in the industry is likely resulting in a higher portion of bad actors?? than most property managers and landlords realize.
For independent and do-it-yourself landlords, finding a good renter and setting the right rent is a similar challenge. In a recent landlord segmentation survey TransUnion conducted, independent landlords voiced that this was one of the most stressful factors as they can’t approach the rental housing game with a portfolio mindset like a multi-family community. Many independent landlords often times own just one property. That means they can’t afford to suffer a bad rental outcome, such as eviction which can cost as much as $4,000. We have seen a tipping point in supply and demand with a shift into an owner/landlord market (characterized by rising rental prices on the aggregate, home ownership percentages at near all-time lows and an abundance of renters on the market) independent landlords still need to focus on finding a high-quality renter who will pay their rent, pay it on-time, respect their property, and be a good neighbor for residents surrounding the unit.
To get the right people in the door, a great online experience is imperative as well as matching the right amenities to target renters. Now more than ever renters are moving towards handling every part of the rental process online and are more likely to not want to deal with a person at the leasing office. Providing the right channels for renters to deal with the property manager can help managers know they are serving their people well. These steps can help to address challenges and ensure property managers stay in line with what today’s customer expects.
Alex Osenenko: For years, the property management industry existed in dusty backrooms of real estate sales offices where resources, education and support were sparse. Service was unprofessional and unreliable, so now, roughly 65% of all single-family and small apartment properties in the U.S. are managed by owners. Even to this day, most landlords don’t trust property management companies to handle their assets, or believe that paying someone to manage their property will actually result in higher returns.
JH: The number one challenge facing the rental industry is a lack of good, professional property management being used. 70% of single family residential rental properties are self-managed. That means only 30% are professionally managed. In Australia nearly 80% are professionally managed! Property managers are underutilized here. I believe good property management can have a massive impact on hundreds of thousands of individuals & families around the US. The two biggest issues facing the industry are 1) a lack of awareness of property management & what property managers do.... And 2) a negative perception & stigma towards property managers. Our mission at DoorGrow is to build awareness & change the perception by helping the best property managers win.
PK: Growing pains. In 2018, 32% of new real-estate investment was in vacation or short term rentals. The vacation rental gold rush has resulted in millions of new rental micro-entrepreneurs that the world isn’t prepared for -- who face rising consumer expectations, shifting legal landscapes, and no standardized technology infrastructure. The world will have to adjust, because this “niche” industry will hit $200B in 2021!
BC: Worse than not being taken seriously was being dismissed by the men I competed against. They really didn’t see me at first and that would be very off-putting and shake my confidence to the core. I learned that I had to get my own attitude on straight…I simply made a mental note of the occasion, who I was with, and then I went out to prove them wrong.
What are the top qualities that make for a great tenant during the tenant screening process?
FJ: One of the best predictors of future performance is past behavior. If the prospective applicant was previously evicted or had missed payments, the likelihood of that happening again is higher. Therefore, it is strongly recommended that a third-party tenant screening solution be used to help property owners and managers predict financial risk.
MD: Ideally a renter has a profile and track record that suggests they have strong potential to be a good, long-term fit. This could be evidenced with a renter having a steady job with ample verifiable income that covers the rent, a good history of making payments on their obligations, relatively low debt-burden, no history of eviction, and a background free of any major, troubling past actions. A potential renter may present sterling credentials in every category, but could still be a viable candidate - it is important to review the whole picture of an applicant to make the most informed decision. Other important factors to consider include a good credit score, which reflects that the renter is managing their finances well. If someone has their finances in order, they likely have their life in order and will be steady and stable tenants and it is a strong indicator they are highly likely to pay you over the life of your lease. Finally, with the emergence of fraud, property managers should ensure they have tools that are checking for red flags they may be dealing with a fraudster as this could cause significant financial and reputational burdens down the road.
What piece of advice would you give to a property manager who wants to utilize technology to grow their business, but doesn’t know where to start? Or give one piece of advice for those entering a career in the real estate industry.
AO: Optimize your core processes and be flexible - adopt the best practices today’s purpose-built technologies offer. My recommendation is to start with the property management accounting software that offers best-in-class owner experience, then adopt tenant experience and onboarding tools, followed by maintenance solutions and customer relationship management (CRM). Finally, your business website is the core of your growth and needs to be treated as such.
JH: The first and best place to start is by getting clear on what is draining your energy and limiting your time from being able to do the things you really enjoy. Those items that have been on your to-do list for two weeks are still there because you are not the person that should be doing them. Then looking into 3rd party tools & vendors that can help you create some leverage will help you save big versus hiring staff. We showcase some of the best vendors & tools on our Podcast, the #DoorGrowShow. Most pain revolves around maintenance coordination. Look into tools like Property Meld, Latchel, EZ Repair Hotline, Supertenders, and the new A.I. tool Diffe.rent to see what will help you create that leverage.
PK: Running a vacation rental business can feel like managing a million disparate tools. Between your listing sites, your website, your financial accounts, and of course your guests and bookings, nothing seems to connect. Yesterday’s vacation rental software was expensive, complex, and clunky. The right technology should simply make everything work, like an invisible layer that syncs your property to the industry. Find something that makes hospitality feel effortless, and get connected.
BC: The best piece of advice I received from my mother, a housewife and mother of 10 kids “Don’t be afraid to fail or you won't learn a thing.’”
What is the most common mistake that property managers make when it comes to developing a marketing plan for their business?
AO: Among those few who actually create a marketing plan, not enough include mechanisms to judge marketing performance (KPIs). Property management business owners need to understand their target customer acquisition cost (CAC) and the annual contract value (ACV) of one unit under management, then use those numbers to evaluate each marketing channel on a 90-day basis. Continuous improvement must be a part of any successful marketing plan.
How has the property management industry changed in the last decade?
AO: When the great recession of 2008 hit, many real estate sales offices realized that their only revenue-producing business units were their property management divisions. Previously resource starved, overworked and underappreciated, property management businesses rescued their sinking real estate sales motherships. The investment industry has also woken up to the growth opportunity and have entered the property management industry in force, fueling larger, multi-region property management companies. is the most common mistake that property managers make when it comes to developing a marketing plan for their business?
It’s common for many vacation rentals to get inspected. What are the top three most common post-inspection safety recommendations and how can an insurance provider help ensure property owners are prepared for such inspector visits?
TM: Common post-inspection safety recommendations are: pool-related items (depth markers, posted safety rules, life-saving equipment, etc.), the removal of tree limbs that are overhanging or touching the roof, and missing or loose handrails. Providing a pre-inspection communication to insurance clients explaining how to identify and address these and other safety hazards before their appointment will help owners prepare.
Why is investing in a trustworthy insurance policy important for vacation rental owners/managers?
TM: If you need to file a claim, you’ll want to have a policy backed by a reputable, financially strong company that has a history of paying claims in this niche market. The policy itself should include, at minimum, property coverage and commercial general liability insurance, which provide protection from claims arising from business operations and recovery from business income interruption.
What are the benefits of pursuing a career in the real estate industry?
BC: The real estate industry is rapidly changing and full of opportunity for up-and-coming real estate professionals. In this competitive field, it’s crucial to not just keep up with trends but to be trendsetter yourself. Remember that the old boys get cocky and fall asleep at the wheel. It's the new kid on the block that owns tomorrow.