From the sudden outbreak and proliferation of Covid-19 to social unrest and demonstrations occurring in the city, Washington DC landlords have needed to adapt to a much more uncertain reality. One of those realities centers on the fact that the balance of power has shifted. Instead of being in a seller's market, Washington DC has quickly become a renter’s market.
Tenants are in a position of strength, as rent prices in Washington DC have significantly decreased. With stories of the new urban flight and uncertainty about a second wave in the fall and winter, pressure on landlords will likely continue for the foreseeable future.
It is for these reasons why it is critical to analyze how landlords can adjust to these new rent prices in Washington, DC. To do this, we will discuss the basic meaning of a renter’s market, what landlords should expect in a renter’s market, and how you can lease in a renter’s market.
What is a Renter's Market?
To get started, it is helpful to first discuss the characteristics of a renter’s market. You can think of a renter’s market as a situation where renters have more power than landlords. This power can come from several different things, including increased housing supply, migration from a city, or even increases in taxes or utilities.
Because of these factors (or other factors), landlords inevitably feel the pressure to decrease rents. This can start a cascading effect, where prices fall even further because landlords are trying to undercut each other. Ultimately, a renter’s market can impose significant economic pain onto landlords. Not only will they need to find new renters to make up for lower rent prices, but renters stand on stronger ground when negotiating current and future rents.
In the last decade, Washington DC has been in a seller's market. That being said, the past few months have been difficult for landlords. For instance, in this year's second quarter, Washington DC-area apartments had the biggest rent drop in this century. Rent prices in Washington DC are certainly under pressure, and much of the reason has been due to significant declines in apartment demand.
Landlords' Expectations in a Renter's Market
This news about rent drops and the new renters’ market can include anxiety among landlords. After all, we are living in a time where there are troubling trends. Both wealthy and young tenants are increasingly leaving cities and moving to the suburbs. Even for those tenants who are remaining in their apartments, many of them are struggling to pay their rent. Complicating the situation is also the fact that the local government has imposed temporary regulations that have tied landlords' hands.
This may cause you to ask that one key question: What is my rental worth in Washington DC?
It's hard to generalize. That being said, you should mentally prepare yourself to sell in a tough market. Rents may continue to be depressed for the foreseeable future. Because of this, it's important to be adaptable and be willing to perhaps try some new things to profitably lease in a renter’s market.
Tips for Leasing in a Renters Market
So, what are some of those actions you can take to lease in a renter’s market? Ultimately, there are several helpful things that you can do right now to improve property management in Washington, DC. Whether you choose to implement some or all of these strategies, you will be able to thrive in a difficult Washington DC renters’ market.
Hire an Experienced Agent
One of the first tactics that you may consider is hiring an experienced agent to assist you during these difficult times. As you know, the two choices when renting your property are a "do it yourself" approach or an FRBO (for rent by owner) approach. While a DIY approach may have worked in the past, an agent can help you navigate current rent prices in Washington DC.
Like anything, there are both pros and cons of working with an agent. As for the pros, your agent can help you optimize the rental value of your property and get more visibility for your listing. Your agent can also help you generate a well-rounded marketing strategy to attract new tenants to your property. Finally, he or she can take these important items off of your plate, freeing up valuable time for you to work on other things. On the con side, working with an agent isn't free. There are financial costs, so you'll need to determine whether those costs are worth the value that you are obtaining.
Often, the pros outweigh the cons. At EJF Real Estate, for instance, we take a client-first approach. Tracing our origins back to the 1920s, our professionals have consistently helped property managers and landlords maximize the potential of their properties. This includes everything from quickly finding and placing tenants into your properties to helping your properties get found.
In sum, an experienced agent can help you navigate these uncharted waters.
Inspect and Make Repairs
Next, you will want to seriously consider inspecting your properties and making any necessary repairs. This may seem difficult, as making these repairs may require some of your much-needed cash. That being said, making these repairs will make your property more compelling for current and future tenants.
As for necessary repairs, you will certainly want to ensure that your property meets DC Housing Code Standards. But beyond these minimal requirements, seriously consider making additional repairs if you believe that it will enhance the value of the property. They don't need to be extremely costly repairs or renovations. Rather, they can make the tenant experience more valuable and increase the chances that he or she renews.
Along with this, ensure that your property is move-in ready. For instance, tenants expect things like a fresh coat of paint and a clean apartment when they start their lease. Make sure that you are checking off these boxes for every new tenant.
If you choose to work with EJF, we can help you with these tasks. We complete a full inspection of your property and can prepare a report of all deficiencies, suggestions, and pricing. From there, we can execute all of these tasks on your behalf and direction.
Make Updates to Attract Renters
Closely tied with making repairs is making updates to attract new renters. Ultimately, making these updates can be an outstanding return on investment for your property.
Because the Washington DC rental market is now a renter’s market, it's important to offer a property that tenants will love. One of the best ways to do this is to update your property so that it is more functional and aesthetic. Investments can be everything from new appliances to even new artwork.
If you work with an agent, he or she will make recommendations and gather estimates. You'll then determine how long the repairs will take. For instance, at EJF, we suggest and prepare estimates and oversee any updates or repairs. We have a deep bench of vendors, and they can obtain the most competitive pricing for our clients. Whether you use EJF or your own contractor, updating your rental properties can be an outstanding decision.
Leverage Marketing Tactics
Improvements to your property won't matter unless prospective tenants hear about them. Because of this, you'll need to create an effective marketing strategy.
A huge part of your marketing strategy should be digital marketing. Whether you use MLS, Zillow, or some other online marketplace, you'll certainly want to post your property on these platforms. When doing so, make sure that you include professional photos. Virtual tools can also be a great way for interested prospects to get a sense of the property. At EJF, we use Matterport for creating virtual tools. Feel free to experiment with it if you'd like.
Along with this, don't hesitate to conduct showings. These showings can either be virtual or in-person. You can show the property yourself, or you can work with a licensed agent. Whatever you choose, staging can be fantastic ways to meet prospects and give them a first-hand perspective of the property. Ultimately, it can increase your odds of taking your property off the market.
This is where we answer what is my rental worth in Washington, DC. Here, you'll need to find the "fair" market value for your property and analyze your competition. After all, even if your property is valued at a certain amount, you may not be able to charge that amount if similar properties are being charged at much lower amounts.
Because of this, it's important to identify your competition. While your competition may certainly be located right next to your property, your competition may be wider for that. For instance, it may be apartments that have a similar number of rooms or amenities. Understanding competitors' pricing, you can then set a price that is both competitive and meets your financial goals.
If you would like to download our free rental analysis and rent report, click here. We have a unique insight into the market and can help you price your property in the most profitable way possible.
Avoid Stale Listings
Stale listings can be extremely harmful to your rental property. They implicitly send the signal that there may be something wrong with your property. Even if there isn't anything wrong with your property, the fact that it has a high days on market ("DOM") can raise red flags in the eyes of potential tenants.
To avoid stale listings, you can do several things. First, you can add more information to your listing. This can include things like updated interior photos and even neighborhood and lifestyle photos. You can even change the property description or update the listing's main photo every day. Don't hesitate to experiment with this, as stale listings dramatically decrease your chances of filling the vacancy.
Finally, you can take on the Washington DC renters’ market by offering incentives to prospective tenants. These incentives can be everything from amenities in the unit or building to actual discounts on rent or other fees.
You will need to be careful with incentives, as you must ensure that you are still economically benefiting from the tenant after accounting for that incentive. Nonetheless, incentives can be extremely powerful tools to drive new tenants into your property.
At EJF, we are happy to work with you to understand the best possible incentives for your rental property. Whether you are looking for immediate occupancy or you have more time to be patient, we can help you design incentives that will meet your economic requirements.
Navigating This New Reality
Property management in Washington DC has become much more complex. From potential tenants leaving the city to Covid-19, times are uncertain for DC landlords. That being said, incorporating the tips above can be helpful in navigating this Washington DC renters’ market.