In 2018, almost 700,00 California residents left the Golden State. Many of the Californians ended up in Texas, Arizona, Washington, and Colorado. California isn’t alone in losing a wave of residents to other states. Places with big cities like Illinois and New York are going through the same thing.
Where are these residents going? What drives them to make the move, and why does this all matter to property managers? You’re about to get answers to all these questions.
Where People Move to and Why
The Dallas Morning News writes that Texas has welcomed more than 86,000 Californians in 2018. What draws them to the Lone Star State? The biggest factors are Texas’s robust economy, strong job growth, and affordable housing. Right behind Texas is Arizona. Californians move to Arizona for similar reasons as Texas: lower cost of living, more affordable homes, and more jobs.
It’s no surprise that Florida has the largest number of interstate moves. After all, the Baby Boomers are retiring in droves leading to a retirement crisis. CNBC
reports almost half say they’ve retired. As such, they’re leaving colder climates for the Sunshine State of Florida.
Unfortunately, most Baby Boomers struggle with the lack of savings. Social security doesn’t go far these days. Very few receive income from a pension plan. Many do not have enough savings partly due to the financial crises of 2008. Then there’s soaring health care costs. Hence, they need to live in more affordable areas.
To make matters worse, wages remain stagnant. Add rising home costs. Bring it all together and it makes it harder to pay the bills especially mortgage. Because of this, more people are choosing to rent an apartment.
Why Property Managers Need to Know About Domestic Migration
It’s not just the Millennials and Generation Z renting apartments. Before digging deeper, you’ll like to know they are renting longer according to the “5th Annual State of Property Management Industry Report.” The surprising part is that 40 percent of today’s renters are aged 45 or older. Who is the fastest growing renter segment? Baby Boomers.
Property managers must attract all three generations. Of course, there are exceptions. Some apartments may target a specific type of renter. For instance, they have designed their property to be a place for people who are single in the 25 to 35 age group. Their amenities entice this group. In this case, property management targets millennials. Generation Z isn’t quite old enough yet.
That will change in 2025. If the property continues to cater to the single 25 to 35 crowd, it needs to change its audience to include both Millennials and Generation Z. By then, the older members of Generation Z will be 30 and the younger Millennials will be 31.
In areas with rising domestic migration, successful property managers change their strategy to acquire the flood of prospective renters. Bear in mind that affordability is one of the leading causes of interstate migration. That means rental rates need careful thought. You don’t want to set the price too high. You will still want to find creative ways to increase your NOI.
How to Adapt to the Growing Interstate Migration
Keeping an eye on interstate migration and multifamily property management trends will help you improve operations. The data informs your decisions and priorities. It’s about attracting prospective tenants to choose your property and then keeping them happy. The happier they are, the longer they’ll stay.
You can get ahead of your competitors with planning and preparation. Start now by doing these four things.
1. Speed response time
In “The Research Is In On Multifamily Lead Conversions,” Donald Davidoff references research and analysis that reveals something alarming. In 2019, an unacceptable 18 percent of requests for information about an apartment did not receive a response. That’s a lot of money left on the table.
The good news is that this is a vast improvement over 2017. Nonetheless, no lead should be left behind. The key here is to create processes to capture every single lead. You can automate the process with technology. However technology alone cannot solve the problem. It requires three things to work together to solve the problem: people, processes, and technology.
Studies have shown that the sooner you follow up with the lead, the greater the chance of making the sale. The Lead Response Management Study
finds that the odds of contacting a lead are highest when you contact a new lead within 5 minutes. This is when you have the greatest chance of turning them into a qualified lead. The odds drop drastically at the 10-minute point. People, processes, and technology can shorten your response times.
You also want fast response times in serving your tenants. When they submit a repair request, they should get an acknowledgment quickly. They want to know they’ve been heard and that someone is working on it. You can automate the customer service process with the right property management system.
2. Keep tenants happy
One of the best ways to maximize profits is resident retention. Here’s an example from “Adding Up The Financial Benefit of Reducing Moveouts.” An apartment building with 225 units has a 40 percent turnover rate. Do a little math and it comes out to 90 moveouts a year or 7.5 per month. A single moveout costs $1,800. That’s an expense of $13,500 for a month’s worth of moveouts. The example uses $650 per unit as the average rental rate. Even if you increase the rental rate average to $1,000, it will still take two months’ rent to cover the expense of a single moveout.
Just reducing the turnover rate by 5 percent will result in an annual savings of $20,000 in expenses. In short, the longer you keep a resident, the more income you bring in. You avoid the expenses associated with a moveout.
You might be thinking that changing tenants gives you a chance to raise the rent. Retaining tenants brings in more profit than finding a new one. This is especially true in places with a cap on rent increases. There’s no guarantee you will find a new tenant quickly enough.
Curb appeal matters. Everyone wants to come home to an inviting place. A place that has no broken windows or visible damage. A place with well-maintained landscaping. A place with a well-maintained swimming pool. Residents will not feel safe when they see a rundown, dirty, and damaged property.
3. Provide the right amenities
Amenities can mean the difference between choosing your multifamily property over another. Residents are willing to pay more for rent for the right amenities. They also expect some amenities as standard. When you shop for a car, you can count on it to have seat belts, turn signals, and locks. These are not upgrades or extras. They’re standard. Renters have the same expectations about certain amenities.
What are the best amenities to offer? It depends on many variables. Surveying almost 400,000 apartment renters in over 5,300 communities, NMHC and Kingsley Associates Renter Preferences Report has a few intriguing findings. More than half of the people responding want an onsite business center. Part of that may stem from the growing number of remote workers. Their apartments become their home and workplace. It turns out that more than 40 percent of the respondents are apartment remote workers.
Moreover, one-third of apartment renters own voice-activated technology like Google Home and Amazon Alexa. If they don’t own one, chances are good they want one and won’t rent from a place without a voice-activated virtual assistant.
At this point, the oldest Generation Z adults have graduated from college or worked for a few years. This is the first generation to enter the world where technology and the internet have become an everyday part of people’s lives. It’s natural they expect their residence to feature smart home and smart apartment technology.
4. Invest in property enhancements and improvements
As stated before, curb appeal affects how people feel about their home. Prospective renters want and expect technology. It’s absolutely essential to maintain a budget for improvements. No one wants to swim in a pool that has cracks in it. No one wants to live in a place where the laundry room has broken machines.
Baby Boomers, Gen Y, and Gen Z all want technology and security. These evolve every day. Remote video surveillance, for example, has advanced enough to distinguish faces and other identifying information. Not all video surveillance systems have this capability. That’s why you want to ask questions and work with a company that has experience in securing multifamily properties. While cameras make residents feel safer, video surveillance can also reduce liability.
The pandemic has forced people to stay home more. They want to be in a place that is comfortable and feels like home. Even after social distancing ends, many things will change. For one, more people will most likely continue working from home.
Only 10 percent of Americans moved in 2018. With people moving less often, it gives property managers fewer opportunities to capture new tenants. It also indicates they need to work harder to hold on to them. Even properties in states with the highest interstate migration cannot rest on their laurels. They still compete with other properties. If they slip, people will look elsewhere.
To learn more about remote video surveillance and other multifamily residential security solutions that your tenants want, please contact us. When you work with our security experts, you gain a team experienced multifamily property security.