The Effect of COVID on the Rental Property Market– and What It Means For Turnkey Investors

Small businesses, especially those in the service industry, took an unprecedented blow from the Coronavirus pandemic. Many businesses shuttered their doors completely, while others were forced to reduce their staff. By April of 2020, the national unemployment rate hit a record high.

The ripple-down effect of COVID and the pandemic has massively altered the way Americans live, work and do business. One sector of the economy that has seen some massive changes is the real estate market.

In this article we’ll take a look at how the pandemic has affected real estate and what this means for you if you’re a rental property investor or considering becoming one.

National Shortage of Real Estate Inventory

Before the pandemic, the United States was already primarily a country of renters. Since Covid, however, the demand for rentals has sky rocketed. Simply put, we are seeing a critical shortage of quality affordable rental housing across the country.

Let’s take a look at what’s going one here.

First, people are buying and selling less real estate. It seems that, due to the pandemic and the uncertainty surrounding jobs and the economy, suburban homeowners are staying put instead of relocating. This has resulted in far less turnover in the market and an overall shortage of real estate nationwide.

With supply down and demand up, the price of single family homes has risen. This has caused many would-be first-time homeowners to instead stay in the rental market.

The Push For More Space

Another phenomena we’ve seen is a push to move to the suburbs. Since the start of the pandemic, many downtown offices and tech spaces have started utilizing remote workers.

Instead of renting apartments, more and more families are seeking single family home rentals. They are prioritizing more space, even if it means being further away from the downtown city core.

What Does this Mean for Investors?

The low-supply of rentals, combined with high-demand has created a national shortage of rental properties– specifically quality, affordable single family homes.

Despite the uncertain economy, the market for rental properties is strong. Investors can expect:

  • The demand for rental properties to remain high.
  • Vacancy rates to remain low.
  • And rental rates will continue to increase.

This trend is expected to continue well into the future, making single family rental properties a smart investment for anyone looking for a long-term buy and hold strategy that will offer consistent monthly cash flow.

What About Rent Moratoriums and Evictions?

Surprisingly, landlords in the high-end rental market have seen higher vacancy rates and the greatest drop in property values. Whereas, vacancy rates remain low in more affordable markets, such as that found Northeastern Ohio property rental market.

Despite what the messages from the media, it’s estimated that less than 20 percent of landlords have been negatively impacted by Covid. Throughout the pandemic, the majority of renters have continued to pay rent despite increased unemployment rate and rent moratoriums.

The reality is, in a shrinking market, renters are motivated to maintain good relations with their landlords and want to avoid the possibility of losing their housing.