The State of Property Management 2020
In 2019, the state of property management was healthy across the US, from California to Florida to New York. More properties, rising rents, and new technology is making property management the envy of the real estate industry.
Technology, cultural, economic and political trends create property management trends which are not always easy to understand or foresee. For that reason, our State of Property Management Report 2020 brings clarity in one brief summary you can use to assist with your business strategy.
The Path to Profitability
Unfortunately, busy property pros have difficulty staying up on trends, salaries, technology, software, regulation, investing, rental housing, ongoing training and education, as well as tenant attitudes and the culture of apartment renting. That means business decisions might be missing key influential data.
ManageCasa’s State of Property Management Report
Our 2020 State of Property Management Report is a helpful look at the business of property management today and at what is coming. Together with other property management resources, it’s a helpful resource for landlords, investors, property management startups, contractors, vendors and established property managers who can see change is in the air.
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Given how important this report is, we’ll update it continuously.
The Path to Profitability
What are property managers and landlords challenged by? We’ve highlighted those challenges and now we’d like to add some numbers to the demand and costs of the business.
It’s important to critique data and take a broader view.
This State of the Property Management Industry report can help you understand where the market is headed, and what your next move might be. There’s more needed than simply adopting a property management platform or even a tenant management system.
The Current Rental Property Market
The Global Real Estate Management Software Market is expected to grow from USD $8.97 billion in 2017 to US $12.9 billion at a CAGR of 4.7% by 2025 — Adroit Market Research.
Research company ARC says the Global Property Management Market will reach USD $25 billion by 2025. It’s our opinion that technology is creating high revenue and profits in this industry which in turn draws more investment and technology into it. As an example, billions of investment is going into Proptech and this will impact how property management is done in the years ahead.
The US rental market is big and due to persistent high housing costs, with subdued new housing construction, regulatory restrictions, and demographic conditions, the rental market looks strong. In fact, whether boom or recession, rental markets do well.
Berkadia’s National Trends report on US multifamily markets revealed the top performing rent growth markets were Phoenix (+8.9%), Reno (+8.3%), Las Vegas (8.0%), Tucson (7.7%), Tampa St Petes (6.8%), Atlanta (5.9%), Los Angeles (5.3%) and San Diego (5.4%)
US Rent Prices
A Yardi survey revealed rent growth of 3.6% at a time as housing prices have flattened or declined. Yardi says that although occupancy has seen a little drop, it’s had no effect on absorption. Apartment list shows rent price growth has slowed the last 2 years, but as construction growth eases and housing stock is absorbed, prices may continue their relentless upward journey.
Quick Facts on the US Rental Market:
- growth in renters was 23.7 million
- growth in homeowners was 700,000
- renter growth outpaced homeowners in 97 of 100 top US cities
- rentership grew 53% in Gilbert AZ, 40% in Plano Texas, 40% in St Petes Florida, and 39% in North Las Vegas
cities with largest share of renters: Newark NJ 74%, Jersey City 70%, and Miami FL 68%
Quick Facts about US renters:
- 43% of renters living in single family homes
- 50% of renters under 30 years of age
- 44 million cost burdened renters in US
- 16% of low income renters can’t pay rent
- eviction is the top reason for eviction
- average rent per month is $1492
- average rent growth is 1.6% (Yardi report)
15 Top Drivers of the Rental Property Market
These 15 factors influence the rental housing market:
- buyer market is young and unable to finance the purchase of a home
- rent has increased faster than wages, thus preventing renters from saving to buy a home or condo
- not enough single detached homes available for purchase
- risks in buying are high with high prices, political turmoil, trade and economic fluctuations, uncertain mortgage rates and housing market uncertainty
- millennials are career minded and not necessarily willing to buy now
- bank of mom and dad may be running out of money
- home and condo prices too high to purchase
- buyers won’t buy due to mortgage finance restrictions and long term worries over a recession/market crash
- cost of living rising
- millennial preference for older urban neighborhoods with walkability
- rents rising too fast compared to cost of buying a home
- cap rates not sufficiently better than other investment options
- immigration into US is still strong
- retiring babyboomers having a tough time finding places to move to
- more good condos and apartments available because regulations are decreasing and construction techniques are better
- the number and share of cost-burdened renters was falling but is beginning to rise again
Multifamily Occupancy Rates
While occupancy rates are high across the country, there are economic, demographic, and accomodation trends that result in higher occupany rates in some cities and neighborhoods. You can read in this post on US rental occupancy rates how some cities in South Carolina, California, Kentucky, New York and even Florida have troubling occupancy issues, much below what invetors need to make their investment profitable. For some landlords, finding quality renters becomes their key ongoing challenge.
US Multifamily Market
The multifamily market is the darling child of the property investment market. A recent glut of new construction apartments released and expectations of 4.2% rent growth for 2019, and moderate asset appreciation means opportunity abounds in the Multifamily sector.
The trend is out of big city markets to secondary markets where employment is rising and new construction is generating plenty of rental stock. There is a trend away from the suburbs to urban neighborhoods near transit, with high walkability scores, and close proximity to workplaces.
If you’re a potential investor looking to flee the stock market in the next few years, begin your research with a look at the US housing market, the multifamily property market, and the best cities to buy post.
Property Manager Salaries
Salaries for property managers continue to rise. Pay ranges from 50k to almost 200k per year depending on seniority and type of portfolios managed.
For those who manage lower number of units, the key to better pay is increasing the number of properties managed. Performance bonuses and incentives are being offered as part of the compensation plan. The data shows greater opportunity for specialization.
US Employment Outlook
The unemployment rate in the US is a very low 3.6% in May, down from 3.9% last year. Most experts believe the rate will rise above 4.0 in the next few years. At this point, employment is solid and growing and with US import tariffs in place, the outlook for US workers is very promising.
As you can see in this graphic from the Atlanta Fed, wages are on an upward trajectory, as employment is strong and worker availability thins.
This graphic from Bls.gov shows most property managers are at the lower end of the spectrum, and although almost no job training occurs wages and jobs are available. As staff are few, and property management companies try to expand their property portfolios, they will have to pay higher wages.
NARPM/Buildium State of Property Management Report 2018
The National Association of Residential Property Managers (NARPM®) and Buildium® combined efforts to survey property managers last year. We’d like to do a brief critique of their survey findings and fill in the missing blanks.
The survey polled thousands of property managers for insight into their challenges and intent. It didn’t pursue questions on failures, pitfalls, and losses which would have been helpful to anyone planning for 2019/2020.
The poll lightly discussed sources of revenues, cost issues, technology usage, staff training and retention issues and other critically important factors in success for property management companies. The findings are consistent with what we’ve published since 2017 here on our ManageCasa blog.
This graphic below shows respondent’s survey responses regarding their goals for 2019. Our comments on the first 4 are included, to help clarify what the response might mean.
It’s a serious topic and one that actually hits at the real underlying reasons why industry transformations are taking place. Few like to report failures or how they’re really growing revenue, and polls can’t really get into what is actually happening. Which is why poll results have to be taken with a grain of salt because they could unintentially mislead.
The poll indicates a changing business focus for many property managers as they mastered challenges in 2017 and 2018 and they’re onto the next. In the NARPM survey, results are segmented according to the portfolio size of the property managers which is helpful.
Here are a few key NARPM report findings:
- property managers are versatile often having two job titles and managing many different types of properties, and many are investors themselves.
- most manage single and multifamily rental units
- most operate about 30 to 500 doors
- more than half have revenues below $250k
- more property managers see growth as a priority
- revenue comes from rent collection, leasing, maintenance, inspections, vacancy marketing, evictions and cleaning services in that order. Accounting and sales make a small portion. The primacy of rent collection and leasing as their key source of income is surprising and may point out how commissions are dominating the sphere.
- poll respondents are experienced managers, with almost 2/3rds having worked in the industry from 3 to 20 years.
- property managers report their biggest challenges are efficiency, maintenance, growth, vendors, staff, tenants, profitability and technology in that order. Other polls have found different challenges such as cost efficient management, modernization, time management, and hiring/keeping their staff were the top priorities.
- revenue is not an issue for most and 9 out of 10 property managers expect their revenue to grow through 2020.
Their challenges emanate from the rental housing market itself, with handling too many rental inquiries and applications, background checks and interviewing, hanlding maintenance tickets, along with doing all this work within budget limitations. With them being overwhelmed, it stands to reason that technology adoption upgrading software, and acquiring staff training would be put off.
Finding new landlords and properties to replace lost properties or scale up their business would be a signficant challenge due to time and maintenance pressures, staff shortages, and finding competent contractors/vendors.
What Are Property Manager’s Hoping to Do?
The report’s authors suggest property manager’s plan to add revenue generating amenities, bring services in-house, use proptech to cut time waste, improve customer services, raise rents, and negotiate lower rates with vendors and contractors. They also mention selling low profit buildings to pursue more lucrative developments and properties in 2019.
Bigger property management companies are looking to buy out smaller ones, increasing their staff, and seeking out large multifamily properties to buy. Finding new service lines such as HOA and Multifamily was cited by many. They are looking at acquiring multifamily units (75 or more), which is something we’ve reported in our multifamily report. New property management software is making high volume management easier, due to automation, and tenant self-management portals.
How Are They Attracting Renters?
Most respondents made vague statements about improving customer service, updating properties, adopting technology, improving amenities, and pursuing a broader demographic.
Few report using renter concessions yet the use of concessions is reported by other research to be strong in some cities where it can guarantee longer time leases. The use of a retention strategy is a little far fetched as it seems most property managers scramble to hang onto tenants, instead of using technology to predict when they’re going to leave and use an integrated strategy to cut tenant turnover.
The surveys conducted by NARPM should grow and be conducted by NARPM themselves for better accuracy and credibility. NARPM’s membership of landlords and property managers could shed much more detailed light on the state of property management in the US.
What the report shows is what we already know. Property managers are enjoying an excellent, growing market of properties and technology opportunities, to manage a well employed base of renters. Here’s the 15 trending areas of interest for 2019.
The key takeaway for you as a property manager is that your competitors are adopting new property management and tenant management solutions because it allows them to take on new, high volume, high profit multfamily portfolios. The challenge is the effort to adopt tech solutions, find good staff, pay them and train them to manage a growing volume of doors.
In 2019, it’s all about simplicity through automation, growing tenant satisfaction and engagement, and positioning for more doors and revenue. We hope you have the tools and people to make success a sure thing.
We hope you enjoyed our 2019 State of Property Management Report. Bookmark this page because we’ll update it with exciting new information throughout the year.
While you’re into the topic of property management trends, why not do a quick FREE TRIAL of the type of software sweeeping the industry? See ManageCasa’s valuable accounting and tenant management features.
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The above state of property management report is provided as an educational resource and is not meant to be specific advice related to any property management business or investment activity. National Association of Residential Property Managers (NARPM®) is an association of real estate professionals serving the USA. ManageCasa is a member of NARPM. Builidium® is a US based property management software provider offering software solutions. The comments and critique contained in this report are of the author and not Buildium or NARPM.