We often report on the growth of Property Management as a career and as a standalone component of the real estate industry, but what is driving this important trend and how can we capitalise on it? Story by Jan Malmstrom.
Not too many years ago, the only people who tenanted rental properties were those who simply couldn’t afford the ‘Australian Dream’. And while that may still apply to some degree, it’s not the case for an increasing percentage of people who choose to be tenants and rent the property that suits their needs, work commitments or their lifestyle.
Times have changed and the world is now a very different place. Our tenants come from many walks of life, different professions, different countries as well as cultures and they approach tenancy with a vastly different attitude to traditional tenants of years gone by.
People in general, not just tenants, are now more mobile, more transient and more inclined to move on when their two year employment contract comes to an end. It’s less common for people to stay in the same job for the rest of their life and future generations will move on more frequently than previous generations, largely through employment opportunities.
A typical example of how a profession has impacted on tenancy can be found with those employed in the IT industry. IT has created a whole generation of people who find it very easy to move from state to state, even country to country, with a two year employment contract and then it’s just as easy to move on to the next employment opportunity as that contract finishes. Their work takes them naturally through a ‘temporary’ residence process. They typify what is happening now in the rental market with single professional people. They are very mobile!
Statistics show that people are now marrying later in life and having children is an even later consideration. This has another big influence on tenancy. Because of this relatively new situation a large majority of single people choose to remain in a rental situation for longer periods than before. When it was considered ‘normal’ to marry young, it was also considered ‘normal’ to move into the first home at the same time. So this situation has brought with it a change in attitude to where and how people live. It’s simply easier for single people to rent than buying a home and maintaining it – renting is a more realistic option. Perhaps there is an element of less responsibility here as well.
The rent-a-lifestyle concept
Tenants who choose to live in units, apartments or townhouses may do so because they want less responsibility in relation to yard maintenance or less area to keep clean – their lifestyle doesn’t allow them to have the responsibility of maintaining a property every weekend.
Many people ‘rent where they choose to live and buy where they choose to invest’. This is common with singles living and working in large metropolitan areas. It can be very expensive in those areas, so many singles choose to buy investment properties in a more affordable location and remain as tenants close to where they work. This way they’re able to build up an asset base without over-extending themselves and still live close to work and their lifestyle.
It would be fair to assume that most rent rolls now have tenants who are landlords themselves with investment property located elsewhere. Attitudes have changed in relation to tenancy and it’s a very good way of securing a sound financial future. Tenants don’t only rent a property these days; they rent a lifestyle. It may be affordable for them to rent the modern, spacious apartment that suits their way of life, but they may not be in a position to buy and occupy the same quality property. So they choose to rent how they want to live, just as they choose their lifestyle.
Families can be transferred with employment. Most don’t want to buy a home for the period they will live in the new location but at the same time they don’t want to lower their lifestyle standard. Renting a large family home with room for the kids to play is now a very easy option and if that’s what they are leaving behind, that’s what they want to live in when they move. Many investors buy homes suitable for family living; this type of tenancy has become very common and from an investor’s perspective, it’s very worthwhile.
The new investor
Because the face of tenancy has changed, the way investors look at purchasing investment property must also change. There is a real need to consider what type of property is going to serve them best from an investment perspective. It’s no longer good enough to buy the cheapest possible property in the cheapest suburb and hope for a return on the investment. Tenants are looking for more quality when they rent and are very conscious of living in the right location.
Investors must do their homework before they decide on an investment property. They need to consider what tenants are looking for in any location. Is it likely to be a family home or will this location be more suitable for singles or even students? Perhaps some investors will even target specific tenants, for example certain investors are happier renting to families, while others may relate more to the single community. Student accommodation attracts a very definite type of investor who gives consideration to the type of property that will satisfy the specific needs students have as well as their young and single lifestyle. In summary, it’s not only the face of tenancy that has changed but the way investors look at the rental market and how they spend their investment dollars.
The needs of the emerging new tenant have to be considered very differently to those more accepting tenants of the past and that’s a good thing. I also believe that those of us who don’t recognise that tenants and tenancy itself have changed and don’t make the necessary changes to the way we manage property, will not only experience more problems but create a few new ones as a result. We now manage residential property in a much more diverse but interesting ‘rental world’.