Challenges and Predictions in the Rental Market

PJ Clay, the Director of Client and Partner Services at Rental Beast, joins us on The Property Management Show to discuss the company’s role as the rental MLS, and how they provide back-end technology to MLS associations across the United States and Canada.

We also discussed whether this type of technology can help or hurt property managers.

PJ says it helps.

Introducing Rental Beast

Rental Beast calls itself the rental MLS. It provides back-end technology to MLS associations in certain markets throughout the U.S. and Canada. The Multiple Listing Service (MLS) is highly customizable, but also built for the For Sale side of the real estate industry. Rental Beast knows that rentals are different. The process of renting is different from the process of buying and selling.

So, they built the technology that can integrate rental listings.

MLS members can add or search for rental listings.

The second piece of this technology is a productivity suite of tools making it easier for property managers and real estate agents to access lead generation, lead qualification, and rental applications. At the core of this technology is a very large database of rental listings. Members of Rental Beast have access to 12 million active listings in the U.S. and Canada at any given time.

Putting all the rental listings into one database is the central part of our technology. Members can get as close as possible to reaching 100 percent of their market.

Accessing Reliable Data and Listings for Rental Markets

Rental Beast is currently working with MLS associations in cities like Boston, where they’re based, Chicago, Raleigh, Miami, Colorado Springs, Toronto, and other markets. They’re actively growing, too, because the demand for this platform has increased. With home sales still out of reach and unaffordable for so much of the market, people are renting. Having the technology for real estate professionals to make the rental process easier has driven that growth.

So, where does the data come from? Where do they gather their listings?

The rental market is fragmented. On the general MLS, you have 80 or 90 percent of available homes for sale on that site. Not all rental listings go onto the MLS, however. Some cities will include rentals on the MLS, but even then you’re only getting about 40 percent of the rental market listed.

Rentals come onto the database from a lot of different sources. The Rental Beast database integrates with property management software. So, platforms like Appfolio, Yardi, RentTech, and Buildium can use Rental Beast as a syndication destination. Any listings on those software sites can be shared with Rental Beast.

The other piece is more difficult and labor intensive. These are rental listings that aren’t found on the MLS or on any property management software sites. Staff at Rental Beast must find the listings and then make actual phone calls to owners and property managers to verify them.

PJ says it took 10 years to build the process the right way. They’re calling any listing that doesn’t come from the MLS or property management software. It’s a huge undertaking, but it’s necessary to avoid scams.

There are also a lot of details that are confirmed for those listings; they ask if there’s an agent compensation fee, what the showing instructions are, and how a tenant can access an application. These listings have to be updated every week or two, depending on the location. If they cannot get a verbal confirmation that the listing is active, it gets dropped from the database.

Are These Listings Professionally Managed?

The majority of listings on Rental Beast are not managed by professional managers or real estate professionals.

They’re managed by the property owners themselves.

PJ believes this is hyper-local. He says that in Boston, property management firms aren’t as recognized or understood as they are in other markets. If a real estate investor owns a few properties, they might hire leasing agents to market the home and get the property rented, but then they take care of the day-to-day management. Even the National Association of Residential Property Managers (NARPM) has a limited presence in the northeast. Recently, they established a local chapter in Philadelphia, but that has only been in the last years.

Compare this to Arizona or other markets in the southwest U.S., he says, and things are different. There’s a larger percentage of listings that are professionally managed.

The estimate is that around 40 percent of the listings on Rental Beast are managed by small, mom-and-pop operations. We’re not talking about large, professional property management companies.

It could also be a terminology issue, PJ says. There may be someone who owns 100 doors, but they don’t see themselves as a professional property manager because they own those units.

Proximity can also be part of the difference. In markets like Texas and Atlanta, it can take an hour to get from one end of the city to another. There’s a concept called leasing and locating where real estate agents will get paid for showing a property without being there physically. The metro area is too spread out.

Is Rental Beast a Threat to Property Management as an Industry?

With all these For Rent By Owner (FRBO) properties in the Rental Beast database and tools that make it easier for those owners to rent out a home, is Rental Beast dangerous to property managers who are trying to grow their business? It’s great to have a single source of data that’s potentially more complete, but there are also solutions being offered to an owner who may self-manage instead of hiring a professional.

PJ is quick to point out that Rental Beast is not trying to be a property management software tool. They understand that a lot of real estate agents hesitate before getting into property management because it’s so much work. Their platform, he says, is more about ease in listing a rental. No one could manage a property only using Rental Beast.

Realtors and agents on the For Sale side have been struggling to sell recently, and so they’re getting into rentals a little bit so they can preserve the relationship with their clients who might be ready to buy in a year or two. Plus, they know they can potentially list some rentals, so it’s a natural shift.

According to PJ, Rental Beast is not looking to replace property managers. They want to complement your work and make your business more efficient, especially in terms of listings. You can get access to a lot of listings, and you have an easier time listing the properties you’re renting out. You get extra syndication, and that drives more showings.

Recently, they worked with a property manager who listed 20 properties on the Rental Beast MLS in half an hour. That’s not something you’d be able to do manually. This is technology that was built for property managers in order to make listings more efficient and easy.

Rental Beast 2023 Market Report

What does the market look like? PJ suggests you check out the Rental Beast 2023 Market Report. He shared a few highlights:

• Rental prices will seemingly increase slightly. This depends on the market, and there’s really no consensus on what’s going to happen with rental values. The data and predictions Rental Beast has gathered say that there will be slight increases, generally.
• Supply is a big variable. There are additional multifamily units coming onto the market in 2024. Supply and demand will impact pricing.
• The sales side of real estate will remain unaffordable for most people, keeping the demand for rental housing strong.

There’s also a Sentiment Report, which reflects what people are feeling about the market and what might happen. They’ve found that 75 percent of the people surveyed believe rents will remain unchanged. Twenty-six of those surveyed believe applications for rental homes will decrease because fewer leads are coming through.

Concessions are also something to consider. Will you have to motivate renters to apply for your property?

The national median for concessions is around 18 percent. But, in some markets, 30 to 40 percent of active listings include some kind of concession. That’s artificially creating demand because it means nearly half the listings are offering some kind of concession. But, that’s not nationwide. For example, in Boston, only 8 percent of the active listings offer concessions.

For Rent by Owner Listings: Is This a Blue Ocean?

As we discussed earlier, a lot of active listings are not professionally managed.

Could this be a blue ocean situation, where property managers can target these owners who are not using professional services right now? Ten years ago, property managers chasing FRBO business would have to pull ads from Craigslist or similar sites to get owner information. Or, you could buy databases from PMLeads.

If Rental Beast can capture so many self-managed listings, however, is there an opportunity for property managers to market themselves?

PJ says property managers are already using the platform to grab leads because of these advantages:

• They get as close as they can to 100 percent of a market’s listings. They’re typically at 70 or 80 percent of all active listings.
• All those listings are verifiable.
• Property managers can access owner information and get a sense of what type of property they’re renting out.
• Listings are updated regularly.

Maybe you specialize in one part of your city. The listings in the Rental Beast database can be sorted according to neighborhood. You can also set up alerts in the system so you know when a listing that meets your criteria shows up.

Closing Piece of Advice: Watch Your Price

PJ says that based on the data he’s seen, the most important thing property managers can do now when renting out their properties is to be careful about where the rental value lands. He sees wildly fluctuating prices in a lot of markets. Remember that you’re competing with an entire market. So use as much data as you can.

If you’re interested in checking out the Rental Beast report, visit their website. You can also check out the Rental Expert Series, which is updated quarterly and includes several specific markets. To sign up to receive the next report, click here.

If you have any questions about marketing your property management, contact us at Fourandhalf. Thanks for joining us on The Property Management Show.

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