Disrupting the Rental Industry
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Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
5yI see five trends:
1. Cameras are going to become still cheaper and more capable. In 10 years I suspect there isn't going to be such a thing as a multifamily rental property bigger than a duplex that doesn't have a camera system. The decrease in local street crime where cameras are means that true D-class areas are going to get smaller and marginal C-class areas are going to get larger.
2. Autonomous driving vehicles are going to essentially kill the need for garages and greatly expand taxi service and rideshare offerings. This will further redraw the C/D map in urban areas. At the same time, autonomous driving vehicles will also make longer commutes more comfortable. A 1-2 hour commute isn't going to be such a hassle if you can sleep, do your email, and study effectively while driving.
3. I have been working from home for 11 years now in my W-2. Although the pandemic increased the number of jobs that can be done remotely, there really is a natural limit to how many office jobs can be turned into work-from-home opportunities. I don't see radical change coming on that front.
4. In our new age of the greatly increased power of the automated background check and ever-growing computerized databases, owning and operating rental properties has become much safer than it used to be. This has led to a huge influx of people buying rental properties as investments, especially large business concerns doing it as a form of alternative investment. This will continue.
5. Landlords have never been more hated. By and large, the influx mentioned in (4) above is the main reason for this. The political backlash has begun and will continue to develop. More restrictions on evictions, collections, more county and municipal inspections, more moratoriums are on the way. In some places, these are very obviously going to backfire and either rent will be untouchable or landlords will simply sell and get out en masse, creating acute housing crises in the affected areas. That's when the trend will quietly reverse, as politicians realize they can't continue to effectively use and abuse the poor for political gain without keeping landlording profitable and keeping the rent down by creating landlord-favorable policies.
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One major thing that could disrupt or take advantage of these trends is cheap modular multifamily construction to replace our ever-decaying residential construction housing stock. This could be achieved through onsite 3-D printing of components, drone labor to assemble the multifamily building, major NGO investment in these technologies. I don't see this happening in 10 years. Maybe 20-30.
I don't see much else, @Steve K.
47 Replies
- Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes5y
I see five trends:
1. Cameras are going to become still cheaper and more capable. In 10 years I suspect there isn't going to be such a thing as a multifamily rental property bigger than a duplex that doesn't have a camera system. The decrease in local street crime where cameras are means that true D-class areas are going to get smaller and marginal C-class areas are going to get larger.
2. Autonomous driving vehicles are going to essentially kill the need for garages and greatly expand taxi service and rideshare offerings. This will further redraw the C/D map in urban areas. At the same time, autonomous driving vehicles will also make longer commutes more comfortable. A 1-2 hour commute isn't going to be such a hassle if you can sleep, do your email, and study effectively while driving.3. I have been working from home for 11 years now in my W-2. Although the pandemic increased the number of jobs that can be done remotely, there really is a natural limit to how many office jobs can be turned into work-from-home opportunities. I don't see radical change coming on that front.
4. In our new age of the greatly increased power of the automated background check and ever-growing computerized databases, owning and operating rental properties has become much safer than it used to be. This has led to a huge influx of people buying rental properties as investments, especially large business concerns doing it as a form of alternative investment. This will continue.
5. Landlords have never been more hated. By and large, the influx mentioned in (4) above is the main reason for this. The political backlash has begun and will continue to develop. More restrictions on evictions, collections, more county and municipal inspections, more moratoriums are on the way. In some places, these are very obviously going to backfire and either rent will be untouchable or landlords will simply sell and get out en masse, creating acute housing crises in the affected areas. That's when the trend will quietly reverse, as politicians realize they can't continue to effectively use and abuse the poor for political gain without keeping landlording profitable and keeping the rent down by creating landlord-favorable policies.
---------------------------
One major thing that could disrupt or take advantage of these trends is cheap modular multifamily construction to replace our ever-decaying residential construction housing stock. This could be achieved through onsite 3-D printing of components, drone labor to assemble the multifamily building, major NGO investment in these technologies. I don't see this happening in 10 years. Maybe 20-30.
I don't see much else, @Steve K.
- 5yJohn UnderwoodPro MemberInvestor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
People will always need a place to live.
With the increased cost of SFR homes, it is even more out of reach to own a home. So more people will continue to rent. This is the new normal, not a bubble.
Congress has created tax benefits to encourage being a landlord. I don't see this changing anytime soon.
It is insane how much rental prices have increased in the last decade. I am getting near double the rent on some properties.
Class D properties are giving way to Class A properties being built all around drastically increasing the ARV on the lower end properties.
As inflation increases it makes RE investments worth even more. The bank is a horrible place to have cash sitting idle as inflation diminishes its purchasing power.
Deals can still be found if you look for them. Networking and looking for sellers is way better than looking on MLS for a property to purchase.
- 5yTheresa HarrisPro MemberMember since 2019 · 15k+ posts · 11k+ votes
I'd say covid and the eviction ban is a pretty big disruption combined with the increase in home sales.
- 5yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
everything being equal its a great time to leave the rental pool and become a home owner and lock in these historic low rates and secure your future.. I think Millinials who were touted to be the rental class because they don't want to be tied down are now catching a clue and are going to use that purchasing power to buy not rent.
Those that simply dont have their personal finance together and just cant buy are going to be stuck in the rental hamster wheel and will generally and will take the brunt of the transfer of RE ownership away from the mass's and into the hands of investors big and small.
AS I see whole new construction communities going to investors for rental purposes those will become stigmatized by the buyers out there and the owner occ neighborhoods will continue to grow in value I mean who wants to buy a home and own it when all your neighbors are renters who do not have the pride of owner ship you would have as an owner.. ( the Hoarders are the exception) End of the day in certain markets where section 8 is a huge driver those properties I only go as far as the section 8 voucher will take them. And so it all comes down to jobs and who can afford what.. I mean as rent rises maybe the 3X of rent that everyone uses is going to have to change since rent goes up faster or higher than wages ?
- Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes5y
Not every industry is going to be disrupted, it's not some law of nature.
What really worries me on a high level is the wealth gap between home owners and renters. The last year alone made on average a 33k difference in net worth. A lot more for many of us investors. Wealth gaps have always lead to social unrest sooner or later.
40 million americans are exposed to years of drought, this year being the hottest and driest yet. Humans are only capable of living in a very narrow range of climate, we like temperatures around 70F, a little rain every few days, but not too much either. A relativley small change in weather can send millions to relocate.
At this point about half of my clients are relocations from the "sunbelt" - soon called the dustbelt - to the waterbelt, formerly known as rustbelt. Milwaukee is one of the benefactors of climate change, a little warmer does not hurt much and we have 20% of the worlds fresh water here in our lake and almost no natural desasters.
- 5yDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
1) More institutional money coming into rental real estate. Will drive up prices, but eventually lead to more efficient markets.
2) Management of Class A & B properties will continue to streamline and automate, driving down management fees.
3) More of management will be outsourced offshores for cost savings.
4) Increased politcal fighting between rich & poor over housing. Democrats will push for increased socialized housing to get the votes of the poor, Republicans will support institutional investors to get campaign contributions to "buy" votes.
Logical Property Management4.9459 Reviews - Real Estate Broker · Rochester Hills, MI · Member since 2009 · 2k+ posts · 2k+ votes5y
If you are not seeing Zillow and other larger players slowly taking over the industry, buying up thousands and thousands of homes and slowly replacing real estate agents, landlords, small investors then you are not paying attention.
In the end, don't blame the likes of Zillow. Thousands of realtors, hundreds of MLS boards and many people on this site blindly give them data and money. They then turn around and use that money to put everyone out of business.
Problem is, not everyone sees the disruption happening, they wait until it is over to recognize it.
- Rental Property Investor · Concord, NC · Member since 2016 · 1k+ posts · 3k+ votes5y
Originally posted by @Scott M.:
If you are not seeing Zillow and other larger players slowly taking over the industry, buying up thousands and thousands of homes and slowly replacing real estate agents, landlords, small investors then you are not paying attention.
In the end, don't blame the likes of Zillow. Thousands of realtors, hundreds of MLS boards and many people on this site blindly give them data and money. They then turn around and use that money to put everyone out of business.
Problem is, not everyone sees the disruption happening, they wait until it is over to recognize it.
Astute observation. No unlike the small farmer of yore.
- Minneapolis, MN · Member since 2019 · 54 posts · 53 votes5y
@Jim K. Great insights Jim! Thanks for sharing.
- Austin, TX · Member since 2019 · 5k+ posts · 5k+ votes5y
I hope the industry is not "Transformed" much. It seems to work pretty well right now.
In all simplicity, person A needs a roof, bathroom, kitchen and bedroom to avoid having to sleep under a bridge abutment, or on a relatives couch.
Person B has control of an unused roof, bathroom, kitchen and bedroom and in return for a monthly cash payment, allows Person A to use it temporarily.
Currently Person C gets elected and disparages person B believing it's a fast ticket to being re-elected. Some person A's respond, but continue to take advantage of living indoors for a monthly fee vs moving outside under a bridge abutment--and not having to pay the fee.
The funny thing is Person A actively seeks out Person B to pay the money to. Not the other way around. No one makes them call Person B, or visit the unused roof, bathroom, kitchen and bedroom person B has.
So what's to Transform (???)
- 5ySteve K.Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votesOP
@Scott M. Zillow is definitely making a big play. I’ve been hearing the argument that they’re taking over (along with Redfin, etc.) for what feels like about 15 years, and yet there are now more agents than ever before… but the recent development with Zillow becoming licensed as a brokerage in every state is a game changer for sure. We’ll see, we’ll see… change is definitely on the horizon IMO.
- 5ySteve K.Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votesOP
@Marcus Auerbach climate could really cause some major natural disruption. Places like the Upper Peninsula in MI could become a lot more populated, and major cities in the desert like Phoenix and Vegas may have some difficulties.
- 5ySteve K.Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votesOP
@Jay Hinrichs millennials finally buying at the same time that institutional investors are snatching up single family homes is definitely huge, part of what is causing low inventory nationwide. I agree that affordability will continue to be a problem in many metros, and the build-to-rent phenomenon is huge as well. Great points, thanks for contributing.
- 5ySteve K.Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votesOP
@Drew Sygit great insights, thanks for sharing. #4 does seem to be reaching a critical point. So far policy tends to have the opposite of the desired effect (because increased regulation tends to increase costs for land lords that then gets passed on the renters, rather than making housing more affordable), but public sentiment does seem to be pushing in that direction, so we’ll see how that plays out.
- Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes5y
50 shades of grey (flooring and walls) is giving way to beige
rusty rake and pitchfork heads hanging on walls is buh-bye
wall-word décor is outdated
modern farmhouse is not so modern anymore
Kidding aside...
Housing is unaffordable for many, space is at a premium, and people are mobile. This may lead to smaller spaces, shorter (or no) terms, and convenience. I also suspect that automation will eliminate jobs and drive down wages and that's a two-drink minimum conversation on impact.
- Austin, TX · Member since 2019 · 5k+ posts · 5k+ votes5y
Originally posted by @Steve K.:
@Scott M. Zillow is definitely making a big play. I’ve been hearing the argument that they’re taking over (along with Redfin, etc.) for what feels like about 15 years, and yet there are now more agents than ever before… but the recent development with Zillow becoming licensed as a brokerage in every state is a game changer for sure. We’ll see, we’ll see… change is definitely on the horizon IMO.
The 2008 housing collapse --- CountryWide Financial (aka. Angelo Mo-Zillo) --- The 2008 housing collapse
And how many SFR's did they snap up with 1-day late foreclosures (???) Tons and Tons.Where is CountryWide Financial (aka. Angelo Mo-Zillo) now (???)
Just because a large player is making large moves, doesn't mean they have insider info on when TSHTF or that being that massive is "Intelligent", it just means they think it is.Decision by committee (???)
- 5ySteve K.Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votesOP
@Mike Dymski thanks for weighing in Mike. I actually tried to tag you in the original post but wasn’t able to for some reason. I agree that “farmhouse/ country chic” has reached it’s peak, and lots of barn doors will be making their way to the consignment shop in the near future! Hopefully people stop painting every brick surface white soon too. That’s an abomination. Thanks a lot, Joanna Gaines! I hear that maximalism is the new farmhouse, and yellow is the new grey.
- 5yWill GastonPro MemberRental Property Investor · Columbia, SC · Member since 2010 · 1k+ posts · 2k+ votes
@Steve K. my personal experience with disruption has mostly come from technology, specifically Zillow, in the rental space.
Zillow has provided centralization of rental market information to the tenants. There is now one place for people to go to get basically all of the market information on pricing, location, pictures etc. It so much easier for them to get what they want. Certainly not the case in 2006 when I started. Many landlords were able to get away with pricing properties at a high price because it was so difficult to compare. Not so anymore.
This is great for the tenant/buyer. I see more trends going in the direction that will give the tenant or buyer more power and leverage in choosing housing in the future.
- 5yTim DelaneyPro MemberBuffalo, NY · Member since 2018 · 790 posts · 530 votes
@Steve K. I think the biggest real disruption that will hopefully come in the next decade or so is the block chain. No, not cryptocurrency- but it’s underlying technology - an open source ledger of all transactions. If this technology is applied to property records it has the power to make the title company and title insurance industry obsolete. While at the same time drastically increasing the speed at which transactions can take place - especially in places like NY where I have been waiting 30-60 days for title work to come back on some transactions recently.
- 5ySteve K.Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votesOP
Originally posted by @Theresa Harris:
I'd say covid and the eviction ban is a pretty big disruption combined with the increase in home sales.
Theresa I agree that covid has been a big disruption, as well as the increase in home sales/historical lack of inventory in most markets. However I was aiming more at "Disruptive innovation" or technology as in a new product or service that replaces, or displaces, a conventional product or service. Like Netflix/Hulu and other streaming services disrupting entertainment, or Wikipedia replacing the Encyclopedia Brittanica, LEDs replacing incandescent bulbs, Uber/ride-sharing services eviscerating the taxi industry, Crypto-currency revolutionizing banking, etc. We've definitely seen some of this happening in our industry already (MLS systems finally going digital instead of being printed as an example, Airbnb/VRBO disrupting hotels, or 3D video tours/remote closings/touch-less transactions as another more recent development), but I feel like we're due for something BIG that will really disrupt the industry in a profound way. I just don't know what it will be.
- 5ySteve K.Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votesOP
Originally posted by @Tim Delaney:
@Steve K. I think the biggest real disruption that will hopefully come in the next decade or so is the block chain. No, not cryptocurrency- but it’s underlying technology - an open source ledger of all transactions. If this technology is applied to property records it has the power to make the title company and title insurance industry obsolete. While at the same time drastically increasing the speed at which transactions can take place - especially in places like NY where I have been waiting 30-60 days for title work to come back on some transactions recently.
Great post Tim, this is exactly what I am wondering about. Blockchain certainly has the potential to upend the title industry and make transactions more efficient and cost effective. Given the amount of human error that effects data currently, blockchain also has the potential to make our record-keeping systems more reliable. If blockchain is widely adopted we could see a profound transformation of title companies and title insurance and change the way RE transactions are handled.
- Investor · Metro East of St. Louis (Illinois) · Member since 2016 · 259 posts · 211 votes5y
In 1970 George Akerlof wrote a paper about "Information Asymmetry." He argued that sellers of used cars have an information advantage over consumers, because they know more about the condition of the vehicle. So, they have a lot of power to set the price higher than the vehicles real value. George won a Nobel Prize in 2001 for this work and lots of folks started applying that concept to other businesses. Give the consumer access to all of the information and you'll have all the consumers. So, exactly what @Will Gaston said.
Rich Barton applied that concept when he built Zillow. His end goal is to move house buying completely online and make it more reflective of the e-commerce environment we know and love.
Regulation represents the biggest obstacle in the path of modernization of the real estate industry. We'll get there though and I'm glad to be along for the ride!
- Investor · Reno, NV · Member since 2021 · 23 posts · 47 votes5y
@Tim Delaney - Blockchain Inc is and likely will receive approval on its innovation zone east of Reno, NV. The entire community will transact via blockchain. Should be a fun test case to watch play out.
https://www.nnbw.com/news/2021/aug/13/blockchains-stays-bullish-innovation-zones-proposa/
- 5ySteve K.Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votesOP
Originally posted by @Alex S.:
Rich Barton applied that concept when he built Zillow. His end goal is to move house buying completely online and make it more reflective of the e-commerce environment we know and love.
Regulation represents the biggest obstacle in the path of modernization of the real estate industry. We'll get there though and I'm glad to be along for the ride!
Good point. Rich Barton also founded Expedia, which disrupted travel agencies. With Zillow Group buying up Trulia, Dotloop, Showing Time, etc. and recently becoming a Real Estate Company by getting licensed in all 50 states and joining the National Association of Realtors, it's obvious that they're trying to control as much data as possible, gain market share and potentially become the Expedia of real estate.
However, the human element is much more important to real estate than it is to travel IMO. The sales cycle is much more complicated than booking a flight or a hotel. It's 100% a relationship business with lots of human interaction and negotiating.
15 years in, Zestimates are still mostly junk because the algorithm can't see inside properties to be able to compare them to similar properties, or know neighborhoods house by house like an experienced local professional agent can. While Zillow will continue to change the industry through creating online tools to modernize/digitize the process of buying and selling property, I don't think this will ultimately disrupt RE on the same level that Expedia did to travel. Home buyers and sellers will probably still want agents to help them make decisions, negotiate, share expertise, lend their shoulder to cry on, or help navigate a lengthy contract process on the biggest purchase most of them will ever make. Real estate is much too technical, and the human element is too critical for it to be reduced to an app or an online shopping cart with a checkout feature, IMHO. I see real estate being more like law, psychiatry or medicine, where humanoid professionals will still have a role for the foreseeable future.
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