Corona Impact - A Fast Rental Market Assessment Tool
There will be a lot of near term disruption in the rental market but that very much depends on the market sector of the property. To analyze how each segment will fare the crisis, we created a table which we call, “The Good, The Bad & The Ugly Analysis”. It is based on the Delphi Method for decision making with special thanks to Clint Eastwood for inspiration. You can duplicate it for any market in which you invest.
We did this for the Philadelphia market where we work. We surveyed the short term and long-term effects of the crisis by leveraging the “Wisdom of the Crowd”.
In this analysis, there is a strong case to be optimistic about ‘B' neighborhoods where it appears, they will offer both good ROI and stability. Lease renewal rates were strong in B neighborhoods even before the crisis. Class "B" properties will likely fare better than more expensive "A" properties or less expensive Class "C" areas that may be more susceptible to job loss and reduced income among tenants. In C and D neighborhoods some renters will "double up" and join with others to share rent if they can't afford it. We may see a trend of young adults who had already ventured out on their own, moving back in with their parents in the near term. The underlying positive long-term rental trends in Philadelphia should bounce back after the crises. In addition, the above table makes a good case for diversification. Investing in various neighborhood classes and products will help hedge against the unknown.
We are focusing our investors on stable and solid investments for now with less emphasis on maximizing ROI and more on building slow steady wealth. Until COVID-19, we were able to get BOTH great ROI and impressive appreciation in Philadelphia and the Lehigh Valley where we are most active. Curious what others are experiencing?