Twin Cities Landlords – Future Depends On Who You Ask
I wish I was psychic; not only because it would be nice to pick the winning Powerball numbers, but also because we all want to know what the rental and real estate sales markets are going to do in the coming months and year.
The media keeps sending us mixed messages.
Late last week according to the National Multifamily Housing Council (NMHC) Rent Payment Tracker reported that nationally, by May 6, 80.2 percent of tenants in professionally managed apartments had paid their rent on time. This represents a very slight decline of 1.5 percent compared to the number of tenants who paid rent on time during May of 2019.
Like the percentage of tenants who paid rent in April, this was a surprise.
While the NMHC tracks larger apartment complexes, I am hearing much the same news from my circle of friends and past clients who own smaller properties report receiving nearly 100% of rent on time.
Meanwhile, the Minneapolis Star Tribune recently featured an article citing a report from the Minnesota MultiHousing Association 95% of the tenants in Class A (newer construction with high-end finishes) properties paid rent on time. Class B (older buildings) properties saw 93% of the tenants pay rent, and Class C (older buildings in less desirable locations) reported 88% of rent came in on time.
The Tribune quoted Vice President Brent Wittenberg of Marquette Advisors who predicted residents of Class B and C buildings will have the most trouble paying rent going forward due to the large number of job losses in hospitality and retail.
Wittenberg suggests the metro area’s estimated 350,000 job losses during the Covid pandemic, combined with the nearly 32,000 new apartments scheduled to be completed by 2022, will result in an average vacancy rate of 10.6% by the end of the year.
In the last decade, the vacancy rate has never gone above 3.5%.
For those of you who haven’t been through higher vacancy rates, that translates to property owners offering incentives to prospective tenants like free Internet, cable, and even some or all of a month’s rent free.
Let’s hope these doomsday prophecies are wrong. After all, even Nostradamus was usually wrong.