If you own rental property considered to be on the smaller side, you might find it easier to get long-term tenants now more than ever. Small homes are in high demand, and it’s a trend that doesn’t appear to be going away anytime soon.
Lately, many renters have been running into issues with high rents, making it harder for them to find a place to live. This makes sense because mortgage rates are sky-high, and landlords have been raising rents significantly. To get around this, renters are now searching for smaller homes with lower rents.
The good news for renters is that “small home season” has arrived. In the fall, the available homes on the market tend to be smaller and more affordable. While this phenomenon has always been a seasonal fluctuation, it’s now compounded by the fact that people, in general, want smaller, less expensive homes.
As a real estate investor, you can capitalize on this current trend either by putting your smaller properties on the market to rent or acquiring new properties.
Small homes are profitable investments
Currently, investors are buying up small homes because that’s what the market is demanding. There are plenty of potential renters, so it shouldn’t be a struggle to fill vacancies.
You might be thinking it’s great to have a large pool of potential renters who want to save money, but how can you protect your property from less-than-ideal tenants? The answer lies in how you vet your prospective tenants, and it begins with hiring a professional property manager.
For example, Texas real estate investors know they can rely on a Houston property management team to fully vet and verify all applicants according to high-level standards before they’ll even be considered.
Your small properties have the potential to be more profitable right now because large homes are sitting on the market, costing the owners money every month they aren’t rented. People just can’t afford the high rents.
When you put smaller properties on the market, you’re more likely to rent them quickly and to tenants who will want to stay long-term.
Housing affordability is driving the demand for small homes
The demand for small homes is high, and the market includes more than just your average first-time home buyer on a budget. You might be surprised to learn that even wealthy homebuyers are giving up their mansions to buy smaller homes to reduce their mortgage payments and maintenance fees. They’re also looking for smaller second homes and investment properties.
Inflation is pretty high, so they’re making wise choices. It’s no longer sensible to maintain a luxe lifestyle when it costs two or three times as much as it did just several years ago.
The pandemic is over and people are downsizing
Downsizing has always been a popular move, but the end of the pandemic seems to have made it even more prevalent. People kept their large homes during the pandemic because they wanted their whole family to be able to shelter in place together.
Now there’s no need for that, and people would rather live their lives than maintain a big house. Hiring professional cleaners can cost $500 or more to clean a 3,000 square foot home. Doing the job yourself can take between six and eight hours. The upkeep on larger homes is expensive.
Tiny homes are still popular, too
If you’ve never considered buying tiny homes to rent, now is a great time to look into this profitable form of real estate. So many people are interested in renting tiny houses that are built sustainably and/or off-grid either as their primary residence or for a vacation.
Tiny homes can absolutely be profitable, especially when used as short-term rentals. More than half of Americans are open to living in a tiny home, and when priced right, they don’t stay on the market for long. People love the idea of living in a cabin secluded in the mountains, the forest, or even in the country. As long as there’s a city nearby and the property is in good condition, it’s going to attract tenants.
Most tiny homes range between 100 and 500 square feet, and have a minimalist interior with clever storage systems. They’re ideal for single people and couples who prefer a simple lifestyle. They’re easy to build and maintain, so maintenance costs are generally low.
Consider investing in smaller homes
A large number of people are downsizing to smaller homes. It’s inevitable since housing affordability is declining while mortgage rates, interest rates, and rents are rising. To secure long-term profitability, start looking into small properties. They’ll rent faster and stay occupied longer, which makes them the more profitable option.
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