Editor's note: This piece originally appeared in the August 2020 edition of DS News, out now.
With more than 22 million Americans currently out of a job, industry veterans are having flashbacks of the financial collapse of 2008. Born in the midst of economic fallout, the single-family rental (SFR) industry founded a new investment sector, which helped provide housing to those most affected by the mortgage crisis. The SFR industry is all too familiar with adapting to the changing tides of the economy—however this black swan event offers unique and unseen challenges. Owner/Operators must modify their operations and offerings with emerging digital tools to sustain stable portfolios.
TRAFFIC TO RENTAL LISTING SITES HAS REBOUNDED
Concerned by the public health crisis, searches for new rentals understandably declined as fear of the pandemic spread across the nation. Traffic for listings on Zillow plummeted 19% on March 11, the same day the World Health Organization declared the novel coronavirus a pandemic. Google search volumes for real estate were down between 10%-35%. As the dust settled, and leases continued to near expiration, people began looking for homes again. Rental web traffic on Zillow is above the company’s pre–COVID-19 expectations, rebounding in April. People are looking for homes again, and without the addition of digital tools, owner/operators will not be able to complete the leasing process.
RECORD USE OF FACEBOOK
“In a time of disaster, people rely more on social services … We are seeing surges in traffic, especially in areas most affected,” said Mark Zuckerberg, CEO, Facebook, during a recent conference call. While Facebook hasn’t released the exact traffic increase for the U.S., the company reported Italy’s time spent on Facebook soared to more than 70% since when it was hit hard by the crisis. This means a lot more people are browsing Facebook.
Though people are spending more time on the social media platform, advertising has drastically decreased. Obviously, the virus has had a huge impact on the economy—budgets are tight, and businesses are spending less on digital ads. Fortunately, this decline is an opportunity for those who do decide to advertise.
Digital advertising is priced based on demand. If many people want to advertise to the same group of people, the cost of the ad placement will go up. If the demand is low, the cost will go down. The most popular advertisers on Facebook are the travel and film industries—which have been hugely impacted by stay-at-home orders and caused them to slow their Facebook ad purchasing significantly. The cost for ads has been halved in North America from an average of 64 cents cost-per-click in December 2019 to 32 cents in mid-March 2020.
Digital ads are a cost-effective way of attracting interest once the advertiser has dialed in on their message and audience. With the majority of Americans spending their days online and ad prices plummeting, now is the ideal time for owner/operators to identify how to effectively advertise to their target digitally. Once ad costs normalize, owner/operators will have perfected their recipe to attract the right people to their properties and will continue running ads.
VIRTUAL TOUR POPULARITY IS SKYROCKETING
With strict limitations on face-to-face interactions, owner/operators look to emerging technologies to keep their portfolios leased and their investments profitable. Renters are limited in their ability to tour homes; therefore, rich media has become a critical aspect of their decision-making process. Virtual tours offer home searchers the ability to understand the size and layouts of vacant rentals. Skyrocketing in popularity, Zillow saw a 536% increase in Zillow 3D home tours in March. Zillow specifically reports that in the SFR space a 3D tour attracted 40% more visitors and drove 50% more saves compared to listings without a tour.
“Virtual home tours allow renters to approve and eliminate homes as they search online without any personal interaction,” said Kori Covrigaru, CEO, PlanOmatic, a national provider of 3D Virtual Home Tours. “Though virtual showings are currently a necessity—3D tours will continue to benefit both the renter and the lessor post crisis by providing an immersive experience.”
Data supports Covrigaru’s opinion. Zillow recently shared that 47% of renters surveyed said they wished more listings offered virtual tours. This overwhelming migration towards 3D walkthrough tours suggests while the current climate may speed up the adoption of these new technologies, renter demand will solidify their position.
AN END TO LEASING AGENT CHAPERONED SHOWINGS
“The pandemic has caused a behavioral change for both renters and operators,” said Andre Sanchez, COO, Rently. “Not only were self-showings in April up almost 50% compared to 2019, but operators are now implementing tools that allow contactless move-ins.”
Self-touring technologies allow renters to see their prospective new home without risking their health. Renters simply sign up online, complete a background check, take a selfie, and check in for their tour. Using a unique code at the home’s door, renters are able to enter the home and walk from room to room without being chaperoned by a leasing agent. In areas where real estate might be a nonessential service this technology provides a noncontact way to proceed with the leasing process.
Beyond our current circumstances, this technology allows prospects to see homes without the hassle of scheduling and gives the renter privacy as they decide if they are interested in renting the home. Eliminating leasing agents’ responsibility to show vacant homes would reduce their workload significantly and reduce vacancy days.
A SMARTER HOME CAN MEAN A SAFER HOME
Self-monitoring, Analysis, and Reporting Technology, or “smart” home technology refers to home devices that can be controlled and monitored remotely using a smartphone, laptop, tablet, or voice commands. Many residents are moving away from physical actuation and toward technology in the home. The sale of smart home voice control devices is estimated to have increased by 30% since the onset of the pandemic.
The use of smart home technology minimizes contact with shared surfaces like light switches, door handles, and thermostats. Homes with multiple tenants can greatly benefit from avoiding contaminated surfaces and could lower transmission of the virus between one another. Smart homes can also minimize exposure with visitors, like mail carriers.
Many people are unable to risk exposure and are instead opting to “add to cart” using smart voice technology. With online shopping growing in popularity, delivery security has also become a highly sought-after feature of smart homes. Smart homes allow packages to be placed in secure areas, rather than in risky public places where theft could occur. Tenants can also use the devices to monitor packages securely on the doorstep until they can bring them in without contact.
At first glance, it might seem like smart home technology might be an over improvement for a rental home. As it turns out, renters want tech amenities, and they would even agree to a rent increase for smart home features, according to a study done by Multifamily Executive in 2018. More than three in four of the people surveyed would accept an increase in their monthly rent in exchange for upgraded technology in their homes. This means smart home technology can actually contribute to rent revenue growth beyond the safety benefits for the tenant.
Precautions born from this pandemic are forming new routines in American work and homes. Elements of these habits will remain long after this crisis has passed. This global pandemic will likely have implications that last well into the decade for SFR. Forward thinking owner/ operators will use this opportunity to creatively leverage technology to simplify their operations and marketing processes while improving the rental home experience for their residents.