Despite the policy challenges and economic uncertainty brought on by Covid-19, the two years following the pandemic's arrival served up the hottest residential real estate market in decades. With soaring property values and limited inventory nationwide, real estate investors watched sale prices and rent prices surge. And, although industry experts predict a cooling off on price and demand in 2023, lucrative opportunities for rental investing abound—with three specific strategies to pay close attention to in the coming year:
1. Metro Hopping Renters Leaving the City for Outlying Suburbs
A trend that began with the work-from-home policies brought on by Covid-19, renters continue to leave cities for outlying areas where availability and affordability get them more bang for their housing buck.
Savvy investors are researching population migrations and finding opportunities to help fill housing needs where there is major movement out of primary markets like New York, Los Angeles, San Francisco, and Chicago. With work-from-home options still firmly in place for many businesses, the migration to smaller markets is likely to continue into 2023 and beyond, making long-term rental property investments in these smaller markets a lucrative strategy.
2. Short-Term Vacation Rentals (and the travelers that fill them) are Back
Covid threatened to shut down the STR industry in the early weeks and months of the pandemic, but the shut down was really more of a slow down and the market is in its bounceback. By 2023, short-term vacation rentals are expected to regain their reputation as one of the best returns on investment in the residential rental space.
Driving the STR resurgence is a return to vacation and work travel. Markets with surging tourism continue to provide strong STR profits. For example, according to nationwide analysis conducted by analytics firm Mashvisor, the highest Airbnb occupancy rates in the U.S. this summer were: Portland, OR (67.5%); Seattle, WA (67.4%);Tucson, AZ (67.3%); and San Francisco, CA (66.9%).
3. A Need for Longer-Term Airbnb Rentals
Another rental investing strategy that emerged during the early days of the Covid-19 pandemic is longer-term rental of Airbnb listings to accommodate traveling professionals, such as nurses in need of temporary housing or metro-hopping renters and buyers needing longer-term, fully-furnished accommodations before landing permanent homes. These furnished rentals provide much needed housing for temporary residents, while offering investors predictable, stable returns and higher income than traditional long-term rentals or STRs.
