Chances are, you have a tenant or two who works remotely.
Remote work surged in popularity during the early days of the pandemic, and while some workers have been called back into the office, many of them continue to work from home or wherever they choose. Over the last few years and even before the pandemic required work-from-home situations, companies began to embrace the benefits of having a remote workforce. It saves money for them on overhead and it also contributes to better hiring practices and employee retention. A mobile team of employees can be just as productive as an in-office group, and that has created a new normal for the business world and the real estate market.
Remote work has a grip on our society and our culture, and it has proved to be more than a trend. It’s a reality, and many workers who are now working remotely would never consider returning to the office. Employers have picked up the cues coming from their employees. People are happier working remotely and in many cases, more productive.
Recently, a news article revealed that it’s not the office remote workers hate. It’s the commute.
Without having to commute into the office and then back home every day, employees enjoy a much better work/life balance. They have less travel stress and fewer time restraints.
Meetings can take place online via video calls and Zoom connections. New technology is enabling collaboration in creative ways. While some jobs will always require an in-person presence, many of them do not, and that means remote work is here to stay.
This isn’t impacting only the business world. It’s touched the real estate world as well, and it’s delivered some new opportunities and some new challenges to property managers in South Jersey as well as landlords who are renting out homes here.
What’s changed? Well, there’s the pricing. There’s also the growing tenant pool. And, there’s a new list of demands that residents are making when they begin a search for a new rental home. New features and amenities are now absolutely necessary.
What does remote work mean for you and your investment property?
That’s the question we aim to answer in this blog. We are using our experience as local property managers and real estate investment professionals to investigate how the remote work trend impacts the entire housing market in South Jersey and property management services in the local market.
Here’s some good news: It’s helping. Sure, there are challenges such as rising prices and new tenant demands. But, the market has been competitive for the last few years, and it’s largely because of the remote work opportunities that employees and even their employers are enjoying.
Why does remote work help the South Jersey housing market?
The increase in remote working has a positive impact on the South Jersey housing market because the ability to work from anywhere is drawing people to our area. It’s no longer necessary to live within commuting distance of New York City. People are choosing to live in places like Cherry Hill and Blackwood instead. There’s plenty of entertainment, natural recreation, and a great scene for art, food, nightlife, and fun in our communities. We have what nearly every tenant demographic is looking for.
We’re attracting tenants and homebuyers from many larger east coast cities. Prices have risen here, but we still offer a lower cost of living than those metropolitan areas, and a higher quality of life.
With the local population growing, we’re seeing more tenants coming into the area with a need for a rental home.
Let’s take a look at some of the opportunities and challenges this presents for you, as a real estate investor.
THE REAL ESTATE INDUSTRY RESPONDS TO REMOTE WORK
Remote Work has Changed the Market
Over the last couple of years, there’s been a lot of sales action in the real estate markets across most of the country. While nearly every major market was impacted, sales have been especially hot in areas where populations are growing.
Specific regions, including ours, have experienced an influx of buyers who are interested in living in smaller cities and more remote suburbs instead of large, crowded, and expensive cities like San Francisco and New York.
As you have no doubt noticed, this has created extra competition in the sales market, limiting supply even as demand soars. That drove up prices.
Over the last handful of years, it seems like everyone was selling a home.
Prices were higher than they had ever been, and real money could be made, especially if you had some equity stored in your property. We saw bidding wars. We saw offers come in high above asking prices. We saw buyers willing to waive inspections.
Now, prices are peaking and the higher mortgage rates have allowed the market to settle a bit. This has also impacted the rental market because the higher prices coupled with the higher interest rates driving up mortgage costs has delayed home buying for quite a few people. They’ll need to continue renting.
Is remote work responsible for ALL of this?
Not all of it, but a large part of it.
Remote work has changed where people want to live and how they choose where to live. It’s also led to more comfort with technology as a whole in the real estate industry. Agents are now offering viewings online. Virtual tours are just as important as in-person tours and open houses.
It’s a new landscape, and remote workers are changing what’s expected.
WHAT DOES THE BUREAU OF LABOR STATISTICS SAY?
Who knows work trends better than the Bureau of Labor Statistics? Here’s what they’re talking about in their Monthly Labor Review, April 2023, in terms of remote work and the impact it’s had on real estate.
|1. Housing prices went up an average of 24 percent between November 2019 and November 2021, and remote work contributed to more than 60 percent of that increase. In addition, this surge in home prices is similar for rent prices.
|2. As of August 2022, approximately 30 percent of work in the United States is still remote work. Between November 2019 and November 2021, remote work increased to 16 percentage points.
|3. The shift to remote work during the pandemic led workers to search for cheaper housing and more desirable amenities. Even with the pandemic over, this is still a priority for remote workers.
|4. As workers left their expensive cities where they had to be for work, they were drawn to areas looking for cheaper housing in less expensive cities. So, the overall price of homes increased.
RENTAL MARKETS IN SOUTH JERSEY
How Does Remote Work Impact Tenants and Rents?
The sales market saw higher prices and more demand because remote workers could buy a home anywhere they wanted and not have to worry about being close to their office. In South Jersey, cities like Cherry Hill are about two hours from New York City. That’s a huge commute if you’re going to work there every day. But, if you only need to be in the office for an occasional meeting or if you’re 100 percent remote, living in this area while working for a New York-based company is completely possible.
A lot of people are choosing to buy and live here instead of in the city.
What about the rental market? How has remote work impacted rents, tenants, and our job as South Jersey property managers?
Well. It’s kept us busy.
- Opportunities: Rental Values
Let’s start by talking about what you can earn on your property, thanks in part to remote work. You’re earning more in rents, that’s for sure. Whatever you were earning five years ago, the amount you’re bringing in now is likely a lot higher. That’s partially because of the trend of remote work being here to stay.
With the demand for good rental housing in markets like this, rents have climbed up, and they’re showing no signs of needing to come down. With all the new tenants in the market, it’s harder for them to find a rental property. There’s a lot of competition among well-qualified renters. As a property owner, you’re in a position where you can ask for higher rents. Good tenants will be willing to pay them, especially when they think about what they’re saving on the rent they would have had to pay in Manhattan or Brooklyn.
The remote work trend is even touching tenants who do still have to physically go into work every day. These tenants are not working remotely, but they do understand that there’s a long line of people waiting to take their home if they move out. That’s going to impact your retention rates. Those tenants you currently have are likely to stay in place longer. They know the market is tough and they know they’ll pay more if they leave your property. You can leverage these improved retention rates.
- Challenges: Property Management and Maintenance
So, some of the best impacts we can see on the rental market include your rental value and your retention. Both factors are leading to higher earnings in the short term and in the long term.
It’s not all good news, however.
Remote work means your tenants are at home for longer periods. That creates one of the largest challenges that’s reaching South Jersey property managers right now.
With more tenants working more hours from home, there’s more maintenance needed on your rental properties.
With your tenants working remotely, they’re using the property more. Working from home means:
- Flushing the toilet more.
- Running the washing machine and the dryer a bit more.
- Leaving the lights on longer
- Running the heat and air conditioning all day and all night.
Doors are opening and closing more frequently. Sinks are being turned on and off. There’s more traffic on the carpets and across the floors for a larger part of the day.
That’s extra usage, and extra usage leads to more wear and tear. Appliances are getting more use from tenants and this means an uptick in work orders and necessary maintenance.
That’s challenging enough on its own, but with maintenance costs rising and sometimes a difficulty in getting vendors who are available to do the work that’s needed, you might find yourself struggling to keep up with this demand for maintenance.
Property managers, fortunately, have a network of preferred vendors and contractors who can respond. It’s still a lot to keep up with.
PROPERTY MANAGEMENT OPPORTUNITY: ATTRACTING REMOTE WORKERS TO YOUR RENTAL HOME
What are Remote Tenants Looking for in a Property?
Here’s something that works as both a challenge and an opportunity:
Attracting remote workers to your rental property. This is an opportunity because these are great tenants; they’re being paid well and they can definitely afford your rental home. They’re going to spend a lot of time in the home, so they’ll likely want to take care of it and keep it looking good.
The challenge shows up when we think about how we can possibly meet the needs of all these tenants. As a property manager, we want to provide a rental home that’s attractive, well-located, and meticulously maintained.
Tenants who are now working from home have a different set of demands than the tenants we’ve been marketing homes to over the last decade. These tenants have some interesting preferences and desires, and if you happen to be renting out a home that can meet their specific needs, you’ll find you’re never without a tenant.
Here’s what tenants who work from home are looking for.
In-Home Office or Dedicated Work Space
You might find some tenants are happy enough to work from the dining room or on the sofa in the living room. This is temporary, though, and eventually your remote working tenants will desire a separate space to work. Long term remote workers will want a dedicated work space where they can set up all of their electronics, files, and office supplies. They’ll need a place to put their desk and their printer. When your rental property has a spare bedroom, a dedicated office, or any space that can be converted into a dedicated working space, you’ll easily attract tenants who have remote working jobs.
Energy Efficiency in Systems and Lighting
The lights will be on longer in your property. Computers will be plugged in. There will be iPads and phones that need to be charged. All of this requires energy, and tenants are not interested in higher energy bills.
Your residents are looking for sustainable, energy efficient elements in the homes they rent. They know that this will keep their electric bills down. The rise in remote work has also led to a shift towards a focus on renewable energy sources like solar power, as well as the installation of energy efficient appliances, light bulbs, and insulation. If you want to attract remote workers, you might want to trade out those old, loud dishwashers and dryers for more modern and less wasteful models.
Remote workers need good tech. This is the cornerstone of their ability to work from home. Can you meet this need? Your property will require access to the latest technology if you want to position your rental property as a home that will attract tenants who work remotely. Most landlords in South Jersey do not provide internet to their tenants; it’s something your residents will be expected to set up on their own. That’s fine, but you should be prepared to offer resources and suggestions. If you can recommend a great internet service provider, your tenants will appreciate the referral. They’re looking for fast speeds, easy connections, and an ability to stream quickly.
Think about other types of technology a work-from-home tenant might appreciate. Video doorbells are increasingly popular. It will give your tenant the ability to see who is at the door before they answer it. This allows them to be notified when packages are dropped off or someone opens a door from the outside.
Remote tenants are going to be the ideal residents for the near future. This is the demographic you should be thinking about every time you’re preparing your property for the market or advertising it to potential renters.
Are you keeping up with the economic realities of remote work? Are you aware of how it continues to impact the real estate market? We’re talking about these topics all the time, and we invite you to the conversation. At Realty Solutions, we’re an adaptable, innovative property management company, so we have managed to help our owners and our tenants respond to the new demands of a remote workforce. If you’d like to talk more about it, please contact us and we’ll talk about your specific investment properties.
We lease, manage, and maintain homes in Audubon, Collingswood, Cherry Hill, Haddon Heights, Blackwood, and the surrounding communities.