Inflation Brings New Opportunities for Property Management
As prices increase and real estate contracts become more sparse, real estate agents are turning to property management opportunities to combat the cap in the market.
Inflation has hit a 40-year high, creating a unique rental and housing situation throughout the nation. The supply of both rental space and homes for purchase is low, leaving many real estate agents uncertain about the future of their sales and concerned about a potential cap on professional success.
Home prices are no longer growing as quickly as they previously were, but year-over-year sales are down more than 20%. Though the market has cooled off in terms of sky-high prices and quick turnaround, prices are still exceedingly high, and it is not becoming any easier to buy or sell a home.
Rent prices are similarly high. With vacancies low but demand persisting, many existing property managers opt to convert any vacancies into long-term rentals with record-high prices. With nowhere else to go, renters are forced to comply with the terms of these rentals.
A lull in new construction only complicates the market further, making the buying and selling processes even more challenging. Generally speaking, there is not much property available for purchase, and the properties that are available are on the market at prices that are unattainable for many. Real estate agents are one group of many who are concerned about the consequences of these circumstances.
As such, many real estate professionals are seeking alternate, more stable sources of income to carry them through the period of low supply as the market remains hot. Property management services, in various forms, provide work that is still within the industry but approaches the sector from a slightly different angle.
Currently, the global residential property management market is worth more than $10 trillion, the global commercial property management market is valued at more than $32 trillion, and there are more than 420,000 homeowners associations worldwide.
For real estate professionals seeking alternative income sources, partnering with a property management company can provide entry into these lucrative sectors and support from an experienced team of property management experts.
In the face of high interest rates and low vacancies, a pivot toward lower-grade recurring revenue can provide stable income as fewer consumers are interested in or capable of making a larger investment.
Residential management can yield 5% to 10% in management fees, and monthly commercial management fees typically fall between 4% and 8%. While homeowners associations (HOAs) are forming consistently through new construction or in areas that previously did not have an HOA, HOA management growth is not growing at proportional rates. Property managers receive multiple inquiries from homeowners associations, indicating a large unmet demand.
With the potential for multiple revenue streams, property management presents a lucrative opportunity.
Looking to the future, there is no guaranteed trend. As the Fed continues to adjust interest rates, prices could continue to rise. At a pivotal time in the real estate market, it is crucial that professionals take advantage of opportunities to cash in on their expertise in less traditional ways, including property management.
Steve Hart is the CEO of Property Management Inc. (PMI), which he founded in 2008. To learn more about PMI or opportunities in property management, visit their website.
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