Having trouble maximizing your income and finding premium quality tenants? Have you taken a good look at your property and be brutally honest with yourself about changes that need to be made? Maybe? Here are some improvements you can make to your property to attract younger renters and maximize your rental income.
Who are Millennials?
Generation Y, otherwise known as millennials, is the generation born between 1981 and 1995. “They number 9.6 million and account for 27 percent of the Canadian population (Kerin, et al., 2018, p. 35).” Millennials are the most educated out of the four generations; “70 percent of those between 30 and 34 years old have a post-secondary certificate, diploma or degree, compared to about 55 percent of generation X at the same age (Heisz & Richards, 2019).” Post-secondary education equates to more and higher student debt than previous generations. In 2016, 24.4 percent of millennials between the ages of 30 and 34 carried student debt with a median value of $12,000; in comparison, 14.8 percent of generation X held student-loan debt at the same age in 1999 (Heinsz & Richards, 2019). “Although they had higher student debt, millennials with a university education were still in a better financial position as their net worth reached $116,000, compared to $34,100 for millennials this age with a high school degree (Heinsz & Richards, 2019).
The biggest challenge this generation is facing is saving for a down payment with over 35 percent of millennials needing to save up for a larger down payment (Schlesinger, 2019). “Additionally, 14 percent noted they cannot buy because they do not qualify for a mortgage, while another 14 percent are currently repairing their credit score. As well, 12 percent of respondents indicated a lack of affordable options keeping them out of the market. Almost 75 percent of those surveyed stated rents were within their budget (Schlesinger, 2019).” Marketing rental properties to Millennials presents an opportunity, as the majority of the generation is looking towards rental properties in their budget.
Who is Generation Z?
Generation Z is the group of people born after 1996. “In Canada, they number 5.8 million and account for 16 percent of the population (Kerin, et al., 2018, p. 36).” Only 8 percent of generation Z Canadians are over the age of 18; of the 8 percent, 63 percent are already credit active (Fabian, 2020). “52 percent of generation Z consumers want to buy homes on their own versus 49% of millennials (Fabian, 2020).” Elton Ash, Regional Executive Vice President for RE/MAX of Western Canada, noted that “Gen Zers are interested in learning more, and a greater effort needs to be made to educate them about the benefits and potential risks of homeownership (Randall, 2018).” This generation is eager to learn more and become informed of the market, trends and industry insight.
Generation Z is entering the rental market and will soon outnumber millennial renters. Generation Z is looking towards luxury and high-end amenities. “When it comes time for Gen Zers to transition from student housing to living on their own, they will look for amenities similar to what they had in college (Pinnegar, 2019),” such as indoor pools, leading-edge wireless capabilities, gym facilities and communal spaces. This generation has high expectations when it comes to amenities. Additionally, members of Generation Z value quality and authenticity, and look to online research, social media presence and reviews for information. According to customer insight from Vision Critical, generation Z has an attention span of eight seconds. “Their sporter attention spans apply not only to time required to consume content but also to the speed at which they can access it (Pinnegar, 2019).” When marketing properties, it is crucial to highlight eye-catching details to attract a younger crowd.
Now, what are these generations looking for in a rental property?
Natural Light
Sunlight has a significant impact on a person’s mood as it produces serotonin, a hormone that impacts the entire body by stabilizing our feelings of well-being and promoting happiness. Serotonin also helps with a person’s digestion, eating, and sleeping. Overall, it helps to boost the person’s quality of life.
Big windows and natural light help increase the value of a home by making the space feel larger, brighter, airier, and more comfortable. Additionally, it saves the tenant money on their energy bill as strategic natural lighting heats up a space without electricity. Plus, if you have an incredible view, might as well show it off in the best way!
During the rental search, generation Z and millennials are paying attention to the direction the windows face. For example, south-facing windows get the most direct sunlight throughout the day whilst north-facing windows tend to generate the least amount of natural light. As an investor, take this into consideration before purchasing a rental property.
Flooring
Whilst carpets are more eco-friendly, flooring throughout a property increases the value and attracts younger renters. Similar to windows, flooring helps brighten up a property as light is able to bounce off the floor rather than get absorbed by a carpet. Additionally, flooring is easier to clean, lasts longer, and looks more elegant in comparison to carpet.
Neutral Colour Pallets
Are we seeing a theme here? Bright walls and neutral colour pallets attract a more diverse crowd of potential suitors for your property. It’s hard for renters to envision living in a property when it already has someone else’s personal style and colour pallet scattered throughout. Whites and light greys are always a safe bet
Picking a brighter colour pallet makes a space look larger and less closed off. Additionally, sunlight is able to bounce off the walls (and flooring) to create a brighter atmosphere.
As an investor, consider using one neutral colour throughout the entire unit. In the future, if you need to touch up or repaint, it will be easier to colour match one neutral colour than finding multiple colours (that may also be discontinued).
Modern Amenities and Living
Trends come and go. In the early 2000s, yellow-toned oak cabinets were all the rave and now clean, simple, and modern is what is in high demand.
The younger generations of renters are looking for properties with modern amenities and living conditions. They want to make the property their own, and to envision that the property needs to be a blank canvas.
Generation Z is looking towards luxury and high-end amenities. “When it comes time for Gen Zers to transition from student housing to living on their own, they will look for amenities similar to what they had in college (Pinnegar, 2019),” such as indoor pools, leading-edge wireless capabilities, gym facilities and communal spaces. Now, this isn’t always possible in a house, this concept is something to think about moving forward.
Finished Basement
A finished basement adds value, space, and appeal to renters; it also allows landlords to increase the rental rate per month that they are charging. A finished basement is a great place to put a laundry room, extra storage, or additional bedrooms to maximize rental income.
A finished basement is especially attractive to renters with roommates. An extra bedroom or two can decrease total rent for renters if it is filled with a roommate. If it is not, the extra space could be used for an office – as working from home is more prevalent – a games room, home theatre, workout space, etc. Additionally, the basement is another space for the renter to escape from their roommates for a bit and have some “me-time.”
When it comes time to resell the property, a finished basement increases your equity and initial return on investment. Think about it this way, people are more attracted to properties that require the least amount of work. If the basement is unfinished, buyers see that as an extra cost that they will need to eventually accrue when purchasing the home. If the basement is finished, the property is viewed as more “move-in ready” and is a great investment for a buyer with a family.
Closet Space
Wow, wow, wow! For investors, cash flow is king; For renters, storage is king – the more the merrier!
Consider building a built-in structure in the bedroom closets. Not only will this help renters out tremendously, but it will also benefit you as an investor! How? Throughout the residency, the tenant won’t be creating holes and damaging walls in the closet to create a built-in framework causing you, the investor, to potentially replace the drywall in the future. Minimize future costs by acting now.
Backyard
We understand this is not always possible, but a yard space definitely adds value to the property. Renters are able to have a space to hang out with friends, relax, catch some rays and get a tan!
As an investor, it is up to you to determine what the landscaping will look like. Will it be a low-maintenance yard with fake grass and more patio space? Will there be real grass – is the tenant responsible for mowing the lawn or is there a condo association that takes care of this? Typically, the less work a tenant has to do, the more attractive the property is.
Parking
Parking, especially in Saskatchewan, is crucial at a rental and tenants recognize this during the search process. Safety is definitely taken into consideration during the rental search and closed-off parking spaces, such as a garage or underground parking, puts the tenant’s mind at ease.
Conclusion
As an investor, remove yourself from the situation and think to yourself “What would my ideal tenant want?” Create a tenant persona and make a list of all the factors that they would take into consideration during the rental search. This will help guide your decision-making process moving forward. When in doubt, research, research, research! Look to online blogs, YouTube videos, and articles for inspiration.