Rental Properties

When credit score restrictions keep people from buying homes, the only other alternative is renting. Both Stultz and Gaikowski try to avoid the rental market because they don’t see it as a good return on the time invested. They both admit they will not turn a renter away, especially if they are from a referral, but they ultimately do not seek to attract rental clients.

However, of the rental clients they do work with, they believe in keeping in touch with them and building relationships, so when that renter is ready to buy, he or she will likely turn to them, the agents who have been waiting in the wings. This has been proven to happen at some point – Fannie Mae analyzed data from its last three National Housing Surveys and found, unsurprisingly, that though renters are content with their living arrangements, many still hope to own at some point in the future.

According to the surveys, 90 percent of aspiring owners anticipate someday owning a home; renters who would rather own a home than rent have much more confidence about their homeownership prospects, though they still suspect it would be complicated to get a mortgage; and 42 percent of those who think they will someday own a home have concluded it may not happen within the next five years.

There are still a good number of potential buyers who can’t obtain a loan right now, which means, unfortunately for Stultz and Gaikowski, the demand for rentals has been extremely high. Gaikowski has seen an increase in rentals in Chicago’s west suburbs of 9 and 10 percent in the last two years. But, this is only about 2 percent of his business.

Studies and surveys of renters show that 51 percent of renters think owning makes more sense when comparing the financial and lifestyle benefits of each housing choice, and at 57 percent, younger renters (ages 18-34) are even more likely to think owning makes more sense. It’s just a matter of time when these renters become owners, and when they’re ready to purchase, ideally, they’ll call the agent they’ve previously worked with.

Powell, on the other hand, says the rental market is tremendous to her bottom line and future listing inventory. She says the rental market is moving quickly in a lot of areas.

She’s renting these with pocket listings because of the lack of inventory in the market. While rental listings were keeping agents afloat during the last few years, Powell says we are coming out of the height of the rental market now. And it seems that way – more and more luxury rental buildings have been added to the marketplace recently, including Related Midwest’s 500 N. Lake Shore Drive and K2 in the West Loop. Rents in Chicago’s downtown market actually outdid themselves again in 2013’s first quarter, with the price per square foot for the area’s top-tier, or Class A, buildings rising more than 5 percent from last year.

For the time being, though, landlords are living the dream in the downtown Chicago rental market: price per square foot in Class A buildings rose 1.9 percent from 2012’s fourth quarter to 2013’s first quarter, hitting $2.63 a square foot; and since bottoming in 2009, downtown rents for Class A units are now up 26 percent. And these rent increases are not restricted to Class A buildings. Class B rentals rose even more aggressively from quarter-to-quarter, jumping 6.9 percent to $2.32 a square foot.

However, such increases are temporary. Though analysts anticipate rents to rise another 4 to 5 percent over the next year, developers are planning on unleashing a huge supply of rental units into the greater downtown rental markets.

“Those agents who were taking on rental listings are taking on more sale listings at this time, and leaving the rental market to the rental agencies more and more,” Powell says. “For a few years they were listing them for the income they were able to generate.”

Rental properties require more investment of time. But listing properties for rent and for sale are extremely similar because agents have to learn as much about the building or home as they can and know the rules/regulations about renting.

Powell says she gets professional photographs taken, especially if the owner is still living in a rental property and it’s staged well. She uses the professional photos and gets a floor plan done so that when it’s time to sell, the images are on the ready in the event that the tenant who rents the property does not keep it in the same kind of “showing condition.”