As the rental market in Los Angeles continues to shift and respond to a changing economy and workforce, a lot of investors and property owners are asking us about renter migration and what it means for Los Angeles.
It means that there’s a higher risk of vacancy and a necessity to make your property more competitive so tenants will be attracted to it.
With more and more people migrating out of Los Angeles, you’ll want to position yourself for success by improving your property to make it the best rental home on the market. You’ll also want to retain the residents you have in place and invest in attracting new ones.
Here’s what you need to know about renter migration, the Los Angeles rental market, and how to position your property for the best possible outcomes.
Los Angeles Renter Migration
The data tells us that over the last two or three years, renters have been leaving California for states such as Arizona, Nevada, and Florida. Renters have been leaving traditionally high-rent markets such as Los Angeles in search for a lower cost of living. This has been a trend since the worst of the COVID-19 pandemic, and thanks in part to remote work being normalized. Tenants who can work from home no longer need to be in close proximity to their places of employment, and that means they have more flexibility. Even if they don’t leave the state, they don’t have to stay in Los Angeles.
The Los Angeles rental market may have long been deemed as one of the most competitive in the country, but the reality of the last few years has required some adjustments for real estate investors, rental property owners, and property management professionals in Los Angeles like our team.
All over the country, there have been transformations to where and how we live, and those transformations have had an impact on renter migration.
The high cost of living in Los Angeles is one of the primary drivers behind the current renter migration trend. Many tenants are feeling priced out of the rental market, and tenants are now more likely to move outside the city limits in search of more affordable housing options that offer more value for their money.
What Migration Means for Your Los Angeles Rental Property
If you own a rental property locally, this is not necessarily bad news.
The current renter migration trend actually presents an excellent opportunity for landlords who have well-located properties and are willing to invest in maintenance and upgrades. You can optimize your property offering and attract the most qualified residents in the market.
Your residents are price-conscious and looking for value. This means that it's crucial to ensure that your property offers features and amenities that will stand out to prospective renters. Upgrading and modernizing your property is the best way to attract renters and retain existing tenants during a time when migration is high.
Understanding tenant preferences is important in a market like this, where you are competing for the residents who are looking for a home in Los Angeles. Tenants appreciate open and spacious floor plans, modern appliances, and outdoor spaces. Catering to these preferences can help you attract more renters.
Expect Longer Vacancies in a Migratory Market
You may notice that vacancy rates are going up. A year or two ago, you might list your home for rent and have several different applicants want to rent it. In this migratory market, you’ll have to work a little harder and possibly alter your standard rental criteria when screening tenants. An income that’s 2.5 times the monthly rent, for example, might be more advantageous than requiring an income that’s three times the monthly rent.
With the way rents have increased, as well as the higher cost of goods and services, tenants in Los Angeles are feeling strapped for cash. They know what they are willing and able to spend on rent. In Los Angeles and the surrounding markets, we have never seen a situation wherein rents had to be decreased. We don’t think that will happen now, either. However, we’ve also never increased rents at the rate that we’ve increased them over the last two years.
There’s also still a response to evictions that’s causing vacancy rates to increase in L.A. After the eviction moratorium ended, a lot of landlords felt like they could finally evict the tenants that they could not evict during the pandemic prohibitions. Replacing those evicted tenants with new tenants has been a bit of a struggle and added to the vacancies we see around the city.
Rental Values in the Los Angeles Market
Rental prices peaked this year, and in a high-priced market like Los Angeles, imagining rents going any higher was simply impossible for a lot of renters. Thus, migration to other, more affordable areas.
Due to this migration trend, rents will need to be more competitive.
According to recent data from Rent.com, rents in Los Angeles and surrounding areas such as Orange County have still risen recently; they’re up 1.65 percent year over year, but that increase is not nearly as dramatic as it has been over the last few years. Rents are returning to a cycle that’s more seasonal, where they rise in the summer months – a popular time to move, and then drop in the winter months, when there’s a lower demand for new rental homes.
The rental rates are stabilizing because of the decreased demand in the market. This is, in part, due to a more expensive housing market in general. There are extremely high interest rates, and people are finding mortgages to be quite costly.
That’s good news for the local rental market, even if tenants are migrating out of L.A. Those who are staying in the city are less likely to move out of their rental home in order to buy a home. They’ll wait for the sales market to offer a bit more of an incentive.
Tenants are staying in place rather than looking for new homes to rent, too. This trend will help you with retention.
Convincing Tenants to Stay
The best way to avoid losing your tenants to rental migration trends in Los Angeles is to focus on your tenant retention plans and keep your best residents in place. You don’t necessarily have to worry about them moving from your place to another rental home in Los Angeles; the danger is that they’ll move out of your home because they’re leaving LA entirely.
So, how can you keep them in place?
Make sure your rents are market-driven and fair. If residents feel like they can be getting a better deal somewhere else, they will move. Talk to them at renewal time and get an idea of where they are and whether they’re thinking about staying or moving out of the area. Offer them a rental increase that’s well below what you could charge. You might even decide to leave the rents where they are. Bell Properties normally would not recommend this, but if you get a sense you’re your resident might be preparing to give notice, it’s something to think about. This might feel like a loss, but it’s not. You’re retaining a good tenant, ensuring you don’t have to find a new one, and saving yourself a lot of money in vacancy and turnover costs, not to mention marketing and advertising expenses as well as screening costs.
Offer incentives that increase the value of your rental property. Maybe they’ve asked for fresh paint or a new appliance. Be willing to give them what they want when you’re negotiating a lease renewal. If this will make the difference in keeping or losing a tenant, it’s worth the cost of a new appliance, some fresh paint, or other amenities inside their home that might convince them to stay.
Create a good rental experience for your residents. When they feel like you make renting easy, they’re more likely to stay where they are. Online rental payments, pet-friendly policies, and perks such as valet trash can keep your tenants loving where they live. Make sure you’re a good landlord, too. Your excellent communication style and responsiveness when it comes to maintenance may not stop renter migration out of Los Angeles, but hopefully it will at least keep your tenants in place.
Tenant retention needs to be an important part of your process now that we know more and more tenants are leaving Los Angeles. Make your property a home worth staying for.
The current renter migration trend in Los Angeles poses a unique opportunity for landlords to differentiate their property offerings and attract and retain highly qualified tenants. Understanding why tenants are moving out of the city is easy; but not everyone is leaving. And, when you know what tenants are looking for in a rental property, you can capitalize on the trends. By investing in modernizing your properties and catering to tenant preferences, you can stay ahead of the curve and attract prospective renters, while retaining existing ones.
Would you like to talk more about renter migration and what it means for you? Contact us at Bell Properties, and we can tell you more.
