APARTMENT RENTER DEMOGRAPHICS AND

© Copyright 2002-2014 Landlord.com

By Bob Cain
www.rentalprop.com
Copyright 2000 Cain Publications, Inc., used by permission

 

Why is it important to know the demographics of your customers? Knowing income levels, marital status, familial status, ages, etc. of the tenants in each of your properties will certainly help in tenant selection. But it will also show you how to serve your customers, your tenants, better.

How does that help you? In my seminar, "How to Make More Money on Your Rental Property" we go through an exercise in describing your rental property and who rents from you. That helps you to create your rental criteria and do better tenant selection. But there's more to it than that.  If you know who your existing customer base is, and the people who are going to rent your properties, you know the kinds of services to provide for them and the kinds of things they will expect to stay a long time, and to continue paying you rent and making you money.

That's why the figures that we are going to look at from the Census Bureau are important.

The large management companies and apartment owners spend a lot of time analyzing their customer base, because they know that knowing who their customers are makes them more profit. For example, Equity Residential Properties Trust, owner of more than 140,000 apartments nationwide, commissions detailed demographic studies of the customer base in local markets that it serves or is considering entering. To them, these studies are sophisticated tools for target marketing of apartments, just as businesses target markets for other goods and services.

By the end of this article, you'll be able to analyze your customer base, figure out what you need to do to attract those customers, the kinds of things they are looking for and their expectations as renters. We'll also look at some future trends so you can look at where you want to take your rental property and the kinds of customers you want to attract in the future.

The three types of renters, broken down by income are the "Affordable Housing" renters, the middle-income renters and a new category, the "lifestyle" renters.

Something to keep in mind here is that renters of apartments in larger buildings are different not only from single-family renters, but also from renters of units in smaller plexes. But keep reading this article if you own only single-family rentals and smaller plexes.

While you are not competing directly with the large apartment complexes, since those renters don't rent houses or duplexes, you can see the trends that affect that market, some of which spill over into yours. Population changes can also affect the number of people who will be looking to rent apartments as opposed to single-family or small-plex units.

Like other housing types, multifamily rental housing offers consumers a unique package of housing attributes. Apartments, for example, can provide a combination of physical features, location and affordability not available in single-family rental structures or owner-occupied housing or any type of structure. Those features determine for the most part the sorts of people who will live in apartments.

Studies show a remarkable diversity among apartment renters. Apartment renters, especially in relation to homeowners, tend to be younger, of smaller household size, with more moderate incomes, and more ethnically diverse. However, apartment renters cover the full spectrum of demographic and socioeconomic characteristics, as you can see in the table. 

Nearly one-third of all apartments are rented by someone under 30. At the same time, apartments are home to many seniors, especially when looked at as a share of all seniors who rent.

Household size is what most distinguishes apartment residents from others. Single people make up almost half of apartment households. Single women living alone account for over half of this group and 26 percent of all apartment households. That makes them the single largest household type in apartment housing. Nearly one-quarter of all apartments are home to families with more than two members. Unrelated roommates make up another 14 percent of apartment dwellers.

It is mostly apartments that provide "affordable housing" to 7 million households with annual incomes below $20,000. Yet another 2 million apartment households have incomes over $50,000. And 30 percent of apartment renters’ incomes exceed the national median.

Mobility

A 1997 study found that 34 percent of apartment renters moved in the previous year, compared with 32 percent of other renters and 6 percent of homeowners. You can associate frequency of moving with age, since 53 percent of apartment renters under 30 moved in the previous year. Many households choose rental apartment housing because they are going to move in a year or two. Renting provides a relatively low cost for move in and move out, as compared with buying a home.

About 15 percent of households, on the other hand, stay at least four years in an apartment.

And for between 10 and 15 percent of the US population, renting is a way of life: they may change where they live, but they will always rent. The upshot of that is while your apartment community will experience turnover, you will see little change in the types of individual and family residents.

Since tenants are going to move anyway, the composition of the residents of an apartment property and neighborhood is what is important, not how long they live there. You are going to get the same type of folks in an apartment over and over and over again.

With that information in mind, how do you best serve each of these income types?

The "Affordable Housing" Market

Though the housing is far from "affordable" for many of these folks, this is the segment of the rental market that is getting the most attention from the federal government. Many of these renters are what you would call "assisted," meaning that they are assisted in paying the rent by some government program or other.

They tend to be older and more likely to have at least one child living with them. They may even have large families. Most interesting is that since their rent assistance is dependent upon residence in a specific property, they tend to stay in one place longer than other apartment renters.

How can you serve them most effectively? Lower income apartments are more likely to have a problem with crime than are middle and lifestyle apartments. That means the more you can control criminal activity in the apartment complex, the happier your good renters will be. While they may tend to stay in an apartment longer than other income levels of renters, what will get them to move is crime and fear of crime. You have to take a firm stand against crime in these complexes. That means no tolerance whatsoever. Your good tenants will appreciate it and stay longer.

Lower income tenants also sometimes don't think rules apply to them, just to everyone else. Either that or they are constantly trying to "get away with" something. That means you have to constantly be on top of what is happening in your property and strictly enforce the rules. The bad tenants will resent strict enforcement of the rules, but the good tenants will welcome it. That means bad tenants may move or just act sullen. Either way, you won't be having problems with them.

It will require constant vigilance, though, because at the first sign of weakness, the troublemakers will be back at their old games.

Middle-Income Tenants

By far the largest segment of the apartment rental market, comprising about 37 percent of all apartment renters, this is a group many of whom could afford to own their own homes, but choose not to. Their median income almost matches that necessary to buy a starter home, but they have chosen for one reason or another to save their money, spend it on other goods and services, or invest it in something other than housing.

Some of the other apartment renters making up this segment are in what you would call "transition." They could be recently separated or divorced, changing jobs, or just graduated from school and looking to move to a more stable life. Renting is easier than buying for this group. Often what they are looking for is a relatively inexpensive and trouble-free place to live.

These folks move more than apartment residents in the other two categories and tend to be younger. In fact people under 30 living alone make up 10 percent of the middle market, with an additional 15 percent of the market consisting of under-30 unrelated roommates.

Mature women constitute a significant piece of this market. Women living alone over the age of 30 are 12 percent of the market segment. Many women choose apartments because apartments provide a sense of personal security not available in single-family homes.

How do you serve this group best? They have their own lives to lead and apartment living requires less hassle with their place of residence than does other kinds, such as single-family and small plex renting. These are busy people, often not spending much time at home. If they aren't working, they are at social functions or other activities. That means that whatever you can do to make living convenient, they will appreciate.

To help the single women, always keep an eye out for security issues. Lighting, parking lot security, key and lock security and other similar issues are uppermost in the women's minds.

Responding quickly to repair problems will keep the under-30 tenants happy. After all, all they want to do when they come home is have everything work properly so they can go about their business. As you may have noticed, they will be the most vocal about failure to take care of maintenance problems. The landlords who take the best care of them will be the ones who have the fewest problems and actually keep them the longest.

"Lifestyle" Renters

This is the group that rents because they want to. Their average annual income exceeds $62,000.

They can be defined as meeting three criteria:

1. They are old enough to be established in the labor force and do not have to move every year or two for jobs or school. Some 87 percent of them are 25 or older, with the average age being 42.

2. They have adult interests and schedules. Some 69 percent are either single or married couples with no children under age 18.

3. They have enough money to buy a house, and, indeed, may once have owned one.

These are the renters who want service. The more you can make the lifestyle renter communities like a five-star hotel, the more they will like it. Some large apartment complexes offer such things as concierge service to take care of everything from getting the oil changed in their cars to getting theater tickets. In addition, they want all the amenities in their apartments. Some will even spend their own money to decorate them exactly the way they want, all the way from wall-to-wall carpeting to expensive chandeliers.

Especially if they sold their home, the group of renters wants to enjoy life. They may travel a lot and don't want to have to worry about a house while they are gone. They might even consider the staff as their employees, expecting them to jump when they call.

Considering the amount of rent many of these folks pay, they could well have the right. These are people whom you must treat as valued customers and do the things necessary to keep them satisfied with where they live.

The Future

Look for more renters in the coming 10 to 20 years, not just as an absolute number, but also as a percentage of the population. As the baby boom population ages and their children leave home, some will opt for moving out of their homes and into apartments that require less upkeep and allow them the freedom to do what they want.

Their children will also become renters as they attend college and after they graduate from either high school or college and before they begin raising families.

The middle-income and lifestyle renters will come to expect better and better service. As landlords we have to always be on the lookout for ways to provide it.

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Robert Cain is a nationally-recognized speaker and writer on property management and real estate issues. For a free sample copy of the Rental Property Reporter call 800-654-5456 or visit their web site at www.rentalprop.com.

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Related articles:

Becoming the Landlord

High Speed Connections

How Would you Like to Be the Landlord?

Keeping Tenants Longer, Part 1, Part 2.  Tenant retention strategy and why tenant retention should be a priority.

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