Private property issue #83 - What do tenants actually care about?

What do tenants want? Us investors need to know because no tenant means no rent.

But you can’t look at a rental property like it’s your own home.

Because tenants don’t want exactly the same things that homeowners do.

What do tenants want?

There are three things tenants want:

#1 – A price they can afford

88% of tenants say that price is the most important factor.

It doesn't matter how many “cool” features a property has. If they can’t afford it ... they won’t live there.

An extra, $10, $20, or $50 a week matters to tenants. Renters don’t tend to earn as much money as homeowners.

Some tenants have high incomes. But most tenants are price sensitive.

Only 15% of tenants say they are willing to compromise on price.

That’s according to a Barfoot and Thompson survey. It’s older data, coming from 2017. But it’s the best available and lines up with what my property managers see.

So a basic home can often be a better rental than a larger, more luxurious home.

#2 – Location

Location is almost as important as price. 85% of tenants say this is an important factor.

Tenants want to be close to where they go to work and where their kids go to school.

That doesn’t necessarily mean you need to buy right in the middle of a city.

In a big city like Auckland, Wellington or Christchurch not everyone works in town. That was a misconception I had to unlearn.

Even fewer tenants (14%) say they’ll compromise on location.

They want a property in the right location with a good price (rent).

#3 – Number of bedrooms

Two thirds of tenants say the number of bedrooms are important.

Tenants want a home with enough rooms for their family (as long as the price is right).

That doesn’t mean they need lots and lots of bedrooms. They just need enough.

Compared to homeowners, tenants live in homes with fewer bedrooms.

What features tenants care (and don’t care) about

Over half of tenants say that car parking (57%) and having extra storage (53%) is important.

Again that doesn’t mean tenants want a 5 car garage.

As we showed in a previous newsletter, people who rent are more likely to only have 1 car. Homeowners are more likely to have 2.

But, tenants don’t care as much about outdoor space or the kitchen size. They’re also willing to compromise on:

• The property type (house vs townhouse vs apartment), and
• The size of the house.

Tenants don’t think like homeowners

Tenants are practical.

They know they don’t own property. So they aren’t looking for their forever home.

They don’t care as much if the property faces North and has all day sun.

Homeowners care about that stuff. Because a homeowner is making a long term, 7+ year decision. And it costs a lot of money for a homeowner to sell and move house.

Tenants make a 12-month-ish decision. And it’s way easier for them to move when their circumstances change.

They don’t have to go through the rigmarole of selling. They give notice and go.

That’s why tenants want a property they can afford, in the right location, with enough bedrooms.

They get what they need now and don’t pay more “just in case” they need an extra bedroom in the future.