How Working Remotely Will Impact the Future of Real Estate
In 2010, only 1.8 billion people had access to high-speed internet. By 2016, it was 3 billion. And, according to experts, it’s possible that all the world’s 8 billion people will have high-speed internet access as early as 2022. All that connectivity set the stage for businesses to take advantage of remote work.
According to Review 42, before the coronavirus hit 4.7 million people were already working remotely. And Mynd employees were among those people. Approximately 30% of Mynd’s team worked remotely, from as far away as Eastern Europe. And most of the remaining 70% worked at least one day per week from home.
It was a good decision. Overhead costs were lower, and studies showed that working from home had, in many cases, increased productivity too. Plus, we could recruit talent from around the world at competitive salaries, which makes a big difference when you're in markets like the Bay Area or Silicon Valley.
Then, as Review 42 reports, the coronavirus pandemic struck, and 88% of the world’s organizations encouraged or mandated remote work.
If you think we’re all just going to snap back to working at the office once the pandemic ends, the numbers and trends tell a different story! Thankfully, these changes will change how real estate is conducted for the better and create more investment opportunities.
Remote Work and Work From Home is Here to Stay
Trends suggest that the longer the pandemic forces people to work remotely, the more companies are expanding their remote work policies, the more productive employees working remotely get, and the more employees want to keep working outside of their office space after the pandemic ends.
A survey by Gartner, Inc. of 317 CFOs and Finance leaders in March 2020 said that 74% of respondents would be moving 5% of their on-site employees to permanently remote work. A month later, a Gallup survey revealed that three out of five respondents said that they'd prefer to work remotely as much as possible once coronavirus is under control.
Months later, in August, as reported by CNN, Mercer, an HR and workplace benefits consulting firm, polled roughly 800 employers. 83% of respondents said they would have more flexible remote work policies after the pandemic. And why not? The same survey said 94% of respondents said productivity remained the same or increased after remote work measures were in place.
In September of 2020, Reuters reported that the US-based Enterprise Technology Research (ETR) surveyed roughly 1,200 chief information officers (CIOs) globally and across niches. The CIOs said they expected 34.4% of their employees to be permanently remote in 2021.
Finally, as reported by Forbes, the decade between 2020 and 2030 will see the number of Americans eligible to work at its lowest point since the Civil War. So it’s a good thing that remote work makes many employees happier and more productive because companies will want to hold onto those employees!
With remote work likely here to stay, expect housing to adjust accordingly.
People May Become Less Tethered to More Expensive Work Centers
The cost of real estate is sky-high in cities like San Francisco, Los Angeles, New York, Miami and Boston – and with good reason. These cities are major employment hubs that attract people from all over the world in search of well-paying job opportunities. Working remotely may mean that people no longer need to live in those areas in order to land jobs with companies based there. They can move to cities like Park City, Utah where the quality of life is high but job prospects are few and far between.
“This should lead to ascending real estate values in the most beautiful vacation spots, though it will take some time for that trend to accelerate as people reluctantly leave more ‘target rich’ environments for the tranquility of their desired turf,” according to Forbes article on the subject.
Workers May Be Willing to Live Farther from Downtown
Not everyone will be able to work from home every day. It’s just not conducive to some occupations and some employers will want their team in the office more frequently than not. Nonetheless, a Gallup survey released last month found that 43% of Americans work remotely at least some of the time. The newfound freedom to work from home will inevitably affect where people decide to live.
Those who long for a single family home in the suburbs may flee the city, accepting a longer daily commute if they only have to make the trip a few times a week. In exchange, they’ll enjoy the larger homes, lower real estate prices, better schools and neighborhoods with lower crime that typically characterize the suburbs.
Demand for Specific Housing Features Will Change
Even before the pandemic, the shift to working remotely rocketed the importance of home offices. Many multifamily developers were already building co-work spaces into their rental properties. And while the pandemic may have made those co-work spaces less accessible, they’ll be much appreciated in the future.
“When I was looking for apartments, a lot of buildings said they had an office space, but when you got there, you’d find this sterile room from the 1990s, lots of brown and mauve,” explained Maani Safa, the co-founder of Etch. “A space like that is utterly useless – an office should be about invoking a feeling of creativity and calm. It should be a place I want to bring people. Otherwise, I’d stay in my apartment.”
Safa ultimately leased a two-bedroom apartment at the Abington House in West Chelsea, a multifamily building that offered a modern co-working space on the ground floor. Other developers followed suit, adding collaborative work studios and computer bars as part of their amenity packages. Those amenities will be put to work once the pandemic has subsided.
It might seem as though the growth of the remote workforce is going to spell the end of cities’ popularity. Not so fast. While plenty of people will relocate to more affordable areas, demand for downtown living will remain. Cities offer a dense collection of restaurants, arts and culture, entertainment, and job opportunities that may be hard to replicate in the suburbs. So we anticipate people will continue paying a premium to live in walkable, transit-oriented areas for the foreseeable future--even if many of the perks and attractions aren’t accessible during the pandemic.
How real estate is conducted, however, will undoubtedly change.
Remote Real Estate
Real estate and technology used to be seen as different realms, but remote work has erased the distance between the two sectors. Before, it was important for real estate investors to monitor these trends closely to understand how advances in technology would impact the future of real estate. Now it’s impossible for many real estate offices to even function without fully embracing remote work.
Thankfully, everything real estate can be done remotely!
- Self-guided tours
- Tenant screening
- Preparing documents using free templates
- Collecting digital signatures
- Online rent collection portals
- Delegating and coordinating tasks to contractors
Online Rent Collection Portals
Online rent collection portals are handy because they bring all communication to a central location. In addition to remotely collecting rent and security deposits, you can also apply late payment fees, let tenants pay rent in increments, make announcements, and handle all communications.
Given the premium placed on responsiveness, being able to prioritize and keep track of messages is indispensable. Online rent collection systems are becoming so commonplace that there’s no reason not to use them.
Remote Security Systems
You can also reduce your liability by installing security systems that can be controlled remotely. For too many landlords, crime is a surprising liability. But a landlord can be sued for failing to protect their tenants or their community from crime--especially if the landlord had precious knowledge of the crime being previously committed on your property or by one of your tenants.
Upgrading to Remote Appliances
Getting smart appliances that can be controlled remotely is one of the top home improvements that will add value to your rental property.
- Stoves + ovens
- Garage doors
- Smart Bulbs
Don’t wait until a vacancy to install these appliances because letting your current tenants make use of them is one of the gestures that show tenant appreciation and encourages lease resigning.
Easier Rental Turnovers
Facilitating remote entry isn’t just useful for self-showings; it’s also useful for easy rental turnovers. If you have a team you can trust, they can clean and perform maintenance with autonomy. And to speed up the process, you can replace carpeting with an easier to clean type of flooring.
No More Getting Locked Out of the House
Your tenants don’t have to worry about getting locked out of the house with keyless entry because they can just buzz you or the property manager and be let in remotely. While whether or not you still need keyed entry will depend on your locality, not having to spend a night out in the cold is always appreciated.
Less Restrictive Pet Policies
Not being home to take care of a pet is often why people don’t get pets. But with people now able to work remotely, they may be more inclined to pet ownership. One of the reasons to allow pets is simply that people want pets, and they won’t move into your property if you don’t let them.
Just remember that whatever pet rules you set, they don’t apply to service or emotional animals because they are working animals rather than pets. So, you cannot forbid either from living in your building.
One of the top reasons to sell your investment properties is to invest from afar. In addition to real estate companies that can help you purchase your properties remotely, you can manage your properties remotely too. There are simply more tools available now than ever before!
From online rent collection apps to smart appliances and security systems you can control from anywhere, technology has evolved to the point where living near your investment is no longer a must. There’s even iBuyers, a technology that automates much of the buying and selling process that drives real estate.
By writing a great listing, screening thoroughly, and going over common, preventable lease violations, you can end up with a hassle-free tenant that reliably generates income. Whether they’re properties you already own or assets you’re soon to acquire, stable income can
can help you scale your investment portfolio quickly and make use of some of the most well-known investment strategies.
There are even programs that pay people to relocate to work remotely in different parts of the country, like Tulsa Remote or Finding Northwest Arkansas, which can provide you with rigorously screened tenants.
Relocation was already on the rise, but it’s expected to gain even further steam thanks to increased work from home.
Relocation and Portfolio Diversification
It’s expected that spending more time at home will inspire people to invest more money and thought into how they live, which will inspire many people to seek their dream homes outside of urban centers. This trend is one of the indicators that the real estate market will be strong in 2021.
As people move from urban centers, investors will have more opportunities to invest in states with no property taxes and landlord-friendly states. With more geographically diverse portfolios, investors will become more resilient simply because they won’t have all their eggs in one basket.
All this movement could have some revitalizing effects on some of America’s forgotten markets.
Investing in Gateway Cities
Cash on cash return (CCR) is the measure of how much money your money is making you. You can increase CCR by investing in class C or class D properties. These are older properties that are less desirable because they require more repair, are less likely to appreciate, are in below-average school districts, have more frequent tenant turnover, etc.
You’re more likely to find class C or class D properties in gateway cities, which are cities that were once considered the gateways to the American Dream. These cities were on the periphery of major cities and contained the transportation, manufacturing, and industrial infrastructure for the region. But when manufacturing and industrial jobs left, many gateway cities could never recover, leaving them full of class C or D properties.
In this way, gateway cities create an excellent opportunity for investors who want to attract remote workers to below market value properties. Gateway cities are particularly attractive for those leaving urban areas because these cities may already be walkable and have accessible transportation that makes trips to urban centers easy.
Investing in a gateway city may also get you in on the ground floor of what will be the next big thing in 10 to 30 years!
More Distressed Properties
Remote work is about more than just doing work remotely. It’s also about everything else you can do remotely too. Shopping, managing your own store, and even managing short term rentals.
As previously mentioned, the pandemic only accelerated pre-existing trends. Remote work was going to eat into the commercial real estate sector one way or another. Online retailers were already giving brick and mortar stores a run for their money. And hotels and motels were taking a significant hit because of Airbnbs.
So, while it may be some time before we get a better idea of how many distressed residential properties will ultimately be created by the coronavirus, we already see the toll of the pandemic on the commercial, retail, and hospitality sectors.
A year where people stopped going into their offices, did more online shopping than ever, and hardly made any trips just made it abundantly clear that companies in these sectors weren’t truly inoculated against remote working. The result: many distressed properties for investors to scoop up!
Buying Utility Renting Luxury
As more flexible work from home policies inspire many to move from urban to suburban areas, it won’t mean cities’ death; it’ll mean shifts in population. This will be an excellent opportunity for investors to employ the investment strategy known as BURL: buying utility renting luxury. BURL is best appreciated with a basic understanding of cap rate, which is the pace at which your property will pay for itself and start making a profit.
Buying utility means playing it safe with properties that generate enough income to pay for themselves and generate profit sooner rather than later. Renting luxury means taking out a significant loan for a luxury property that will pay for itself and generate profit later rather than sooner. But, it’s worth it because the luxury property will appreciate significantly in value. In this way, buying utility makes renting luxury possible!
And thanks to remote property management and investment, people will be able to BURL nationwide!
Don’t Forget the Human Touch
Just because so much can be done remotely doesn’t mean you should entirely forgo human interaction with your tenants. To begin with, having a trusted representative is essential for remote property management. Having a face and voice you can associate with good service builds trust. In fact, the less human interaction you have, the more critical the few interactions you do have will be!
Plus, some things just can’t be done remotely. For example: doing a pre-move-in/move-out inspection with your tenant to ensure any and all damage is accounted for before doing repairs. It may be your representative who does it, but someone will have to do it.
You’ll also want someone to go over house rules at least once, like fire prevention guidelines and common preventable lease violations, because it’s possible your tenants won’t closely look over documents you give them--including ones as important as a lease agreement!
Finally, on holidays and special occasions like birthdays and anniversaries, give your tenants a gift basket or gift certificate to local businesses. It’ll make your tenants feel appreciated and contribute to fostering their connection to their community, which can go a long way to inspiring a lease resign.
Bottom Line on the WFH Impact on Real Estate
Coronavirus and remote working went hand-in-hand in changing the way people conduct business and live their lives. Coronavirus didn’t force us to embrace remote work; it accelerated our embrace of being a remote worker.
The only way we could adapt so quickly is because of all the progress we had already made. And while the impact of that accelerated change has yet to be fully observed and understood, we now know that even when the pandemic has gone away that remote working is here to stay.
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