With scarce inventory and a booming pre-pandemic job market, Phoenix has seen some of the fastest growing rent prices in the country, with single-family home rentals rising 5 percent in Phoenix compared to 1.4 percent nationwide in June.
While the growth has slowed modestly amid the pandemic, the city is still experiencing one of the hottest real estate markets in the country. Property managers, in turn, are seeing more people seeking to rent than units available and scammers capitalize on that dearth by listing bogus properties online.
“The market in Phoenix has been constrained for a while so when something comes up for rent, you get eight or nine calls,” Jake Beeson, who co-founded Beehive Property Management and manages over 300 single-family properties in the Phoenix area, told Inman.
Inman chatted with Beeson about how COVID-19 has affected the Phoenix rental market and what property managers need to do to protect themselves from scammers.
Inman: Tell us about your properties. How many do you have and what are they like?
Jake Beeson: We’re kind of Valley-wide. We’re on the West Side of Phoenix and also the East side of Phoenix, the suburbs. We also have about 120 low-income housing properties in downtown Phoenix. So we cover what we call the Valley here in Phoenix. We don’t manage apartments and I know that the big apartment managers may have a different experience than we have. All I can speak to is that it’s largely a single-family, duplex and fourplex portfolio. That’s what we work with now.
How has the pandemic affected your business from March up to now?
When it first broke out, the biggest challenge was the uncertainty and not knowing how things were going to go. We took precautions and closed our office and sent a note to all of our tenants, giving them instructions on how to contact us if they needed to. We drafted a letter and sent it to all of our clients, letting them know what precautions we were taking to keep our clients and staff safe. When the virus hit, we kept the office closed for probably three weeks to a month. When we got some better guidelines from the government, we opened our office carefully. We try to do social distancing and work by appointment only. We try to use masks as much as we can. As far as the business side of it, we immediately let our tenants know about the state moratorium on evictions a well as the federal guidelines.
And how did that go?
We actually didn’t have any evictions. We haven’t done any related to COVID or otherwise since the crisis started so we’ve been lucky from that perspective. We had a few tenants that moved out, that lost their employment unfortunately. We didn’t chase them for any penalties or anything like that because we understood. But ironically, our rent collections have been better than they have been in the past. We’ve had fewer evictions, fewer people paying late and fewer people not paying at all. From a rent collection perspective, maybe we’re an anomaly but we haven’t seen any effect on rent coming in.
Before the pandemic, Phoenix was seeing enormous growth and demand. What’s it like now?
Properties are still renting quickly. I had a conversation with a client today where he had a tenant unfortunately break their lease which hasn’t happened much in this market. Because rents are going up, tenants tend to stick around longer. When they look at the property they live in, if they choose to replace that property with another rental, their rent could be going up at least 10 percent and in some cases as much as 20 percent. So more and more people are staying put and when we do have homes available, they tend to rent quickly even at the increased rents. So, despite what’s going on with COVID the rent seems to be going strong, at least in our little part of it.
And inventory shortage is the main cause of this?
I think that’s what’s happening. If you look at what’s happening in our portfolio, lots of folks bought their properties between 2010 and 2016. Those properties now have doubled in value. When those investors sell those houses, they’re typically not selling them to more investors. They are typically selling them to users. And when a user buys a home, it’s not a rental anymore. There was a statistic floating around that said that Phoenix has underbuilt its apartments by 20 percent for the past five years or so. The market in Phoenix has been constrained for a while so when something comes up for rent you get eight or nine calls. It’s crazy.
Do you think that the habits (social distancing, contactless screenings) property managers picked up during the pandemic will stick around after it’s over?
I feel like the way things are going, people are getting more and more used to this touchless system. They want to be able to reach out to somebody and get an answer to go look at the house without anybody there with them. The struggle is security. We used a system in the past that didn’t have good security and they ended up giving our keys to scammers that were trying to rent the house out from under us. But I don’t think the technology is going anywhere. My colleagues in the property management game tend to be using more and more every chance they get.
Property management scams are a big problem in the industry, especially now.
If you know what you’re doing, it’s pretty easy. I saw it a couple of times as a property manager. We’ll adjust our technology to get around to it and then the scammers will do something different.
What advice would you give to property management and tenants who may be at risk of losing money in this way?
The sad thing is that when you sign up for new technology you have to think of how you can get scammed with it. When you think that way, you’re more likely to be able to say ‘Oh, yeah here’s how I can get around that.’ We were using a company for self-service showing and they put all of our listings on their website. Anyone that goes to their website knows that all of the properties on that site are set up for self-service showings.
It’s the same with texting. You have to figure out a way to make sure that you’re talking to the actual person that you think you’re texting. Texting systems now have pretty sophisticated bots and systems mandated by the federal government. People have to opt in to be able to text back and forth. That is a layer of safety as well but, sadly, you have to think like a scammer whenever you adopt new technologies.