The business of being a Chicago apartment landlord has always been a serious one, but a seriously challenging year such as 2020 puts certain questions in stark relief. One of those timely questions: “Am I charging too much for my Chicago apartment in 2021?”
Let’s unpack this question a bit. If a landlord is wondering whether or not their Chicago apartment’s rent price reflects the market conditions in the wake of 2020, they’ll need to first dive into the state of the market. Overall, there was a decline in Chicago's rent prices in 2020 versus the prior year with prices dropping as much as 12% in certain areas.
Finding Fair Market Value for Chicago Apartments in 2021
The severity of rent price decline varied from place to place. It would be a simplification to say that an apartment’s rent MUST come down for the year ahead. If it’s located in or near downtown Chicago? Sure, the rent most likely needs to come down to meet market conditions in 2021. However, some Chicago neighborhoods actually witnessed rent growth in the past year. On Domu, apartment listings in far north side neighborhoods like Andersonville, Edgewater and Rogers Park had gains despite the economic turmoil of 2020, with Rogers Park apartment rents climbing more than 5% versus the previous year.
Landlords will want to look closely at comparable units already on Domu before significantly lowering the rent out of the gate. The neighborhood pages on Domu are a great resource for this type of comparable analysis. There, landlords will see a range of rental prices for places that are currently active.
And it’s good to keep in mind that landlords who list their apartments on Domu can make on-the-fly adjustments to their listings so they're never locked into a higher price point.
How Long Should Chicago Apartment Landlords Prepare to List their Apartments in 2021?
To understand how long it will take to rent a vacant apartment, landlords look at a metric called time on market. What is “time on market?” Time on market measures how many days, on average, it takes to find tenants to sign a lease for a vacant apartment. This metric did go up steadily over the course of 2020, with some months witnessing an increase of market time as high as 40% compared to the previous month.
There are a number of potential reasons that lead to longer times on market for Chicago apartments. The uncertainty brought on by the pandemic was chief among them. Many renters, especially the student renter contingent, ended up breaking their leases to move back home with parents to ride out school closures and take up virtual learning rather renting apartments close to college campuses.
Will these conditions persist for another year? It’s hard to say. It’s possible there could be more renters who are motivated to move in 2021 due to lower average rent prices throughout the city. But landlords would be wise to brace themselves for potentially longer time on market than previous seasons.
Seasonality is another key factor in determining how long it takes to rent an apartment. Chicago’s rental market is the most seasonal in the entire country, meaning that there’s typically a surplus of renters looking to move during the warmer months (May - September) and fewer during the cold weather months outside of that window. That said, more creative means to attract renters, such as a lower net effective rent with a longer lease agreement, could be effective in marketing apartments. Savvy renters in Chicago know that they can find good deals outside of the busy season.
Tips for Avoiding Long-Term Vacancy in Chicago Apartments in 2021
With so many changes coming to the market over the past year, many landlords are understandably concerned about the real cost of apartments sitting vacant. Here are some of the best tips that Domu has seen to reduce long-term vacancy in Chicago apartments.
Avoid Overcharging for Rent and Giving Renters Cold Feet
Landlords should view their rental apartments as an investment, no doubt. But following a tack that favors quick return on that investment over treating it as a sustainable operation can wind up backfiring for landlords. What does a sustainable operation look like? Landlords should get in the mindset of finding good tenants -- not renters who are just willing to pay higher prices for their apartments.
If rents are set at maximum value to make the most return on an investment, landlords might end up losing money as the apartment sits empty. Find a happy medium by using Domu’s Rent Calculator. This calculator returns a rental price range based on annual income. This can also act as a guidepost during the tenant pre-qualification process for Chicago apartments when landlords assess a potential renter’s finances.
Landlords may also find that more square footage doesn’t automatically equal higher dollar value for their apartment rent. Renters are willing to pay more in rent for a place with amenities that make their lives more convenient like in-unit laundry, outdoor space and quality appliances.
A survey of Domu’s users revealed that renters are OK with paying a little extra rent to have a convenient feature like in-unit laundry. So, it makes sense that a renter might balk at the prospect of paying a higher rent for a place that’s simply bigger but doesn’t have the convenience of in-unit laundry or an outdoor space.
The same logic applies to other cosmetic upgrades, such as hardwood flooring, newer kitchen and bath fixtures, a dishwasher, and so on. Upgrading the apartment wherever possible will translate to a more premium rental price.
And, last but certainly not least, landlords should never underestimate the value of quality photos when it comes to marketing an apartment listing. At any price point, the photos on the listing do some serious legwork to entice renters to come visit the apartment, condo or house for rent. Landlords should make sure the photos are up to the level that they’re anticipating charging in rent.