Rising Rental Market Amid Housing Challenges
As rental markets thrive amidst rising interest rates and limited housing inventory, single-family rentals (SFRs) and build-to-rent (BTR) properties are seeing unprecedented growth. However, with growth comes challenges, especially for institutional investors managing complex property tax processes. This blog explores the key trends in rental markets and how innovative property tax solutions can simplify operations, mitigate risks, and boost profitability.
Key Takeaways:
- Rental Market Growth: The demand for single-family rentals and build-to-rent properties continues to rise, driven by high interest rates and low housing supply.
- Challenges with Property Tax Management: Investors face complexities managing taxes across 24,000+ jurisdictions, where accuracy and timeliness are critical.
- Solutions for Efficiency: Automated tools like LERETA’s property tax services streamline processes, reduce risks, and ensure compliance for growing portfolios.
As prospective new homeowners continue to be challenged with higher interest rates and lower housing inventory, the rental market, by default, is thriving say Brian Carmody, Director of Marketing & Communications at LERETA. Both the apartment and single-family rental (SFR) sectors are seeing growth; according to a recent report from Apartments.com, apartment demand has surged to an almost three-year high. Likewise, single-family rentals now make up the second-largest rental housing type in the U.S., accounting for approximately 14 million households. Experts predict the demand for SFRs will continue its growth trajectory which is also fueling an uptick in build-to-rent construction.
The Build-to-Rent Boom: A Growing Trend
In 2023, more than 27,000 build-to-rent homes were completed, according to RentCafe, which was 75% more than the year before. This year, more than 45,000 additional build-to-rent homes are under construction, but it’s not just one-off rental homes being constructed. Traditionally, the SFR market was made up of small investors or investor groups, but the market is changing, becoming more institutional with larger players buying significant portfolios and BTR communities, as well as individual properties. Entire rental communities are increasingly popular for families and retirees, offering upscale amenities and the feeling of a safe and stable neighborhood.
So, what does all of this growth mean for SFR investors — particularly institutional investors and large-scale build-to-rent developers? It means opportunity, but as any real estate investor will be quick to admit, sometimes increased opportunity comes with increased risk.
The Complexities of Property Tax Management
One of those risks is with property taxes. The operational challenges of managing property taxes on thousands of rental homes located within the more than 24,000 tax agency jurisdictions across the U.S. are significant. Accurate and timely tax data is critically important for rental investors in order to confirm tax amounts and identify property tax delinquencies for the properties they own or are considering purchasing. For builders, having correct tax information on parcels and building sites is key before the first shovel of dirt can be turned. On an ongoing basis, ensuring property taxes are paid on time to the correct taxing agencies can directly impact profitability if not management properly. Property Tax Management Services can help streamline this process and reduce risks.
Investors and builders have their strengths in finding, renovating and building rental homes, but minding the countless details that go into property tax reporting and management isn’t one of them. And for good reason.
Not only are due dates different from one agency to the next, the contacts, methods for requesting and securing information, and payment processes are always changing and being updated. More and more agencies are transitioning to digital platforms, but many still retain their traditional analog methodologies so understanding the nuances of each individual tax entity is key in reducing the risk of inaccurate data and/or missed or late payments.
Streamlining Tax Reporting for Rental Investors
The growth of the home rental segment is what led LERETA to develop a new solution that provides tax reporting and management for single-family rental and build-to-rent properties. The data-informed, automated tax reporting solution allows real estate investors to maximize efficiencies and productivity while also reducing the risk of loss and penalties that can occur with manual processes and inaccurate data. Investors can reduce the risk of missed or incomplete property tax payments by having access to correct and complete tax agency information and parcel number identification. For additional improvement to operational efficiencies, investors can make the tax payments themselves or allow LERETA to provide full tax servicing and make the payments on their behalf, providing a turn-key solution for their entire portfolio.
Automated Tools for Accurate Tax Management
Searching for tax information on a property or group of properties is now significantly more efficient with these advanced search and automated capabilities. For example, an Automated Delinquency Search can provide ad-hoc delinquency checks on individual properties, property sets or entire portfolios. The search functionality can also be used to review live National Tax Certificate data that is available for any property, even before purchase, in order to confirm tax estimates and tax lines to ensure accurate management of assets.
Common Questions:
How do property taxes impact real estate investors?
Property taxes play a vital role in real estate profitability. Accurate and timely payments ensure compliance and reduce risks like penalties or delinquencies. LERETA empowers investors with tools to manage tax obligations efficiently, offering precise data and automated solutions to streamline operations.
What are the common challenges in property tax management for investors?
Managing taxes across thousands of jurisdictions comes with challenges like inconsistent deadlines, evolving payment processes, and varying reporting requirements. LERETA simplifies these complexities through automation and accurate data, minimizing risks and enhancing operational ease for investors. Discover more about our Total Tax Solutions® for efficient and transparent property tax management.
How can investors streamline property tax payments across multiple jurisdictions?
LERETA offers a seamless solution for managing property tax payments nationwide. Our services provide real-time access to tax information, automated reporting, and payment capabilities, allowing investors to ensure compliance and efficiency across even the largest portfolios.
Simplify Property Tax Payments with LERETA
Contact us for more information on how real estate investors can streamline their property tax reporting and management.
