As we work our way through 2024, we’re not at all surprised at the attention that our market is getting in Hampton Roads and throughout southeast Virginia. Local investors who have been here for a while know that’s a diverse and impressive place to buy a rental home. Investors from outside of the area are also beginning to shift their attention to markets like this one, and we’re seeing a lot of activity.
The Hampton Roads rental landscape in 2024 is pretty hot. That’s good news for real estate investors who already own property here. For investors looking at new opportunities, prepare for a bit of competition and a fast-moving market that requires preparation, strategy, and sense.
The key to a successful investment experience is minimizing risk and maximizing profitability. We want to help you do that, so today we’re looking at the rental landscape in Hampton Roads, and what we expect for the rest of the year.
Why is Hampton Roads Real Estate So Hot?
With diverse and unique neighborhoods, investors are finding that there are real estate offerings that match almost every investment goal you can come up with. Whatever your needs and expectations are, this market can meet them. The local economy is healthy, and the industries here are strong. The defense industry contributes to that economic stability and the military presence here draws potential tenants to the region all the time. There’s also plenty of tourism and a high quality of life.
The Hampton Roads “Virginia Beach–Norfolk–Newport News, VA”, MSA has a population of over 1.7 million, making it the 37th-largest metropolitan area in the United States.
Hampton Roads is known for its large military presence, ice-free harbor, shipyards, coal piers, and miles of waterfront property and beaches, all of which contribute to the diversity and stability of the region's economy.
Most of the tenant pool is qualified. Residents work in largely port-related industries, including shipbuilding, ship repair, naval installations, cargo transfer and storage, and manufacturing related to the processing of imports and exports. Almost 80% of the region's economy is derived from federal sources. This includes the large military presence, but also NASA and facilities of the departments of energy, transportation, commerce, and veterans’ affairs. The region also receives a substantial impact in government student loans and grants, university research grants, and federal aid to cities. The Hampton Roads area has the largest concentration of military bases and facilities of any metropolitan area in the world. Nearly one-fourth of the nation's active-duty military personnel are stationed in Hampton Roads, and 45% of the region's $81B gross regional output is defense-related.
The harbor of Hampton Roads is an important highway of commerce, especially for the cities of Norfolk, Portsmouth, and Newport News. The following companies that are operating in the area. Huntington Ingalls industries (formerly Newport News Shipbuilding and Drydock Company), was created in 2008 as a spinoff of Northrop Grumman Newport News and is the world's largest shipyard. In Portsmouth, a few miles up the Elizabeth River, the historic Norfolk Naval Shipyard is located. BAE systems, formerly known as NORSHIPCO, operates from sites in the city of Norfolk. There are also several smaller shipyards, numerous docks and terminals.
Our population is growing, and that’s contributing to a strong rental market. There’s an increased demand for housing and services, and real estate investors know that means good things for their portfolios.
Higher Demand for Rental Homes in Hampton Roads
Recent data tells us what we already suspected: home sales have stalled, and that’s contributed to more demand in the rental market, and higher rents, too. This is something we expect will continue throughout the year, or at least until interest rates come down and mortgages are more affordable. First-time homebuyers have been waiting to buy, and they’re likely staying in their rental homes while they bide their time. Homeowners who might have sold what they own in order to buy something new are also waiting out the higher mortgage expenses.
Because of the increased demand in rental housing, owners are earning more than ever before on their properties. Rents are high, and somehow, they keep climbing.
As you do the math to determine what you’ll earn and likely spend on an investment property in Hampton Roads, you can factor in a rather comfortable rental range for your investment.
You will not have to worry about lowering your rents anytime soon. Even rental increases on lease renewals have been healthy; and tenants have been more likely to stay in place and renew their lease agreements. They know they’d only spend more moving into a new home. We do expect the rental landscape throughout the rest of the year will have high rents and comfortable profit margins for rental property investors.
As we head towards the end of this year and the early part of next year, we expect to continue seeing well-qualified residents who can afford the higher rental values that the Hampton Roads rental market demands. Their expectations will also be higher, so you’ll have to be prepared for that. Think about what you can offer that attracts good tenants and justifies a higher rent.
A Guide for Property Owners: Attracting and Retaining Hampton Roads Tenants
There are a few ways to position yourself to maximize what you earn in the current rental landscape. First, you have to know where to invest and what to buy. Second, you have to make sure you’re offering the type of rental property that qualified residents are willing to rent.
Here’s what we recommend.
Location
Location has always been an important part of success when choosing real estate investments. Right now, downtown Hampton Roads and areas like Fox Hill, Buckroe Beach, and Willow Oaks are seeing a lot of activity from investors. That’s because they’re highly desirable neighborhoods for tenants who are looking for proximity to entertainment, conveniences, and shopping. Schools are good, and there’s a strong sense of community and a commitment to infrastructure. Look for locations that will attract high rents, long-term tenants, and future appreciation. There are a lot of fantastic neighborhoods in Hampton Roads, and if you have a great real estate partner and property manager who can talk to you about rental values and tenant demographics, you’re setting yourself up to benefit from the current and future rental landscape.
Flexibility
Your military tenants could get PCS orders at any time. You might also find you have tenants coming into the area who are not interested in a full, 12-month lease, but want to rent for eight or nine months. Will you be willing to work with them? You should be. The rental market has changed, especially in places like Hampton Roads where there’s a large population of more transitory tenants. We have contractors here for work assignments. We have visiting professors and students. This is a desirable area for remote workers to stay for a while. If you’re willing to be flexible with your lease terms, you’ll find that you can earn more in rent and also attract a much wider pool of local tenants.
Property Improvements and Upgrades
We used to talk about renovations that involved fresh paint and new flooring.
Those things are still important, but the demands of today’s tenants in Hampton Roads are more sophisticated. They want an attractive, well-maintained rental home, but their standards are higher. They also want smart home technology. They want energy-efficiency and eco-friendly systems.
The market has changed, and so have tenant demographics. New generations of renters are focused on sustainability and living a greener lifestyle. They’ll be looking for appliances with Energy Star ratings. They’ll appreciate low-flow plumbing fixtures and LED light bulbs.
Smart thermostats and video doorbells and keyless locks are also popular features. Integrating their smartphone apps and their voice-activated assistants to turn on lights and coffee makers and sprinklers is important. They appreciate the ease and convenience that smart home technology can provide, and if you’re willing to make it available in your rental property, you’ll find that you have a lot of tenants interested in your property, and all of them will be willing to pay higher rents.
Hampton Roads Rentals and Relationships
Technology is having a big impact on the current rental landscaping in Hampton Roads in many ways. It’s present in the tenant demands we just talked about. It facilitates a more automated and consistent process for leasing, managing, and maintaining rental homes. It delivers data that we need to price properties, track repairs, and make improvements.
This is still a relationship business. As you think about what you’ll need to navigate this rental landscape and the trends that are coming later this year and into next year, your relationships will be your best tools. Professional, respectful relationships with tenants are critical. You need to provide a great customer experience to keep them in place. You also need to surround yourself with experts in real estate, property management, and investing. Expand your network and invest in relationships. This is the best way to ensure you’re successful now and in the future.
We love talking about this topic, and we’d be happy to answer any questions you may have about your specific property or portfolio. Contact us at Doud Realty Services, Inc. We provide expert property management in Chesapeake, Hampton, Newport News, Norfolk, Portsmouth, Suffolk, and Virginia Beach.