(Click here to download a PDF copy of the letter.)
Dear Home Forward Owner,
We hope you’re doing well! We wanted to take a moment to update you on what’s been happening in the Central Kentucky rental market this past year and share some insights on what to expect in 2025. While this letter covers a lot of ground and some trends might be a bit concerning, we’re dedicated to keeping you informed.
LOOKING BACK ON 2024
Extreme Weather
Weather was a hot topic this year, influencing our operations and impacting your residents in various ways. We started 2024 with a deep freeze in January, which created some challenges for heating systems in your properties. The cold weather led to frozen pipes and an uptick in maintenance calls, so our team had to jump in quickly to tackle these urgent issues and ensure everyone stayed safe and warm.
Then came the major wind storms in April and September, causing significant damage in some areas. These storms disrupted daily life, bringing down trees, creating debris, and causing power outages. Our team sprang into action, coordinating with local utilities and repair services to clear the mess and restore power so residents could get back to normal as soon as possible.
As summer rolled in, we faced record-high temperatures that really tested home cooling systems. We worked diligently to monitor and maintain air conditioning units to keep everyone comfortable during the sweltering heat. We also reached out to residents with energy-saving tips to help manage their costs and reduce wear and tear on HVAC units.
Throughout these weather challenges, we dealt with some tricky insurance claims as well. Navigating the complexities of these claims required careful documentation and timely communication with insurance providers. Our main goal was to prevent long-term damage and minimize the financial impact on both residents and property owners. Despite the hurdles, we’re proud of how our team came together to effectively manage these situations, showing our commitment to providing a safe and secure home for everyone.
New Legislation
Another major theme of 2024 has been the substantial impact of new legislation on the rental industry here in Central Kentucky. In our 15 years of operation, we’ve never seen such extensive legal changes. It’s safe to say that the new laws passed this year have dramatically reshaped the property management landscape in Kentucky, adding more responsibilities for property owners while strengthening tenant rights.
We’ve discussed many of these laws in our monthly updates, but here’s a quick overview of the key changes:
Short-Term Rental Regulations: Lexington introduced stricter regulations for short-term rentals (like Airbnb), requiring hosts to obtain permits and comply with local zoning laws, including limits on the number of rentals allowed in certain areas.
Housing Stability Ordinance: This ordinance provides extra protections for tenants facing eviction, including mandatory mediation sessions and legal aid before any eviction proceedings can start, which aims to reduce the number of evictions.
Increased Tenant Protections: The city has bolstered protections against retaliation for tenants who report unsafe living conditions, making it harder for landlords to evict those who exercise their rights.
Security Deposit Regulations: Local rules around security deposits have been updated to clarify timelines for returns and require landlords to provide detailed explanations for any deductions.
Income Discrimination: The local council in Lexington passed an ordinance preventing landlords from refusing any lawful source of income (like Section 8 or housing vouchers). Shortly after, the Kentucky legislature passed a law overriding this local ordinance. However, they kept in place the requirement to eliminate phrases such as “we do not take Section 8” from their advertising which extends to answering questions over the phone. Essentially, landlords are not required to consider assistance programs as a form of income, but are in a tricky Fair Housing position of not being able to say so in written or verbal form. These laws can be complex and have required us to make quick operational adjustments, but we’ve been working closely with our legal team to ensure compliance while protecting your interests.
State of the Rental Market
In addition to these legislative shifts, the Kentucky rental market has seen a decline in renter demand. Rents peaked early this year and current averages are showing a decrease compared to last year. Many large complexes with vacant units are now offering incentives like one month of free rent and reduced deposits to attract new tenants. The local rental market will continue to be faced with competition from these companies with deeper pockets being able to incentivize with discounts.
LOOKING AHEAD TO 2025
We shouldn’t assume the legislative challenges are behind us. The 2025 Kentucky legislature is expected to tackle several bills, including potential clarifications on tenant rights, short-term rental use and a possible tax credit for renters.
The Central Kentucky market is experiencing an influx of new rental housing, and this trend will continue into 2025 with more units on the way. More homeowners will become first time landlords by opting to rent out their properties instead of selling in a slower real estate market. We will also see an influx of short-term rental investors transitioning to long-term rentals due to the new regulations in that space.
At the same time, slowing renter demand is being affected by inflation and rising rental prices from previous years. We anticipate these factors will lead to stable or slightly declining average rents in 2025.
Landlords will face rising costs related to property ownership with property insurance and taxes expected to increase. Maintenance and repair costs have also surged, with some items/services rising by as much as 40% over the past two years. However, we believe the pace of these cost increases will start to slow in 2025 as compared to 2023-24.
In short, the current rental market is defined by rising supply, declining demand, stable rents, increased expenses, and heightened legal risks. While this may seem daunting for investors, it’s important to remember that the past decade has been characterized by extraordinary rent growth and low interest rates. What we’re seeing now is more of a market correction toward more moderate conditions.
OUR STRATEGIES FOR 2025
We have several strategies lined up to protect you and your property:
Resident Retention: High turnover costs can be a burden for landlords. We achieved an impressive lease renewal rate of 73% in 2024, and we’ll continue to focus on keeping our quality residents by providing excellent service, prompt repairs, and convenient online payment options.
Minimizing Vacancy Time: For properties that do turn over, we’ll make sure they’re rent-ready as quickly and cost-effectively as possible. Our marketing strategies will maximize visibility, and our leasing team will be actively monitoring activity to minimize vacancy.
Increased Maintenance Efficiency: We are investing in new technology and software that increases the efficiency of our maintenance teams with the goal of reducing your bottom-line costs for those services.
Competitive Outside Vendor Pricing: We conduct annual reviews of our vendors to ensure competitive pricing and quality service. We’ll leverage our scale and the current labor market to keep costs manageable.
Comprehensive Real Estate Solutions: We are making it even easier for you to buy and sell investment property. We will continue to develop real estate agents who keep their finger on the pulse of the residential investment market in order to secure you the best deals possible.
Focused Social Media & Marketing Presence: We have moved our social media and marketing in-house which will allow us to more effectively advertise your rental and sale properties in places where residents are spending most of their time: online.
Wait and See: Obviously, with the changing of the guard in Washington we will also see changing policies regarding interest rates, real estate investment, governmental oversight and more. One of the most important strategies we can implement is to be patient and adapt to those changes as they come.
We remain optimistic about the long-term outlook for residential real estate investors. By managing properties with integrity, we aim to create value for both property owners and residents through safe, clean, and fairly priced housing.
OPERATIONAL UPDATES FOR 2025
As mentioned, new laws have prompted significant changes in our operations, affecting applicant screening, rent collection, lease renewals, and evictions. Here are some key updates that may affect you:
Enhanced Screening Process: We’re constantly refining our screening process for all applicants to minimize risks. Thanks to our diligence, our rent collection averages an impressive 99.5%.
Eviction Process: The eviction process has become more complex, extending up to an additional month. We’re experienced in managing these situations fairly and efficiently.
Short-Term Rentals: Given that short-term rentals in Central Kentucky are becoming less financially viable, we’re advising clients to consider medium-term rentals as an alternative. These options can provide increased income, reduce wear and tear on the unit, and bypass the current local restrictions on short-term rentals.
Property Inspections: With increased focus from governmental agencies on health and safety issues related to tenancy, regular inspections are now more critical than ever. To simplify the process and better protect your investment, we’ve implemented an additional “drive-by” inspection system for all properties at no cost to you. Beyond routine maintenance visits or interior inspections, your property will also receive an exterior inspection twice a year.
Security Deposit Returns: With security deposits being the main focus of recent legislation, we are streamlining our tracking system with a greater level of detail. This will ensure compliance with new regulations and protect you from unnecessary litigation.
New ePay Methods: We are introducing a “Retail Cash” payment option which allows residents to pay their rent at local gas stations, grocery stores, and pharmacies. These are guaranteed funds and further increase the security and timeliness of payments.
GIVING FORWARD
Our mission at Home Forward is to create a place where residents, homeowners, team members, and investors feel at home. We believe that part of making people feel at home includes helping those who are going through tough times. As you can imagine, we often encounter residents who are not able to pay their rent due to some unfortunate short-term circumstance and could benefit from some extra support to help them regain their footing. We want to help!
That’s why we’re thrilled to announce a new initiative for 2025 called GIVE FORWARD. This is a fund designed to assist our most vulnerable residents in their time of need. We will start the year off by making a contribution of $1,500 and are excited to see how it grows from there. If you’d like to contribute to the fund at any point during the year, please feel free to reach out. We are in the process of developing this into a non-profit entity where contributions can be tax-deductible. We know that helping people through a tough month can be the difference to keeping them in their home. That is something we could all be proud to say we played a part in! Stay tuned for more details and opportunities to give.
The 2025 real estate investment market presents an exciting opportunity for growth for investors who can retain residents, minimize legal risk and cut down on unnecessary expenses. With the right information and hard working team you can grow your investment by standing out above all the rest. We are proud to provide you with the right information and be part of your team. If you have any questions or want to discuss your property or other investment opportunities, don’t hesitate to get in touch.
Thank you for your partnership! We look forward to serving you in 2025 and beyond.
Warm regards,
Debbie Adams, Nathan Peel,
& the Home Forward Team
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