Investor · Saint Paul, MN · Member since 2015 · 98 posts · 64 votes
For those seasoned long term buy and hold investors out there what have you seen with rent cycles? For now they keep going up but those too will change or at least not at this pace. When I analyze deals I always challenge it against the lowest rental rate in the area for a similar but less desirable property. If I still cash flow ($100+/month) then I feel good about it sustaining long term. (I realize there are a string of caveats but). just in general will there be a "correction" in rental rates? Down 20%?!? More?!? Less?!?
During the last correction we saw rents go up not down as more people choose rent over ownership the demand for rentals increased. Obviously this will not always be true but talking to my parents who had rentals in the 80s/90s they saw similar trends then as well. For me I underwrite assuming that a drop of 10% is possible and if I still like the rents then I feel pretty good about it. So far we have never had to lower rents a single time but in fairness I started buying in 2011 so the market hasn't been going down during that time frame.
Jeffrey Holst thanks and good to know. I have assumed that they are relatively stable for prices but when time gets tough it might be harder to find tenants that meet the criteria. Thanks for the feedback!