Rents - Flat or Declining
Lender · Tampa/Saint Petersburg, FL · Member since 2014 · 356 posts · 148 votes
Rents - Flat or Declining
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Investor · San Diego · Member since 2020 · 97 posts · 62 votes
3mo@Amber Stout flat is the only defensible base case right now, and I'd go one step further: underwrite the in-place rent, not the asking rent. Asking rents are a lagging indicator because landlords cut concessions before they cut the listed number. A market can show "flat" asking rents while effective rents are already down 3 to 5 percent once you count a free month and reduced deposits. Days on market and concession activity on comparable listings tell you more than the Zillow trend line.
Practically, that changes underwriting in three ways. The deal has to clear your cash flow bar at today's actual collected rents, with zero growth for year one and two. Vacancy and turnover assumptions deserve more room than usual, since flat markets usually mean tenants have options and re-leasing takes longer. And any value-add premium (the "it'll rent for $200 more after the rehab" line) needs a live comp behind it, not a pro forma.
The acquisition criteria shift is that rent growth stops being a return driver and debt structure starts mattering more. If a deal only works with 3 percent annual rent bumps, it doesn't work.
Are you seeing concessions show up in the Tampa listings before the asking rents move, or is your market still holding the line on both?
30 Replies
- 3moJaron WallingPro MemberRental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
@Amber Stout We're underwriting for flat rent growth. Rents have stalled in our market which is C+/B class starter homes. We're placing new tenants on Wednesday in one of our rentals. My expectations for rent we're a bit high. After a $25 drop we quickly found the right tenants. I think it's wise to be slightly below than pressuring people to pay top end rent.
A golden goose is only good if it sticks around and doesn't move out every year.
They same can be said for pricing. Buyers are HIGHLY SPECIFIC and have inventory to choose from. In my opinion outdated, over priced properties are DOA on the MLS.
- Investor · San Diego · Member since 2020 · 97 posts · 62 votes3mo
@Amber Stout flat is the only defensible base case right now, and I'd go one step further: underwrite the in-place rent, not the asking rent. Asking rents are a lagging indicator because landlords cut concessions before they cut the listed number. A market can show "flat" asking rents while effective rents are already down 3 to 5 percent once you count a free month and reduced deposits. Days on market and concession activity on comparable listings tell you more than the Zillow trend line.
Practically, that changes underwriting in three ways. The deal has to clear your cash flow bar at today's actual collected rents, with zero growth for year one and two. Vacancy and turnover assumptions deserve more room than usual, since flat markets usually mean tenants have options and re-leasing takes longer. And any value-add premium (the "it'll rent for $200 more after the rehab" line) needs a live comp behind it, not a pro forma.
The acquisition criteria shift is that rent growth stops being a return driver and debt structure starts mattering more. If a deal only works with 3 percent annual rent bumps, it doesn't work.
Are you seeing concessions show up in the Tampa listings before the asking rents move, or is your market still holding the line on both?
- 3moJorge VazquezBusiness MemberReal Estate Broker · Tampa, FL · Member since 2017 · 1k+ posts · 695 votes
I agree. Here in Tampa Bay, I am underwriting based on today’s actual rent and assuming flat growth for at least the next 12–24 months. We manage about 500 properties, and tenants have more options right now, so being realistic on price is better than chasing an extra $50–$100 and losing a month of rent. We have also become more creative with lease terms—using 15- or 17-month leases when needed so renewals do not fall during holidays or slower rental periods. In many cases, we keep rent the same for a good tenant because avoiding vacancy and turnover is worth more. Our growth over the next couple of years may come less from rent increases and more from controlling expenses: improving properties to lower insurance, disputing increases when appropriate, and making repairs that reduce long-term costs. If a deal only works because rents need to rise every year, it probably does not work.
Graystone Investment Group517 Reviews - Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes3mo
We are also underwriting on rents remaining flat for the next 12 months.
7e investments53 Reviews I have been underwriting 5 years 0 appreciation and zero rent growth since 2022. In my market I was one year early. I think my nesxt underwriting I may use 4 years for the first time in a while.
In the last few years the vacancy rate in my market has tripled; it went from very low to slightly low (~7%). The vacancy unit count is the highest ever. Fortunately the rents have stayed level (rent growth flattish).
The vacancy rate is highest in high class new units but also high in b/c class new units. The cost to build dictates a rent necessary to achieve a NOI that does not result in capital loss developing the units. These new units that have increased the supply and the vacancy rate have not helped lower rents. They may be a rent decline inhibitor,
Adding more units if they cost enough to develop that they dictate renting at the top of rent range will not lower rents. The syndicators must project a solid profit to obtain LPs. If the property at stabilization has lower value than cost to develop, the LPs do not achieve projected returns. Especially with various large cap stock funds (sp500, fab 5, mag 7, etc) producing outlandish returns, syndicators need to project and deliver solid returns.
I think most investor knew that we were not going to see the rent growth/appreciation that we experienced from 2010 to 2023 indefinitely. Now is that time that is more challenging for RE investors. Also RE will not always be the best investment option.
Good luck
- Real Estate Agent · Lansing, MI · Member since 2020 · 171 posts · 91 votes3mo
@Amber Stout We are in the Lansing, MI market and are still seeing slowwww but steady rent increases, across all of our properties (SFR up to apartment). We plug in a 2% rent increase per year following the year that we either make improvements or stabilize the unit / building to current market rents.
- Mechanicsburg, PA · Member since 2013 · 3k+ posts · 2k+ votes3mo
@Amber Stout We just re-rented a place and raised about 5%. We a have anothher coming up and we are planning on raising rent about 25%. We have been renting for many years, and probaly have had 1000's of tenants and have only once reduced rent, and it was during the winter and was having difficulty filling the vacancy. We do our best to never have a winter vacancy as a result.
- 3moDenise SuppleeBusiness MemberRealtor · Willow Grove, PA · Member since 2017 · 1k+ posts · 652 votes
I agree. Markets go through cycles, and after over 40 years in real estate, I've learned not to count on rent increases that may never come. Through our co-investing club, we like to see deals work based on today's numbers, and if rents grow later, that's simply a bonus. I'd rather be pleasantly surprised than disappointed.
Spark Rental Co-Investing Club583 Reviews - I’m personally underwriting based on the current cash flow numbers without the appreciation and rent increases, even though it’s something that I have in my market even in “2026” so it really depends which side of the country you’re talking about. When you see headlines, you should know that it really depends which side of the country you’re looking at
- 3moShiloh LundahlPro MemberRental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
My strategy is lease options so I charge a little higher rent and I charge an option fee. I have written into the lease an increase every year for 3 years. It talked a little longer to find a tenant with the cash for the option fee and their first month's rent payment, but they are much better tenants. And the cash flow is better.
- 3moJaron WallingPro MemberRental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
Quote from @Shiloh Lundahl:
My strategy is lease options so I charge a little higher rent and I charge an option fee. I have written into the lease an increase every year for 3 years. It talked a little longer to find a tenant with the cash for the option fee and their first month's rent payment, but they are much better tenants. And the cash flow is better.
If you don't mind me asking what is your option fee amount? I'm familiar with the strategy but have never tried it.
I did talk my friend out of selling his property via seller finance (no investing experience) because he had no clue what he was doing. A prospective buyer tried taking advantage of him.
- 3moShiloh LundahlPro MemberRental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
@Jaron Walling my option fees are usually between $3900 to $5900 depending on the value of the property.
- 3moShiloh LundahlPro MemberRental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
@Jaron Walling you can check out my profile. On there I have a link to a bunch if videos about lease options.
We’re still getting 5-8% increases in Vegas and Lake home in Mpls.
For those of you “underwriting” zero percent rent growth, or underwriting zero percent for years. I assume you’re still asking for rent increases at every renewal?
It just seems like very few if any “deals” short of buying well under market or somehow buying something that cashflows with almost zero in to the deal would work if you don’t underwrite for either appreciation or rent growth. After all anyone on BP for more than a year knows “Underwriting for appreciation is gambling and cashflow is the only thing that matter.”
I can’t see buying a property, Holding it for 10 years while expenses like insurance, maintenance, capex and property taxes rise. (Call it doubling in10 years at 7%.) and rent stays flat. Then paying 10% in closing costs to sell at your purchase price. I assume “underwriting” for it you can’t be expecting it or you’d move in to lending, flipping, or something with a much better return. If you’re underwriting it without expecting it you’re really just stress testing the deal not underwriting it. IMHO.
I’m not trying to nitpick. I’m trying to learn what people mean when they use the word. Almost all the properties I own I own because everyone else expected mass vacancies and depreciating values. They couldn’t buy because that’s what they expected no matter what they underwrote for.
Ps. Can someone post an example of a hypothetical good deal with zero rent growth and zero appreciation deal bought at or near market price and not modified to increase value. (Otherwise call it a flip.) That is then sold in 7-10 years with average buying, holding, and selling costs? Something where just the cashflow on an average deal is good enough to overcome holding and selling costs I guess.
- 3moJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Bill B.:
We’re still getting 5-8% increases in Vegas and Lake home in Mpls.
For those of you “underwriting” zero percent rent growth, or underwriting zero percent for years. I assume you’re still asking for rent increases at every renewal?
It just seems like very few if any “deals” short of buying well under market or somehow buying something that cashflows with almost zero in to the deal would work if you don’t underwrite for either appreciation or rent growth. After all anyone on BP for more than a year knows “Underwriting for appreciation is gambling and cashflow is the only thing that matter.”
I can’t see buying a property, Holding it for 10 years while expenses like insurance, maintenance, capex and property taxes rise. (Call it doubling in10 years at 7%.) and rent stays flat. Then paying 10% in closing costs to sell at your purchase price. I assume “underwriting” for it you can’t be expecting it or you’d move in to lending, flipping, or something with a much better return. If you’re underwriting it without expecting it you’re really just stress testing the deal not underwriting it. IMHO.
I’m not trying to nitpick. I’m trying to learn what people mean when they use the word. Almost all the properties I own I own because everyone else expected mass vacancies and depreciating values. They couldn’t buy because that’s what they expected no matter what they underwrote for.
Ps. Can someone post an example of a hypothetical good deal with zero rent growth and zero appreciation deal bought at or near market price and not modified to increase value. (Otherwise call it a flip.) That is then sold in 7-10 years with average buying, holding, and selling costs? Something where just the cashflow on an average deal is good enough to overcome holding and selling costs I guess.
I bought some new construction in MS that this is the exact scenario rents were flat and prices never really moved.. And when I went to sell I had to put 10 to 20k into each one to get retail owner occ buyers.. the ONLY saving grace for me it was a tax play for GOZONE bene's other wise it would have been a loser.. No paying market and flat rents and only exit is a rental is not going to make anything or much of anything your only win is deprecition and mortgage paydown.. IMHO but I think the math proves it. Quote from @Bill B.:
We’re still getting 5-8% increases in Vegas and Lake home in Mpls.
For those of you “underwriting” zero percent rent growth, or underwriting zero percent for years. I assume you’re still asking for rent increases at every renewal?
It just seems like very few if any “deals” short of buying well under market or somehow buying something that cashflows with almost zero in to the deal would work if you don’t underwrite for either appreciation or rent growth. After all anyone on BP for more than a year knows “Underwriting for appreciation is gambling and cashflow is the only thing that matter.”
I can’t see buying a property, Holding it for 10 years while expenses like insurance, maintenance, capex and property taxes rise. (Call it doubling in10 years at 7%.) and rent stays flat. Then paying 10% in closing costs to sell at your purchase price. I assume “underwriting” for it you can’t be expecting it or you’d move in to lending, flipping, or something with a much better return. If you’re underwriting it without expecting it you’re really just stress testing the deal not underwriting it. IMHO.
I’m not trying to nitpick. I’m trying to learn what people mean when they use the word. Almost all the properties I own I own because everyone else expected mass vacancies and depreciating values. They couldn’t buy because that’s what they expected no matter what they underwrote for.
Ps. Can someone post an example of a hypothetical good deal with zero rent growth and zero appreciation deal bought at or near market price and not modified to increase value. (Otherwise call it a flip.) That is then sold in 7-10 years with average buying, holding, and selling costs? Something where just the cashflow on an average deal is good enough to overcome holding and selling costs I guess.
It would need one or more of the following: value add, below market purchase, alternate rent model that already produces some cash flow with realistic expense estimates, below market financing, a longer hold than 7 years.
My last underwrite I did used alternate rent model (monthly STR income was 2.5% purchase ratio) and still could not be sold at year 7 making more than CD rates (I used 5 years no appreciation and rent growth same as my expenses that was 3%). At 10 years return was marginal. Could be why I lost out by a pittance $10k purchase differential.
I have stated this numerous times, it is a tough RE market. Without changing goals to make current market work, there are few RE purchases that make sense. My goal is 3 years to recover investment. Very challenging today without a sophisticated value add.
So my view is you are correct that few deals can sustain underwriting 5 years 0 growth. However, nationally property prices in early 2022 were higher than today. If you purchased 4 years ago, on average you are down in value. https://fred.stlouisfed.org/series/QUSR628BIS
My market has had very low appreciation over last 2 years and flattish on the rent growth over the same period and vacancies went from real low to slightly low (~7% today from ~2.3% ~4 years ago depending on the source referenced). I started using no growth mid 2022, so I was a bit early for my market but accurate on national level.
There are a lot of people who purchased RE since late 2022 that are not hitting their profit projections. I suspect there are a lot that purchased in that time span that if they sold today would be losing significant money on a non passive investment.
Good luck
- 3moDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
Agree with the majority that you should u/w with zero rent growth for next 12-24 months.
BUT, that doesn't mean you should NOT ask for rent increases!
Two reasons:
1) Not all tenants follow the rental market closely, so they won't know rents are flat or dropping.
2) There's a "breakpoint" where it's cheaper for tenants to accept an increase vs the cost of moving + the stress of moving.
Logical Property Management4.9465 Reviews - 3moJames JonesPro MemberInvestor · Collierville, TN 38017 · Member since 2017 · 815 posts · 599 votes
Flat rents aren't the thing I'd worry about. Expenses are.
If you're underwriting flat top line but still penciling 2-3% expense growth, that's not conservative, that's just a slower bleed. Especially in Florida where insurance runs more than double the national average. Flat rent plus real expense inflation means your NOI shrinks every year you hold it. Stress the expense side as hard as you're stressing rent.
Also, and this one's in your own backyard, Tampa isn't flat. It's negative. Asking rents dropped 1.3% in Q1, biggest quarterly decline since late 2023, and about half the listings out there are running concessions. So if you're underwriting to asking rent you're underwriting to a number nobody's collecting. Effective rent is the only one that counts.
Honestly though, everybody says they underwrite flat rents and then sticks an exit cap 50bps tighter than entry. The fantasy usually isn't in the rent line.
One bright spot: Tampa permits were down 41% year over year in Q1, so 2027 and 2028 deliveries should thin way out. That's a reason to make sure you survive to the back half of the hold. Not a reason to pay up today.
- Lender · Tampa/Saint Petersburg, FL · Member since 2014 · 356 posts · 148 votes3mo
@Benjamin Sussman Great points and what you've shared I've found to be true in our market. I am seeing both asking rents move and concessions, so effective rents are already below what the listings suggest. Although, just because concessions are offered, doesn't always mean they're applied. For example, we offered concessions if they signed by a specific date to incentivize getting them rented sooner. For both listed rents, they signed after the concession offer AND on both, they negotiated the price lower which we agreed to, to avoid further vacancy.
- Lender · Tampa/Saint Petersburg, FL · Member since 2014 · 356 posts · 148 votes3mo
@Jaron Walling Completely agree and that is what we're seeing in the St.Pete/Tampa market as well. I'd much rather price it under rents and be able to have a bigger pool of quality tenants. Congrats on getting your unit filled!
- Real Estate Agent · Memphis · Member since 2026 · 591 posts · 347 votes3mo
I'm a lot more conservative on rent assumptions than I was a few years ago. If a deal only works because rents might increase in the next year or two, it's probably too thin for my comfort.
I'd rather underwrite to today's achievable rents—or even slightly below if there's a lot of new supply or concessions in the market. Then, if rents do grow, that's upside rather than something the investment depends on.
I also think this puts more emphasis on operational improvements. Better expense control, lower vacancy, and solid tenant retention can have a bigger impact on returns than trying to squeeze out another $50–100 in monthly rent in a flat market.
- Lender · Tampa/Saint Petersburg, FL · Member since 2014 · 356 posts · 148 votes3mo
@Jorge Vazquez Managing 500 properties definitely gives you insight as to what's happening in the market. I like your point about focusing on occupancy and controlling expenses instead of relying on rent growth. I hadn't though about strategically using 15 or 17 month leases which I think is smart to time the renewal.
Out of curiosity, are you still seeing investors actively buying in Tampa or have more of them shifted into "wait and see" mode?
- Lender · Tampa/Saint Petersburg, FL · Member since 2014 · 356 posts · 148 votes3mo
@Chris Seveney I think that's the smart way to do it right now.
- Lender · Tampa/Saint Petersburg, FL · Member since 2014 · 356 posts · 148 votes3mo
Thanks for sharing your perspective. I'm seeing something similar firsthand here in St. Pete. Between a wave of new apartment buildings coming online and net migration slowing from what we saw a few years ago, there's been a shift in the supply/demand balance. I've actually seen rents come down from their peak in parts of my own rentals.
I think it's a good reminder that deals need to work based on today's rents and realistic assumptions, not on hoping for the kind of appreciation and rent growth we experienced over the last decade. It'll be interesting to see how markets with a lot of new supply perform over the next couple of years as that inventory gets absorbed.
To clarify, you're now underwriting with 4 years for the first time, meaning you're becoming more optimistic? What's has you shifting your assumption?Quote from @Amber Stout:
Thanks for sharing your perspective. I'm seeing something similar firsthand here in St. Pete. Between a wave of new apartment buildings coming online and net migration slowing from what we saw a few years ago, there's been a shift in the supply/demand balance. I've actually seen rents come down from their peak in parts of my own rentals.
I think it's a good reminder that deals need to work based on today's rents and realistic assumptions, not on hoping for the kind of appreciation and rent growth we experienced over the last decade. It'll be interesting to see how markets with a lot of new supply perform over the next couple of years as that inventory gets absorbed.
To clarify, you're now underwriting with 4 years for the first time, meaning you're becoming more optimistic? What's has you shifting your assumption?>To clarify, you're now underwriting with 4 years for the first time, meaning you're becoming more optimistic? What's has you shifting your assumption?
Correct on the more optimistic but I have not yet used 4 years but i am considering it. The more optimistic is in the time span remaining. Note if I use 4 more years, I am still one year longer than my initial 5 year number (2 years already, 4 years to go = 6 total years). My market is 2 years flattish appreciation and 2 years flattish to slightly negative on rent. 5 additional years would put it at 7 years. The longest ever non appreciating time in my market was under 8 years at the GFC. Do we think this period will rival the recovery period for GFC? do we think it could be the longest ever in my market? I do not know.
I am glad to already have a fair amount of property and money and have no pressure to make my underwriting more aggressive in order to complete a purchase. It is a challenging period for RE investors and I am fine sitting on the sidelines on new acquisitions if nothing meets my standards (my standards are high as I usually desire investment recovery in no more than 4 years).
The new housing builds in my market have slowed down, but the state this week just passed a developer financing bill that may give it a modest boost (I have seen estimates that it could save up to an average of $40k per home, but that estimate came from people in support of the new bill (so I suspect it is at the optimistic end of range to help the bill pass)).
4 years more is 6 years total in my market. 5 years more is 7 years total in my market and basically the recovery period of the GFC. The GFC seemed like such a crisis compared to this. Do we think the recovery times can be similar or exceed the recovery time of the GFC.
How long are you expecting this flat to slight decline to last in your market?
My recommendation has not changed for RE investors to do conservative underwriting. While a few years ago conservative underwriting may have meant 2% appreciation and rent growth, today in many markets that is aggressive in the near term and I have been using 0% since some point in 2022 (it was a little early for my market as 2023 had modest appreciation).
Be careful with your money. Vet your investments and partners thoroughly.
Good luck
- Lender · Tampa/Saint Petersburg, FL · Member since 2014 · 356 posts · 148 votes3mo
@Dan H. I appreciate you taking the time to clarify. That's a helpful distinction between stress testing a deal and what you actually expect to happen over the hold period. I also like your point that "conservative" underwriting changes depending on the market cycle. This would be my first "down" cycle so it's really helpful to understand how other's are underwriting/thinking about investments.
In St. Pete, I'm planning for flat to slightly declining rents over the next 12-24 months just based on what I'm seeing with new supply and slower demand. I also think there is an uncontrollable which is hurricanes. Since the back to back hurricanes in 2024 we've seen the market shifting since then. Beyond that, I would expect the market to eventually normalize. I just don't know exactly when.
Thanks again for the thoughtful perspective.
- Lender · Tampa/Saint Petersburg, FL · Member since 2014 · 356 posts · 148 votes3mo
@Troy DeLong Thanks for sharing, Troy. It seems like market dynamics are so localized right now. Here in St. Pete, I've actually experienced the opposite in parts of my own portfolio. Between a lot of new apartment supply coming online and slower net migration than we've seen over the last few years, I've seen rents come down from their peak.
It's interesting to hear markets like Lansing are still seeing steady growth. Makes me think underwriting has become much more market specific than it was a few years ago when it felt like rents were climbing almost everywhere.
- Lender · Tampa/Saint Petersburg, FL · Member since 2014 · 356 posts · 148 votes3mo
@Bill B. That's a great distinction and appreciate you bringing that up. I don't think underwriting flat rents mean I expect rents to stay flat forever, it's more of a stress test to make sure the deal still works if rent growth takes longer than expected.
In my market (St. Pete), we've actually experienced declining rents in parts of our portfolio over the past year due to lots of new apartment supply and slower net migration, so it's made me even more conservative upfront. If rents outperform my assumptions, amazing. If they don't, I know I didn't buy a deal that depended on rent increases/optimistic projections to work.
I do agree with you that over a 7-10 year hold, I'd expect some level of rent growth. I just don't want to need it for the investment to make sense.
- Investor · San Diego · Member since 2020 · 97 posts · 62 votes2mo
@Amber Stout that distinction is the useful part, and it is exactly what published rent data misses. A concession that gets advertised and then negotiated away on top of an already reduced asking rent means the effective rent moved twice while the listing history only records it once. Anyone reading a market report is seeing maybe half the move.
Practically it argues for treating your own signed leases as the comp set rather than any index, since you are one of the few people who ever sees the final number. Even four or five signings a year logged as asking rent, concession offered, concession actually taken, and final signed rent will show you where your submarket is heading before any report does.
Is the negotiating pressure coming mostly from renewals or from new applicants? Those two usually break differently, and if it is new applicants doing the pushing, that reads as a supply signal rather than a retention problem.
- 2moJimmy LieuBusiness MemberReal Estate Agent · Columbus, OH · Member since 2019 · 3k+ posts · 2k+ votesSo glad you posted this! I think that's the right mindset. I'm underwriting assuming today's rents, and in some cases I'll even stress test with flat rents for the next couple of years. If a deal only works because I'm counting on aggressive rent growth, I usually pass. Rent growth is a bonus, not part of my investment thesis. What has changed for me is being a little more selective on acquisitions and paying closer attention to cash flow on day one, operating expenses, and having a healthy reserve for unexpected costs. If rents outperform, that's great, but I'd rather be pleasantly surprised than disappointed. Happy to connect and answer any questions you have!
Quote from @Amber Stout:
I was listening to a podcast this morning discussing how rent growth has largely flattened in many markets with labor market softness and affordability playing a role. Additionally, it may continue to be flat in many markets for the unforeseeable future.
For those actively buying rentals today,
- Are you underwriting with flat rents for the next 12-24 months?
- Has this changed your acquisition criteria at all?I think this is a good reminder that deals should work based on today's numbers (and possibly be conservative for lower rents) not future rent increases that may or may not happen.
Curious what everyone else is seeing in their markets.
Jimmy Lieu, Red 1 Realty4.9121 Reviews
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