50 percent rent increase OK?

23 Replies

I live in midtown Sacramento and pay low 700s for 1 BR. Recently my neighbor got a letter for her rent going up from 700 to 1090, an increase of over 50%!!!

What are some ways to avoid this or negotiate before I get a letter next? Should I go try sign a lease? Any other suggestions? PM me if you have connections at property management companies who may be able to help. :-) 

Rents are about to blow up in Mid Town. Many of the long time building owners are selling at record highs. When a new owner is paying $100k+ per unit you can bet rents won't stay at $700 for long. Studios are on their way to $800+ and 1's will be $1000+. The market is tight and PM's are being pushed by new owners to push rents for the first time in a long time. I have been trying to buy in Midtown or Alkali Flats and most of the buildings are under market and have deferred maintenance. Rents will need to rise 30-40% to justify the pricing and capex.

Minka,

If the neighbor is in the same development I would contact the property management company and be upfront with them.  If you are not in a lease then ask if you should be expecting a notice also.  They may tell you if the owner is looking for that high of an increase. 

That is a very high increase and it makes me wonder if the owner is looking to come in and do significant upgrades or is looking to sell the place.  I can't see too many people staying in the units with that high of an increase.  There are a lot of vacant units downtown right now. 

If it were me I'd keep my eyes open for other deals around the area you are in.  If you can show the management company the rents are reasonable they may not raise your rent but I don't think that is the case.  That high of an increase sounds like the owner either wants to make a big change in the development or they wanted that tenant out.  I would raise the rents significantly if I had issues with a specific tenant I wanted to get rid of.  The tenant would either move or I would get a big increase to make it worth my time to deal with a bad tenant.

You should get at least a 60 day notice for that big of an increase if they do notify you.  Plenty of time to move but I understand moving is a pain.

Originally posted by @David Hutson :

Minka,

If the neighbor is in the same development I would contact the property management company and be upfront with them.  If you are not in a lease then ask if you should be expecting a notice also.  They may tell you if the owner is looking for that high of an increase. 

That is a very high increase and it makes me wonder if the owner is looking to come in and do significant upgrades or is looking to sell the place.  I can't see too many people staying in the units with that high of an increase.  There are a lot of vacant units downtown right now. 

If it were me I'd keep my eyes open for other deals around the area you are in.  If you can show the management company the rents are reasonable they may not raise your rent but I don't think that is the case.  That high of an increase sounds like the owner either wants to make a big change in the development or they wanted that tenant out.  I would raise the rents significantly if I had issues with a specific tenant I wanted to get rid of.  The tenant would either move or I would get a big increase to make it worth my time to deal with a bad tenant.

You should get at least a 60 day notice for that big of an increase if they do notify you.  Plenty of time to move but I understand moving is a pain.

I like the idea of contacting the PM company but I also think that can go two ways 1) what if they "flag" me as a tenant who will have his rent increased next - in case they forgot about me. 2) 

Good point on high increase, incomes have not gone up as the rents have gone up, so it's definitely a strange place in midtown. I agree with @Joe B. 

Who would be the decision maker in the PM company for this? I'm wondering if the Property Manager even has any authority on this thing or I need to talk to someone else. This is a big midtown Property management company. 

Like Joe said, Midtown rents are going up. I've heard from multiple friends that their fairly crappy apartments are going up. 700 to 1090 seems really high, unless the original amount is under market based on the quality of the apartment.

@Joe Bertolino

100k per unit in Midtown? I haven't seen anything that cheap in years. Am I missing out on something?

Originally posted by @Derek Daun :

Like Joe said, Midtown rents are going up. I've heard from multiple friends that their fairly crappy apartments are going up. 700 to 1090 seems really high, unless the original amount is under market based on the quality of the apartment.

@Joe Bertolino

100k per unit in Midtown? I haven't seen anything that cheap in years. Am I missing out on something?

 As per the letter from the PM company, their "market analysis" supports the 1095 rent. I know there are people who will pay that much but damn this is Sacramento - not some Bay Area town. 

The new arena, accompanying developments and rail yard development will completely transform downtown and midtown in the next 5-10 years. Pricing has already jumped but I think rents and per unit pricing will jump again as those projects open up. The job base and demand supports the higher rents. Those who can't afford it will be pushed out. Looking long term, I think investing in West Sac right across the river is a good plan.

Like Chris said, it would be a lot more if this was the Bay Area.

If you look around, midtown has similar amentities to any given neighborhood in the San Francisco. It's a bargain compared to there, and is only getting better. 

@Joe Bertolino Not to sidetrack this post too much, but where would recommend finding listings like 2220 L street? It's not listed for sale on any of the usual MLS sites I frequent. Also, according to the descriptions I can pull up, not all of the units in that place have bathrooms.

Broker sent it to me and I walked it.  Nice building.   I think it was 2 1 bed,  7 studios and 5 SRO units that share 2 bathrooms and a kitchen.  They are leased to some residents at Sutter General.  Even the SRO's will be going to $600 soon.   

@Minka Sha ,

As far as the PM forgetting about you and not increasing your rents, that's highly unlikely.  They run reports and can see what everyone is paying in a complex.  Why would they choose someone else and not you to get more money?  You could ask some of your neighbors that your are on good terms with about their rents, if you comfortable with that and can talk to them.  You can also look to see what vacant units are listed for, if there are any.

As for who to talk to at the PM company, I would talk to the most senior person you can get the attention of.  There is no one set person who determines the rent increases, it's different across the companies, often determined by the size of the company.  For the properties I manage for other people, it's usually me who suggests a rent increase as the PM.  I usually get a feel for or discuss the owner's desires and tolerance for rent increases along with my opinions of the market at the time.  Some owners are happy with the rents and don't want to take a chance on turning over a unit that could cost $1,500 for a $25 increase if the tenant decides to move.  Others want an increase every year and are happy to have the rent increased whether the tenant moves or not. 

A lot has to do with the market and supply and demand.  If there are many available units in an area I strongly recommend against an increase unless the rents are already low or the area supports it.  If there are not a significant number of available units available or rent hasn't been raised reasonably then I recommend it.

Currently, I see a lot of for rent signs when I am driving around downtown so if they decide to raise the rents you have a lot of options.  The PM should know that it will take time and money to turn the unit over so unless they have a waiting list or other people who are willing to pay much more it may not be worth it to give you a large rent increase since you can find another place to live fairly easily.

Originally posted by @David Hutson :

@Minka Sha,

As far as the PM forgetting about you and not increasing your rents, that's highly unlikely.  They run reports and can see what everyone is paying in a complex.  Why would they choose someone else and not you to get more money?  You could ask some of your neighbors that your are on good terms with about their rents, if you comfortable with that and can talk to them.  You can also look to see what vacant units are listed for, if there are any.

As for who to talk to at the PM company, I would talk to the most senior person you can get the attention of.  There is no one set person who determines the rent increases, it's different across the companies, often determined by the size of the company.  For the properties I manage for other people, it's usually me who suggests a rent increase as the PM.  I usually get a feel for or discuss the owner's desires and tolerance for rent increases along with my opinions of the market at the time.  Some owners are happy with the rents and don't want to take a chance on turning over a unit that could cost $1,500 for a $25 increase if the tenant decides to move.  Others want an increase every year and are happy to have the rent increased whether the tenant moves or not. 

A lot has to do with the market and supply and demand.  If there are many available units in an area I strongly recommend against an increase unless the rents are already low or the area supports it.  If there are not a significant number of available units available or rent hasn't been raised reasonably then I recommend it.

Currently, I see a lot of for rent signs when I am driving around downtown so if they decide to raise the rents you have a lot of options.  The PM should know that it will take time and money to turn the unit over so unless they have a waiting list or other people who are willing to pay much more it may not be worth it to give you a large rent increase since you can find another place to live fairly easily.

 Thank you for the detailed reply! 

so rent is officially gone from 725 to 1095. Private message me if you know any cheaper places in Sacramento midtown! Thank you in advance. 

That is totally crap.  I'm curious as to whether anyone will want to stay there for that much.  Not much you can do other than move.  I'll keep my eyes open for a good place.  You should start walking the neighborhoods that you like looking for a new home.

I wonder if your place wasn't underpriced to begin with.

Back in 2007 my wife was paying ~675 for a pretty crappy 1BR. And that was quite a while ago, both in time and the amount midtown has picked up. Maybe the market rate for your place should been closer to 900, and in which case an increase to 1095 isn't as extreme.

@Minka Sha

On a related topic, I've been trying to figure out something about the midtown market for a while now, and I was wondering if you might be able to shed a little insight.

I realized the other day that I don't actually know anyone that still lives in Midtown any more. Most of us have settled down in close ring suburbs (East Sac/Land Park Arden/Natomas/South Sac) I'm also involved with a local theater company where I meet a lot of people in their mid to late 20s. These are the types of people who would have all lived in Midtown 10 years ago when I lived there. None of them do now. A lot of them are living in Oak Park, Arden, or with their parents.

So what I'm wondering, is where are all these 20 something year olds living in Midtown getting the money to spend on $1500 apartments (or $1095 apartments)? Where do they work? Are they commuting out to other areas for work? Are the jobs located downtown? State workers? Living beyond their means? Mom and Dad money?

Originally posted by @Derek Daun :

@Minka Sha

On a related topic, I've been trying to figure out something about the midtown market for a while now, and I was wondering if you might be able to shed a little insight.

I realized the other day that I don't actually know anyone that still lives in Midtown any more. Most of us have settled down in close ring suburbs (East Sac/Land Park Arden/Natomas/South Sac) I'm also involved with a local theater company where I meet a lot of people in their mid to late 20s. These are the types of people who would have all lived in Midtown 10 years ago when I lived there. None of them do now. A lot of them are living in Oak Park, Arden, or with their parents.

So what I'm wondering, is where are all these 20 something year olds living in Midtown getting the money to spend on $1500 apartments (or $1095 apartments)? Where do they work? Are they commuting out to other areas for work? Are the jobs located downtown? State workers? Living beyond their means? Mom and Dad money?

I have noticed an influx of young people in midtown, e.g., lots more young people visible and also people playing games on their porch - heck, I saw beer pong being played on 23 and P the other day! 

Trust me, I am wondering the same thing about sustainable income of midtown renters. Technically, if 1 BR are going for 1200 per month implies the average income of a person renting (reliably) has to be 3 times the rent or 3600 per month after taxes, or people are making at least 60-70k per year. Young 20 somethings don't usually start at that level unless they are doing professional entry-level jobs. 

May be Sacramento midtown is turning into Walnut creek / Rocklin, new money families or rich dad kids are moving in? Who knows, I'd rather BUY a place than paying 1200 buckaroos per month for a place (cough...suburb) called Sacramento.

The guideline for the general public is 28% of GROSS income. So to afford $1200 a month you need to make about $50k a year. These days that means just about any state job. A first year school teacher in Sacramento makes $44k. Most college grads are starting at $42k. Bartenders and hairstylist at the nicer spots can easily afford it. I don't know what will happen in mid town/downtown as another 10,000 units are built in the next 10 years, but right now the demand is much, much higher than the supply. Most can raise rent 30-50% and still have little problem finding tenants unless it is a total dump. You can move, the landlord will have a dozen people in line. Occupancy rates are over 95% in the grid.

Wow. For  that much rent you can find a nice two bedroom in Natomas. But rents are definitely going up all around for apartments. I use to rent two bedroom in Natomas in 2011. It was 850$. Now its like 1k or little higer. Not that big of a jump but still pricey for apartment. I would rather rent a house but I know there is more maintenance.

Originally posted by : @Derek Daun

I realized the other day that I don't actually know anyone that still lives in Midtown any more. Most of us have settled down in close ring suburbs (East Sac/Land Park Arden/Natomas/South Sac) I'm also involved with a local theater company where I meet a lot of people in their mid to late 20s. These are the types of people who would have all lived in Midtown 10 years ago when I lived there. None of them do now. A lot of them are living in Oak Park, Arden, or with their parents.

So what I'm wondering, is where are all these 20 something year olds living in Midtown getting the money to spend on $1500 apartments (or $1095 apartments)? Where do they work? Are they commuting out to other areas for work? Are the jobs located downtown? State workers? Living beyond their means? Mom and Dad money?

Me! I still live in Midtown. We're buying in Midtown too. I'm happy to give you a little insight... My husband (then boyfriend) and I moved to midtown in 2011. We found a great little 1 bed/1bath/750'sq for $1145. At the time we made roughly $50k combined, so we were stretching our budget, but wanted to move to the area for the restaurants, nightlife, etc. We both work about 15 min outside of midtown. (Not a bad commute when you're going against the downtown/gov traffic each way.) Four years, a job change, and several raises later that $1145 is no problem at all. We're easily living BELOW our means and saving nearly 50% of our income. We're also both in our late 20s. 

There are a lot of young professionals in Midtown. I think $1500/month is a bit steep for, say, a college student, but a 20-something with a decent 9-to-5? Perfectly reasonable. And keep in mind that there are very few people living on their own in Midtown. Most apartments are rented by couples or people with roommates. So let's say a young professional is making $30k per year, and following conventional budgeting does not spend more than 30% of their income on housing. That means their monthly rent budget is maxed out around $750. But rent with a significant other/roommate making the same income, and now your budget is $1500/month. Living within their means, no mom & dad money required. ;)

Originally posted by @Jessica Sorensen :
I think $1500/month is a bit steep for, say, a college student, but a 20-something with a decent 9-to-5? Perfectly reasonable. 

Yeesh.  That covers my mortgage and then some.