Do rents ever go down?
Seriously, everyone around here invests like rents are guaranteed to go up forever, do they?
Has anyone ever experienced a declining rent environment? what caused it?
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- Real Estate Broker
- Cody, WY
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Rents can - and do - go down. However, you won't see 50% decreases in rent like you would sales prices. It's more likely you'll see a 5 - 10% decline over a period of time.
If you listen to some of the seasoned pros with decades of experience, they'll tell you rents are least likely to decline in the middle-income bracket. I live in Wyoming and we were impacted by the energy field layoffs of 2015. Rents were going crazy, everything was renting fast, and prices were going up for a couple years. Then the layoffs happened and we were stagnant for one year and then started to decline the next year. I had to reduce prices on about 10% of my rentals just to get them filled and even then it was tough.
This is why it's important to cash-flow on day one. I see many investors saying they are buying properties with no cash-flow or even a negative cash-flow because they predict the market will continue to grow and they'll eventually gain a cash-flow and build equity. All it takes is a 5% downturn and they can lose their shirts.
- Nathan Gesner
