Double-digit rent hikes are on the way

General Landlording & Rental Properties
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Double-digit rent hikes are on the way

Jon Klaus
Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes

http://www.marketwatch.com/story/double-digit-rent-hikes-are-on-the-way-2011-01-13

A perfect storm is brewing for rents to rise.

Some highlights:

"Multifamily developers broke ground on just 114,000 units in the United States in 2010, a figure so low that it wouldn’t account for all the multifamily units lost last year to the wrecking ball or natural disasters."

“I’ve never seen so much pent-up demandâ€

“Why the demand? It’s impossible to buy a home because it’s darn near impossible to get a mortgage,†Jacobson said. “And we have this huge population in the biggest renter cohort†about to hit the market."

“When we open a 100-unit project, with three- and four-bedroom units, we will have 800 applicants every single time, wherever we are building across the country,†he said. “Without more investors to provide equity and more capital financing it is going to be very difficult to meet that demand.â€

This is obviously good news for investors and landlords, but is it true in your market? Personally, I have 100% occupancy, and it doesn't tale long to lease when one comes open.

What are you seeing in your market? Have you increased your rents? Do you buy in to double digit increases coming soon?

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David Beard
Investor · Cincinnati, OH · Member since 2010 · 1k+ posts · 928 votes
15y

You can't effectively classify entire counties or cities as A,B,C,D. These designations apply at the neighborhood level, and sometimes block by block the closer you get to the urban core in major cities. It reflects in aggregate: location, as well as property condition, architecture, and amenities (i.e. appeal).

Small non-institutional Investors generally love to find cheap C buildings in A/B locations.

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  • Raymond B.
    FL · Member since 2009 · 2k+ posts · 357 votes
    15y

    Linked:

    http://www.mortgagenewsdaily.com/01312011_vacancies_and_homeownership.asp

    Ray

    0Reply
  • Jon Klaus
    OP
    Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
    15y

    Great report. Thanks Ben.

    0Reply
  • Steve Babiak
    Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    15y

    Interesting how the "home ownership graph" fluctuated around 65% +/- 1% until around the year 2000; and now it is heading back down to that same range ...

    0Reply
  • Ben Kevan
    Investor · CA · Member since 2010 · 150 posts · 40 votes
    15y

    Another one today:

    http://www.cnbc.com/id/41355854

    0Reply
  • Brian Skinner
    Member since 2011 · 2 posts · 0 votes
    15y

    me and my wife are buying houses for 10-15 thousand at 6.5% and renting at 600.00 a month, do the math. these are C properties at best and renters are kicking down our door and blowing up our phones trying to get in. Mortgages are impossible to get right now unless you have a 720 FICA or better. Who has that? I do.

    0Reply
  • Raymond B.
    FL · Member since 2009 · 2k+ posts · 357 votes
    15y

    Brian,
    Can you tell me where you're buying those homes?

    Thank you,
    Ray

    0Reply
  • Jon Klaus
    OP
    Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
    15y

    Another bullish article on the rental market.

    http://money.cnn.com/2011/03/15/real_estate/rent_rise_housing/index.htm

    2Reply
  • Bryan Hancock
    Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
    15y

    Rents should do very well with the inflation coming and the lack of building in my area. Net debtors should do quite well in addition to getting the rent bumps.

    0Reply
  • Jon Klaus
    OP
    Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
    15y

    Th Wall Street Journal said it first:

    "The even bigger risk would be if the collapse of the single-family housing bubble led to the creation of one in rental properties."

    http://online.wsj.com/article/SB10001424052748703512404576209034062511522.html?mod=WSJ_RealEstate_LeftTopNews

    0Reply
  • Jason Miller
    Investor · Aurora, CO · Member since 2009 · 200 posts · 74 votes
    15y

    I know in our market things should start rising soon. Denver vacancy at all time low of 2%.

    http://www.denverpost.com/breakingnews/ci_17462257

    0Reply
  • Tod R.
    Investor · Southlake, TX · Member since 2009 · 950 posts · 338 votes
    15y

    Big institutional investors are following the trend. There is plenty of money(equity and debt) for new multifamily construction in strong markets. We just sold a build and lease up project in San Antonio and are about to close on land for another in SA. We are working on other deals in San Antonio, Austin and DFW. The big money guys are eager to invest!

    2Reply
  • Bryan Hancock
    Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
    15y

    That is because the smart money knows now is the time to invest!

    0Reply
  • Dustin Gott
    Involved In Real Estate · St. Paul, MN · Member since 2010 · 65 posts · 15 votes
    15y

    Our local MLS has added a rentals section as there was growing demand among frustrated real estate agents that were seeing their sales turned into rentals somewhere else. They get a marginal fee for bringing in the renter but it is nice because now I can see what places are actually renting for not just the asking price. Is anyone changing their thinking on length of the rental agreement? We typically look for a year agreement but with this news should we look for shorter terms so we can raise rents more often?

    0Reply
  • Jon Klaus
    OP
    Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
    15y

    A few more recent articles:

    Vacancies fall, rates rise with area rental properties

    http://www.starnewsonline.com/article/20110325/ARTICLES/110329787/1155?Title=Vacancies-fall-rates-rise-with-area-rental-properties

    Number of available Treasure Valley rentals is shrinking --3% vacancy rate here

    http://www.idahostatesman.com/2011/03/25/1579770/number-of-available-valley-rentals.html

    Tight Rental Market Squeezes Tenants

    http://www.housingpredictor.com/2011/rental-market.html

    Rentals Rule the Chicago Market as Housing Sales Stall

    http://www.chicagonow.com/blogs/todays-chicago-woman-jobs-money-opinion/2011/03/rentals-rule-the-chicago-market-as-housing-sales-stall.html

    Rental Houses Heading Up In Price

    http://www.kpho.com/news/27270254/detail.html

    0Reply
  • Justin Case
    Real Estate Investor · Seattle, WA · Member since 2009 · 308 posts · 61 votes
    15y

    Has anyone experienced it first hand that it has been easier this year to rent your homes out?

    0Reply
  • Jon Klaus
    OP
    Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
    15y

    My market is absolutely stronger now than one year ago.

    0Reply
  • Bryan Hancock
    Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
    15y

    Austin's job market is booming and my rentals are all full. Hopefully that trend will continue. Our units in other Texas-based cities (Killeen, Ft Worth, etc.) are doing quite well too.

    0Reply
  • Jon Klaus
    OP
    Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
    15y

    I took a deposit on my only vacant home yesterday. This was about one hour after finishing the make ready.

    1Reply
  • Rich Weese
    Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
    15y

    All my properties have seen nice increase in occupancy.
    sfrs in Rio grande valley have been 100% full for a year or so. (40-50 homes)

    154 units in Garland (class C) have stayed pretty solid at 94-96% full.

    500 plus self storage units bought 18 months ago have increased from 55% to 87% full last month. Consistent upward trend.( Ft Myers, FL.)Rich

    1Reply
  • Bryan Hancock
    Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
    15y

    Great news Rich....I think we are in the low 90% occupancy for the product we own or co-own with others.

    0Reply
  • Ben Kevan
    Investor · CA · Member since 2010 · 150 posts · 40 votes
    15y

    I have 100% occupancy in my 2 unit :o).. lol.

    I've seen HUD accepting much lower offers then their typical 82% of listing. I'm wondering if this move is to get them sold to investors, to increase rentals on the market to keep rental prices tamed.

    0Reply
  • Bryan Hancock
    Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
    15y

    Here are more signs of rent hikes coming:

    Apartment Vacancies in U.S. Fall to Three-Year Low as Rental Demand Climbs

    0Reply
  • Jon Klaus
    OP
    Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
    15y
    Originally posted by Ben Kevan:

    I've seen HUD accepting much lower offers then their typical 82% of listing. I'm wondering if this move is to get them sold to investors, to increase rentals on the market to keep rental prices tamed.

    What a sensible plan. Hopefully that's what they are doing.
    0Reply
  • Michael Rogers
    Certified Public Accountant · Chattanooga, TN · Member since 2008 · 279 posts · 151 votes
    15y

    Cleveland, Tennessee has seen positive signs over the last year.

    I have been able to get modest increases on my 5 multifamily units and 1 single family home. The biggest difference I have seen is that it is so much easier to rent than it was 1.5 to 2 years ago. I remember it just being dead back then. I had one property sit empty 5 months before I could get a qualifying tenant.

    I purchased a small self storage center 8 months ago and it has gone from 15% occupied to 95% occupied currently. I'm turning people away right now. I hope to build an additional 14 units on the property in the next 3 months.

    Overall, I think things are definitely looking up.

    0Reply
  • Ben Kevan
    Investor · CA · Member since 2010 · 150 posts · 40 votes
    15y

    Interesting video from CNBC:
    http://www.mortgagenewsdaily.com/video/archive/2011/4/26.aspx#208911

    Speaking of rental properties, and HUD selling to investors (nearing the end). The title is: Renting: The New American Dream.

    They talk about rentals as landlord being the government (HUD).

    0Reply
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