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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  • Mitch Kronowit
    SFR Investor · Orange County, CA · Member since 2009 · 1k+ posts · 1k+ votes
    15y

    Just to update my post from earlier this year, we raised the rent on two of our rentals recently and our most recent vacancy went faster, and for $55 more a month, than planned when we bought the place.

    We're still a little concerned that one of our tenants decided to go month-to-month on their lease, but they are a family of five (1 in college) that came from a large 5 BR house and are currently "shoehorned" into our 3 BR rental, so I understand their desire to find a larger place.

    0Reply
  • Dee Xixi
    Real Estate Investor · waltham, MA · Member since 2009 · 212 posts · 8 votes
    15y

    Dear fellow,
    When you guys are talking about class A-B-C & warzone locations. Can we be more precise about the counties or cities. This will help out state investors.
    Thanks

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

    The articles mostly reference class A in primary markets, but the lesser classes and markets are following the trend. Do you have a specific market in mind?

    0Reply
  • Dee Xixi
    Real Estate Investor · waltham, MA · Member since 2009 · 212 posts · 8 votes
    15y

    John, I am looking into the Detroit-Atlanta-Charlotte & Texas market. Feel free to share your opinion if you are familiar with those markets.
    Thanks

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

    BP has active members in each of these markets. I'll address Texas later after I am done driving.

    0Reply
  • 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.

    4Reply
  • Ben Kevan
    Investor · CA · Member since 2010 · 150 posts · 40 votes
    15y
    Originally posted by Jon Klaus:
    BP has active members in each of these markets. I'll address Texas later after I am done driving.

    You can drive and do BP on a mobile device? That's one of my biggest gripes with BP.com. It doesn't do well on my BlackBerry. I've done it and it's painful.

    0Reply
  • Jon Klaus
    OP
    Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
    15y
    Originally posted by Ben Kevan:
    Originally posted by Jon Klaus:
    BP has active members in each of these markets. I'll address Texas later after I am done driving.

    You can drive and do BP on a mobile device? That's one of my biggest gripes with BP.com. It doesn't do well on my BlackBerry. I've done it and it's painful.

    I was sitting at a stop light on the way to Home Depot :roll:

    0Reply
  • Mitch Kronowit
    SFR Investor · Orange County, CA · Member since 2009 · 1k+ posts · 1k+ votes
    15y

    iPhone, Ben. iPhone.

    (Typed on Mitch's iPhone)

    1Reply
  • Bryan Hancock
    Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
    15y
    Originally posted by Ben Kevan:
    You can drive and do BP on a mobile device? That's one of my biggest gripes with BP.com. It doesn't do well on my BlackBerry. I've done it and it's painful.

    I actually switched from my Blackberry to the HTC EVO for this very reason. I kept wanting to read BP threads while I was away from home and it was very painful on a Blackberry. The screen would zoom all the way in and you had to start over.

    The EVO has some nice features, but I still really like my old Blackberry better :cry:

    0Reply
  • Rich Weese
    Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
    15y

    Jon Klaus or others- I'm having a teleconference with my professional mgmt team this afternoon. Any of the Dallas/Garland members have current, special occupancy rates for Class "C" properties. I want to seem like I have SOME info about the area my units are in! Rich

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

    Rich, Garland occupancy rates are very strong right now. I'll get back with you shortly on specifics.

    0Reply
  • Rich Weese
    Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
    15y

    Thanks my friend.

    0Reply
  • Jon Klaus
    OP
    Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
    15y
    Originally posted by Rich Weese:
    Jon Klaus or others- I'm having a teleconference with my professional mgmt team this afternoon. Any of the Dallas/Garland members have current, special occupancy rates for Class "C" properties. I want to seem like I have SOME info about the area my units are in! Rich

    Nationalrelocation.com says Garland's rental vacancy rate is 3.5%, but doesn't specify whether that is for SFRs, multi-family or both. Vacant housing units are 2059 out of a total of 75,277.

    Marcus & Millichap reports that DFW apartment vacancies dropped from 9.7% to 7% last year, and should drop to 6.1% by the end of this year. Effective rents should increase 3.7% this year to $721/mo. Rents were up 1.8% last year.

    This increase in the market will be driven by the addition of 77,000 jobs in 2011. Combine this with only 6200 apartment units added to the market over the trailing 12 months. The preceding 12 month period added 15,300 units. Growing demand with very little growing supply will push occupancies and rental rates up.

    Rich, I will email you a PDF with more detail.

    0Reply
  • Rich Weese
    Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
    15y

    Thanks Jon. It helped out greatly. I also sent you a reply on the other item....Rich

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

    More:

    Improving job market ignites sharp rise in apartment rents
    http://www.usatoday.com/money/economy/2011-05-04-rental-costs-rise_n.htm

    Miami Renters Feel the Heat
    http://www.businessweek.com/lifestyle/content/may2011/bw2011055_505745.htm

    Manhattan's apt.-vacancy rate? Less than 1%
    http://www.crainsnewyork.com/article/20110511/REAL_ESTATE/110519971/0/REAL_ESTATE

    1Reply
  • Mark Fitzpatrick
    Residential Lender · Irvine, CA · Member since 2011 · 56 posts · 34 votes
    15y

    I've also read that many people burned in the housing crash are now completely done with homeownership and will be renters for the rest of their lives. Young people coming out of college often are burdened with debt and have damaged credit and/or little cash, so they have to rent as well. Seems to be there are a lot of factors pointing to more rent demand in the future.

    Where I'm invested, my prop mgr has been able to keep us fully leased, even in advance, but there's been a lot more competition from "reluctant landlord" homeowners who have had trouble selling because of the tough financing conditions. Where a 2-bedroom apartment might rent for $600 to $700, some luxury homes are renting for $1200 because the homeowner is desperate to move and just wants somebody to at cover at least part of the mortgage.

    1Reply
  • Jon Klaus
    OP
    Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
    15y

    Updating this thread: What are you seeing now with rents in your market? Stability? Inflation? What about occupancy rates?

    0Reply
  • Rich Weese
    Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
    15y

    Hi Jon- 2 vacancies out of 154 apts. No vacancies out of 40+ sfrs. As one becomes vacant, rents raised 3-6% with no resistance. All in TX. Rich

    0Reply
  • David Myre
    Dallas, TX · Member since 2011 · 12 posts · 1 vote
    15y

    I have seen rental prices creep up recently, and they still seem to be going quickly.

    0Reply
  • Jon Klaus
    OP
    Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
    15y
    Originally posted by Rich Weese:
    Hi Jon- 2 vacancies out of 154 apts. No vacancies out of 40+ sfrs. As one becomes vacant, rents raised 3-6% with no resistance. All in TX. Rich

    Wow, you are literally at 99%.

    0Reply
  • Jon Klaus
    OP
    Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
    15y
    Originally posted by David Myre:
    I have seen rental prices creep up recently, and they still seem to be going quickly.

    David, what type of properties for how much rent?

    0Reply
  • Robert Steele
    Investor · Lucas, TX · Member since 2010 · 620 posts · 352 votes
    15y

    I can't seem to keep the up with the rent increases here!

    I use MLS leased comps and usually ask at the top of the market (my SFHs are nice). I have started getting tenants offering more than my asking rent. I haven't encountered that ever. It doesn't take more than a few days to get a deposit.

    I recently did a round of comps and one place that I have been renting out for $1,350 to $1,375 these past three years now reads as a $1,650!? Other properties I have are 5 to 10% below market.

    Remember this is not because I ask too low. It's because rents have been going up! Most of my leases are 2 year. I am only doing 1 year from now.

    1Reply
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