Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
This investment fundamental 101 seems to be overlooked by some on BP. Inflation can cut your rental income in half every 15 years historically.
Your rental income today will not have the same buying power if it is not appreciating by at least 3%. Some say appreciation is just the icing on the cake. That whole cake will be cut in half in 15 years if there is no icing:). Hopefully it is more than 3% as this does not cover cap ex and the rest either. Some might overlook and some RE investment promoters tend to ignore this fact. Chasing short term cash flow numbers where it never appreciates can be very costly in the long run. Professional financial planners and advisors will cover this fundamental in the first five minutes.
@Matt R. And I've been calmly and politely suggesting a look see at appreciation and rent growth for years but the ungrateful ruffians gotta learn on their own.
@Account Closed Yes thanks for sharing your wisdom. I fell for the trap personally. Luckily I made the correction before I needed a long rope to get the F out. It is all too easy to get fooled with REI if you don't consider the sage advice from gentlemen like yourself. As they say "numbers don't lie" but some in this game edit numbers let's say when financial gain in their favor. The crap trap is alive and well still it seems. Thanks for keeping us educated in this matter.
I made a big mistake not keeping up with rents a few years ago due to health issues. Then, I found myself $200 under market on some properties. I had to make adjustments (fortunately the one that needed the fastest adjustment was on a month to month) which I implemented over a fairly short term ($190 a month increase within 5 months). Tenant stayed and is still there today. I have another that will need at least a 10% upward adjustment when the lease expires in Feb or March next year. Not raising rents is a disservice not only to the landlord but to the renter. When rents are raised a substantial amount in a short period it can be a shock to the tenant. Gradual yearly increases are easier for the tenant to understand and helps offset not only the destruction of our purchasing power but also increases in taxes, insurance, etc.