Stockton Rental Market - How much do apartments rent for today.

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Stockton Rental Market – From the Renters Perspective.

A few months ago I acquired seven additional units in Stockton, CA. Most of these units are, in my opinion under-rented. After I get them stabilized I plan to bring the rents closer to market, so I can at least have the idea that I am making some money:). In order to get some idea of what the current rents in Stockton are I spend a few hours on Craigslist plowing through FOR RENT posts. I find this to be a great indicator for rents in my segment. I was amazed, shocked almost, so I thought I’d share my findings.

Under $500 - Rooms

The only way to sleep under a roof for under $500 is to rent a room from someone. That’s it. No exceptions really.

$500 to $600 – Questionable Studios

Almost nothing under $600 either, a few questionable studios mostly.

$600 to $700 – Undesirable 1 Bedroom

Between $600 and $700 the 1 bedroom becomes available. Most of these are in apartment complexes like around Gateway or downtown. Nothing too desirable, bit finding a place to live under $700 where the owner pays W/S/G is possible.

$700 to $800 – Still Mostly 1 Bedroom territory, but some 2 Beds

Over $700 is where you start to see two bedrooms. Still a lot of 1 bedrooms though. Even some 3 bedrooms in god-awful areas like around Acapulco. Surprising how few 2 bedrooms 1 baths there were available at this price. There were a very few 2 bedroom / 2 baths in this segment but nothing structural.

$800 to $900 – Solid 2 Bedroom 1 Bath Territory

This is where it’s pretty easy to find a 2 bed 1 bath unit. Some bigger units and even the occasional tiny house, but that was the exception. Still most of the offering seemed to come from the large apartment complexes. Very few 3/2 duplexes to my surprise.

$900 - $1000 – A few Houses and 3/2’s.

Surprisingly few houses and 3/2 units.

$1000+ Houses and Everything Else

This is where houses really start and where I will stop my analysis, since I don’t compete in that market. What was most surprising to me is how many studios, 1 bedrooms and 2 bedrooms there still were in this segment…

My Conclusion

I had not checked rents for a while. The only rents I saw where those on rental listings for sale. And those typically lag behind the market quite a bit because the previous owner kept the rent similar to when the tenant moved in and did not raise it much. It turned out they lagged behind quite a bit more than I thought.

So what this craigslist dive tought me is that the Stockton rental market is hot and rents have gone up quite a bit. I was also surprised how little variation there was in the offerings and how little one can rent for say under $800 (utilities not included).

I try to look at this from the perspective of the tenant who’s rent I am about to raise and my conclusion is that I can go up quite a bit, even for units that are not totally redone. Tenants frankly don’t have a lot of options, unless they want to: A.) leave Stockton, or B.) want to seriously downgrade their lifestyle.

For example one of the buildings I just bought has two 2bd/2bth/2cargarage units in decent shape that are currently renting for $750. I now feel pretty confident that I can raise that to $850 without risking the tenant finding a better deal elsewhere. If they do leave I would start marketing the units at $895 for starters, just to see what would happen.

Anyway, I hope this was of some help to you. If it was, please click on the VOTE button, so I know where I should spend my time on:). Also, feel very welcome to comment what you are renting your units for in Stockton, so we can all compare notes:)...

Originally posted by @Rudy Jimenez :

Hi Chris,
I'm a realtor and contractor from Stockton and from reading your post I think your correct and you should be okay.

Thanks! And yeah, I think so too, especially since my units are nicer that a lot of the rent comps that I included in my analyses. All in all, I was really surprised how much rents had gone up across the board.

I just checked my rent roll, and I have 8(!) units that have 2 bedrooms that are renting for under $800. Then I did the math and found that if I raise the rent up to $800 for these 8 units I will generate another $515 in cash flow. And as long as no-one leaves, at no additional expense.

In general I like the idea of rewarding long term tenants for staying by keeping their rent under market. Long term tenants are *the best*, because I find that your saving on rehab and vacancy until you rent it again take a looooooong time to recoup. However this whole exercise did make me realize I probably do need to be a bit more aggressive on raising the rents on my legacy units (especially if I don't get any organic turn over (which I usually use to rehab and raise the rent to market). It's a delicate balance:).

Originally posted by @Embert Madison jr :

What do you do to rehab your units when a tenant leaves? On average. What costs are entailed?

This is great information.

 Thanks! (If you like the post make sure to hit the VOTE button so I know I am not just doing this to keep myself busy:) )

Anyway, rehab costs of the interior of a unit range between about $3000 for Carpet & paint, cabinet refinishing and new Formica counter tops.

You can easily take it to over 10K if you want to put in tile, replace all cabinets, add stainless appliances, square decora switches and plugs, put in granite counter tops and rebuild the kitchen fluorescent tube box into recessed lighting and put in a new bathroom. 

I have gone both routes, and found that sadly enough route 1 gives you more bang for your buck. Doing this (rehab instead of rebuild) does feel like kicking the can down the road, but then again, you could argue that all of life is just kicking the can down the road...:( 

Personally I really like to do the quality (rebuild) approach, but what I found is that if you do one thing quality, you need to do the next thing quality etc. etc. etc. For example if you are going to do the the 10K+ rebuild inside you will also want to get rid of those horrible aluminum windows. And when you do those, you might as well do the siding and if you do that you might as well paint the building, after that the old garage doors look really crappy so you are tempted to put in new ones, might as well add and electric opener while you are at it etc. etc. etc. Its basically the Rehab version of: "if you give a mouse a cookie":). Only in this version you are both the mouse AND the boy.:)

Originally posted by @Taye N. :

Hello this info is great, what area of Stockton are b and c neighbors?

I was thinking of multi-family in Stockton. But not sure where?

 Stockton actually does not work like that. Its block by block. If you tell me an address I can give you an idea. Use PM if you want. 

In General any multi family that make any sense cash-flow wise in Stockton is at least C-class. (no B). And even on those you will have a really hard time finding property that makes sense cash flow wise, unless the property is old and non conforming like and old Victorian. In that case you might still see a 1% rule property, but just know that it is only a 1% rule on paper. Once you factor in CapX and the headache the 1% will be gone. I wrote a few expansive posts on the Stockton market that you might want to browse over and you'll get the picture. Here is a link to one of those posts: Stockton Market Analyses

A comment on Criagslist it is the asked price. I know most will haggle for a discount if the landlord seems to be interested. The rent is not what advertised.  

The long term tenants often live on subsidized rent. They take care of the problems and pay on time. That is another reason that those not making the grades are politely escorted out eventually. One can add the improvement by charging a market rent.  Most tenants only care about interior features as counter top, new tile matter a lot and older carpet, original kitchen do not appeal to them.

  

Originally posted by @Sam Shueh :

A comment on Criagslist it is the asked price. I know most will haggle for a discount if the landlord seems to be interested. The rent is not what advertised.  

The long term tenants often live on subsidized rent. They take care of the problems and pay on time. That is another reason that those not making the grades are politely escorted out eventually. One can add the improvement by charging a market rent.  Most tenants only care about interior features as counter top, new tile matter a lot and older carpet, original kitchen do not appeal to them.

  

 That is actually not my experience. There is currently not shortage of tenants so they pay the asking price. With the market as it is right now I doubt if other landlords who are flooded with applications are in the mood to make concessions:)...

Also, my personal experience as far as what difference interior improvements make is different too. What I have personally experienced is that people want a save, clean place to live in an OK neighborhood. I have rehabbed units with granite counter-tops, all new luxury cabinets, quartz bath enclosures, stainless appliances design faucets, new wire closet shelf, nice 2" faux wood blinds instead of the mini blinds, new 18" porcelain tile 5" baseboard instead of the 80's 2" crap etc. etc. etc. I have also redone units by putting in new vinyl, carpet, paint and laminate counter-top + refinish the bathtub and 80's cabinets. And to my surprise I could charge just about the same amount of rent. Moral of this story; in my market duplex/triplex housing is a commodity. Make it safe and clean and get the most bang for your buck.  An additional advantage of this approach is that you do not have too much exposure if a tenant is rough on the property. 

Anyway, I know little about other markets, but in the Stockton duplex triplex market this has been my experience.

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