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

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Stockton, CA Rental Market – From the Tenants Perspective.

About 9 months ago I did a little "market research" because I was bringing a few new units in Stockton online. This week I had another one come up and since I needed to "research" rents and I figured I'd share my findings here on BP. 

This is the very "scientific" method I used: I went on Craigslist and plowed though the listings, in ascending price order. Kidding aside, I do feel this gives a pretty good idea of what the prospective tenant will see when looking for a place to live. 

*If you like this please click VOTE so I know I don't write this for myself...:)*

Under $650 - Nothing at all. Maybe a Room or a 55+ Studio.

With few exceptions the only way to sleep under a roof for under $650 is to rent a room from someone.

$650 to $750 – Studios and Questionable 1 Bedrooms

Less desirable downtown stuff. Studios and 1 bedrooms in undesirable apartment complexes.

$750 -> - 1 Bedrooms

Over $750 one bedroom units become available. Most of these are in apartment complexes. To my amazement these one bedrooms go all the way up $1000+! These are units in nicer communities of course, but still; $1000 for a 1 bedroom in Stockton? Crazy! 

$$800 -> - Still Mostly 1 Bedroom Territory, but some 2 Beds

Over $800 is where you start to see a few undesirable two bedrooms (downtown rundown buildings etc). Still a *lot* of 1 bedrooms though! Just like the last time I checked I was astounded by how few 2 bedrooms 1 baths there were available at this price!

$900 to $1000 – Solid 2 Bedroom 1 Bath Territory

This is where most of the conforming 2 bedroom / 1 baths units are priced at today. Again it surprised me how many of these were in apartment complexes and how little were available in duplex/triplexes!

$1050 to $1300 -> 2 to 3 Bedroom 2 Bathroom’s.

This is where 2/2 and 3/2 units are renting for now. Most of these start around $1100 and we are not even talking units in very desirable areas...

$1300 and up Houses and Everything Else

This is where I stop my analyses because I don't rent in that segment but again, it surprised me how many 2 bedrooms and even 1 bedrooms there still were in this segment…

My Conclusion

The Stockton market is as hot as a cast iron skillet with sizzling fajitas! Unfortunately the purchase prices for rentals are outpacing the rent growth:(. The high purchase prices probably have a lot to do with the hight rents being charged on new units coming on the market. If you just paid $275K for a duplex you simply can not afford to rent the units out for $850 a pop...

Despite the high prices there seems to be little supply available in my market segment(2/1's to 3/2's). Most of my current tenants would probably not income qualify for for a lot of these units. My theory is that the tenants that are currently moving in at the higher prices are refugees from the (even higher priced!) Bay Area rental market. I have several newer tenants that fall into this category. Imagine commuting to Oakland from Stockton every day:(...

General Observations about ads on Craigslist.

First of all; Craigslist's "housing" section is starting to get more and more polluted/spammed by "Rent-to-own" operators. You can basically disregard all ads that have text on the picture and sound to good to be true. 

For those of you not familiar with the rent-to-own model: An operator has tenants pay a few thousand dollars worth of "option fee" for the right to buy it in the future at a certain price. However, ninety percent of the R2O tenants will drop out for various reasons. The operator then keeps the option fee and repeats the process wit ha new R2O renter. Basically just like those buy-here-pay-here car lots... For obvious reasons they are very heavy on the marketing...

Second observation: What makes the independently owned inventory even harder to find is the fact that apartment complexes SPAM the living F* out of craigslist, so you need to scroll down many pages to even find a few unique listings.

In between all this spam it becomes harder for tenants to use Craigslist to find a place to live. Fortunately my property management software also syndicates my listings to Trulia and Zillow etc.:) I might use one of these websites for my next round of "research" instead...

Anyway, that was long as usual, but I hope this was of some help to you. If it was, please click on the VOTE button, so I know I am not just doing this to exercise my fingertips.:). 

Also, feel very welcome to comment what you are renting your units for in Stockton, so we can all compare notes:)...

Updated almost 2 years ago

Quick good news update: We just listed a 2 bed 2 bath duplex unit, rehabbed in North Stockton for $1050 and people were falling over each-other to rent it, which causes me to believe we could have asked for more... However we got it rented within a few days to a couple that has an average credit score of over 700... Which must be a new record:).

Thank you for this quality share. Gosh stockton had the highest amount of foreclosures in the Great Recession. Our experience with investors have been positive . The location as always in real estate in important. Naturally in the real estate cycle as the Bay Area becomes more expensive the great migration does happen. 

This is good, more people should share their findings like this. A lot of people in the greater Bay Area find Stockton a market of interest, and let's be real there are too few people on BP that it's likely to actually increase competition (Colorado where BP is headquartered? Maybe a different story!). 

Hmmm. I wonder if there is a breakdown of how many BP members there are in various markets.

@Chris V. your findings are spot on. I own a few units in Stockton. One of the tenants of our 2/1 indicated that they would move so I put it up for rent on Zillow and Craigslist. In one day I had about 50-70 interested parties for $930. Some were ready to sign a 2-year lease and had very solid income/work history.

Simply, right now there is hardly anything available out there in Stockton.

This is the same house that was vacant in 2012 for 4 months, unable to rent for $725. Loving this market as a landlord!

Originally posted by @Chris Mason :

This is good, more people should share their findings like this. A lot of people in the greater Bay Area find Stockton a market of interest, and let's be real there are too few people on BP that it's likely to actually increase competition (Colorado where BP is headquartered? Maybe a different story!). 

 I could be more cynical and say; how many people are there on BP that will actually take some action...:))). Kidding aside, I don't recommend investing in Stockton if you are not already active in the market. If you look at it nation wide I am sure there are way better places to invest.

Back to cynical: I don't loose anything by posting rents (since there are so many prospective tenants anyway!) and I potentially would gain because if other landlords would raise their rents, I too win (better retention and better chances of raising my own rents without consequences...):)

However, the main reason I am sharing is because; I really believe the real estate is not a zero sum game (abundance mentality and all that). :)

Originally posted by @Jan H. :

@Chris V. your findings are spot on. I own a few units in Stockton. One of the tenants of our 2/1 indicated that they would move so I put it up for rent on Zillow and Craigslist. In one day I had about 50-70 interested parties for $930. Some were ready to sign a 2-year lease and had very solid income/work history.

Simply, right now there is hardly anything available out there in Stockton.

This is the same house that was vacant in 2012 for 4 months, unable to rent for $725. Loving this market as a landlord!

 Thanks! I agree, however I must say that the applicants I see in Stockton more often than not have something wrong with them (credit history, income too low, no long consistent work history etc.) Very seldom do I get people that are 100% no-problemo-qualified. I use Buildium to screen my tenants, what do you use?

As far as 2 year contracts... I would actually not see a benefit in that; the sort of people that I rent to will be impossible to collect from if they default on the lease anyway, and having a year+month to month allows me to raise the rent. What is your thinking on that?

Originally posted by @Bill Hamilton :

Hmmm. I wonder if there is a breakdown of how many BP members there are in various markets.

 That would be cool! And on top of that I would like to see a breakdown of people that are actually doing deals vs. not... Per market:).

Originally posted by @Jo-Ann Lapin :

Thank you for this quality share. Gosh stockton had the highest amount of foreclosures in the Great Recession. Our experience with investors have been positive . The location as always in real estate in important. Naturally in the real estate cycle as the Bay Area becomes more expensive the great migration does happen. 

 You're welcome! Wasn't Mountain House the forclosure capital of the US?

BTW the asset class that I rent out was not too affected by the market downturn (I don't own any single families etc). I like to joke that my tenants don't even know how to spell ekonomie:). Kidding aside, if the market gets better my tenants are extremely unlikely to buy a house and if the economy gets worse they are unlikely to find a cheaper place + there will be push down from people that were living a bit more upscale. It would suck to loose the equity for a while, but with my fixed low mortgages I am not too worried for my cash flow if the market corrects...:)

Originally posted by @Chris V. :
Originally posted by @Jan Halasz:

@Chris V. your findings are spot on. I own a few units in Stockton. One of the tenants of our 2/1 indicated that they would move so I put it up for rent on Zillow and Craigslist. In one day I had about 50-70 interested parties for $930. Some were ready to sign a 2-year lease and had very solid income/work history.

Simply, right now there is hardly anything available out there in Stockton.

This is the same house that was vacant in 2012 for 4 months, unable to rent for $725. Loving this market as a landlord!

 Thanks! I agree, however I must say that the applicants I see in Stockton more often than not have something wrong with them (credit history, income too low, no long consistent work history etc.) Very seldom do I get people that are 100% no-problemo-qualified. I use Buildium to screen my tenants, what do you use?

As far as 2 year contracts... I would actually not see a benefit in that; the sort of people that I rent to will be impossible to collect from if they default on the lease anyway, and having a year+month to month allows me to raise the rent. What is your thinking on that?

You're right, most of the applicants in Stockon have issues, almost all of them have credit issues. I used Credasys before and it was alright. In the last 6 years I only had one problem with a tenant that resulted in an eviction. Long story: I tried to help them as they got into a tough spot and they took advantage of me....lesson learned.

I do see a lot of benefit in a 2-year contract as I would most likely lose 1 month of rent if someone leaves. I could not raise the rent high enough to cover that month. Also, it's less headache for me when someone stays longer (you have to make repairs that you would otherwise not need,  advertise, screen, meet, etc.)  I have good paying tenants and it makes PM easier for me.  Remember though, I have SFHs, not apartments. 

@Jan H.

I always do a 2 year lease with a small increase for the second year.

There isn't a surprise and they expect another increase if they stay a third year 

Never had a problem.

Thank you Chris V. for sharing. As newbie in this game researching my first deal I have picked Stockton as the town of interest. As matter of fact I was out there Sunday scouting the neighborhoods from the south part of town to the north and assessing the numbers in my head. Your information practically validates my thoughts "the purchase prices for rentals are outpacing the rent growth:(."

Thank you again for the information.

Originally posted by :
Originally posted by :
Originally posted by :

You're right, most of the applicants in Stockon have issues, almost all of them have credit issues.

CV: Exactly, I don't think I have ever seen a prospective tenant that I would consider totally "clean". This probably also has to do with the market segment I operate in, but still. SAD.:(

I used Credasys before and it was alright. In the last 6 years I only had one problem with a tenant that resulted in an eviction. Long story: I tried to help them as they got into a tough spot and they took advantage of me....lesson learned.

CV: Funny! I had the exact same experience. I was able to make it almost 4 years without doing a SINGLE eviction by playing the game and working with people and working to ge them out, then I bought a building in June and got played by a tenant who I tried to help as they were in all sorts of drama. Lesson learned indeed!!! They played me for almost 3 months, and then after the eviction was filed it took another 3 months for the Sheriff to put them out. They left my with 5 digits worth of damage and.. (drum roll!) A DOG!  

I decided that from now on I will start an eviction on the 15th, damn the financial consequences. The eviction itself cost me about $1000  but if I would have filed right away I would have saved myself at least 2 months of missed rent. Lesson learned indeed:).

I do see a lot of benefit in a 2-year contract as I would most likely lose 1 month of rent if someone leaves. I could not raise the rent high enough to cover that month. Also, it's less headache for me when someone stays longer (you have to make repairs that you would otherwise not need,  advertise, screen, meet, etc.)  I have good paying tenants and it makes PM easier for me.  Remember though, I have SFHs, not apartments. 

CV: Yeah I could see that SFH's would be different. However maybe 2 year leases could still be beneficial because they have a sort of "screening effect". People that are thinking they only need it for a while might be turned off by it, which would be good, because i could not agree most of the cost of turnover... Turnover is without a doubt the bane of my land-lording existence:) Its also a silent profit killer that I find most people do not like to talk about...:(

The unemployment rate has dropped to 7.5% which is healthy for Stockton. It was 17% in 2010.

With a multi-family I imagine one can still stay to be profitable even with some vacancies. This is a potentially good investment esp people who live in East Bay to manage themselves.

Originally posted by @HS Wong :

Thank you Chris V. for sharing. As newbie in this game researching my first deal I have picked Stockton as the town of interest. As matter of fact I was out there Sunday scouting the neighborhoods from the south part of town to the north and assessing the numbers in my head. Your information practically validates my thoughts "the purchase prices for rentals are outpacing the rent growth:(."

Thank you again for the information.

 You're welcome! And yes, I believe that the property "values" are very rapidly outpacing the rents, and even though the rent growth have bee phenomenal, a 12.5% rent growth is of course not sustainable:(. 

So basically if you are a cash flow investor you will be competing with people that are just looking to park their money long term (classic doctors lawyers etc behavior:)) and with so called "investors" that have been sitting on the side line so long to wait for all the world to agree that real estate is a good investment and want to jump on the band wagon at any cost now that the parade has been rolling through town for years:). Anyway not a good place to be for a cash flow investor.:(

Full article here: https://www.apartmentlist.com/rentonomics/national-rent-data/

Originally posted by @Sam Shueh :

The unemployment rate has dropped to 7.5% which is healthy for Stockton. It was 17% in 2010.

With a multi-family I imagine one can still stay to be profitable even with some vacancies. This is a potentially good investment esp people who live in East Bay to manage themselves.

 Hi Sam - While I believe that over a long enough time line almost all real estate investments can "work out", I would not say that investing in on-market properties in Stockton is currently the best use of one's investment dollar. Also, I doubt if most Bar Area residents have the stomach to self-manage Stockton cash flow property...:)) 

We have two properties in Stockton, a SFH and a Town-home both in good locaitons. We haven't had any problems with getting good applicants, vacancies (going on 3 & 4 years now) or on-time payments. Rents have increased over the last several years (yay for us!). We are looking to add another property to our portfolio but now the market doesn't make sense for us and we are looking for other locations.

Wow, thank you for sharing the information Chris. I used to live in Stockton but we moved to Elk Grove couple years ago. Please continue with the similar research =) I truly enjoyed it.

We manage several single family homes in Stockton area. Rents are fine. Tenant quality is generally low! Repairs are a struggle as handyman in general are bad or unreliable. But very good gains in equity and cash flow. So a mixed bag. 

If someone has a good handyman reference, please share. 

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