Investor · MN · Member since 2021 · 21 posts · 20 votes
I've been hearing a lot about rental prices dropping in many cities. For those who are more experienced, do you see this as a common trend? Will they go back up? I just purchased a property recently with fairly tight margins, (my current house hack) and want to know if I made a mistake because I am relying on current market rent prices for it to be profitable. Thanks on advance!
I have read a number of these articles myself, and when you dig into them, you find out that they are mentioning facts from just a handful of markets, and usually, they are not mentioning the class of properties they have data for. If you own class B properties but there have been rental price decreases on class A properties, does that affect you, maybe or maybe it shows that people are leaving class A for class B.
Real estate is also hyper-local. If there is limited supply in a small, sought-after section of a city, there might not be any rent decreases there but, units on the outskirts of the city might have to decrease prices in order to entice people to live there. You cannot tell when an article lumps together the whole city.
The last point is value-add investing versus yield investing. BP is really based on the idea of buying, renovating (adding value), and renting. If you are adding value to units, the rent decreases have minimal effect on you since you are driving appreciation by making your property better. If you are a yield investor (buying a completely renovated property); rent decreases might have more of an effect since there is not much, if any, value left to add to the property.