Rental rates going through the roof. Getting a feeling. Is this a "Rental Bubble"

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This might sound weird but I just Rented a sfh 3/4br 2ba for $2200 to a professional that has a 3yr employment contract with a local medical center. I have had this property since 1999 and purchased it for 88k back then. This area of NJ is experiencing growth but not industrial or commercial growth just residential growth and actually there are apartments that just were completed that are renting 2 B-Rooms for 2100. That said the family we rented is a quality tenant IMO. That said in the town of my rental I can p/up 3br 1-1 3/4 baths for 150k that need 10k of work and get between 1800-2100 K easy and to be honest it is not the best neighborhood in my county. Is it possible we are in a rental bubble? Is one coming?. 30 yrs of doing this I just am getting a feeling like the same one in 2006. As a contractor I know a 2x4 costs me $2.47 these numbers just do not seem right. Your thoughts...

I don't know if it's a bubble but rentals are in high demand, vacancies are low and operators are pushing rents. But there is a limit in how far rents can be pushed and that's somewhere around 1/3 the median income for the area in most places. Rents above that starts to reduce the number of renters who can qualify for professionally managed properties. However in the bedroom communities surrounding the major coastal metros even those may be pushed beyond that because of the higher in-city rents.

Was on a call today with an operator who has about 35k units spread from the Southeast to the Upper Midwest and they're only targeting about a 2% increase in rents across the portfolio after several years of double digit growth. So I think in general the big leaps in rent growth have already been taken.

Thank you Giovanni,

"professionally managed" interesting term. Maybe a little subjectivity in that phrase. Anyway, I agree with you regarding the limited rental growth rate. I am in ways shocked but not surprised at how much these managed developments are able to charge (They are creative in there marketing I will tell you that). We are adjusting our niche product (and price point) to those that seek the benefits of pride & freedom in home "ownership" coupled with a greater potential financial upside possibility than the rental situation they are in. We design our homes to mitigate the confirmed issues we find in on-line reviews we monitor and interviews we perform of our potential clients most of whom had resided in the "professionally managed" conditions in the past.

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