Jacksonville, NC: currently higher vacancy? Raise rent?

Question

Dear all,

This is my first rental, so relatively a newbie here. A duplex in Jacksonville in a C-class neighborhood. Rentals in that neighborhood average $450 - $630 for similar 2-bedrooms. When I purchased the property it was rented for $700 because it was completely renovated. This was 1.5 years ago.

At the end of tenants' first year I didn't increase their rent because my PM adviced against it since the rent was already higher (due to perfect house conditions). So, one tenants rotated with no rent increase (as per PMs advice). Second tenant stayed but got no increase.

Another investor that I know (who's properties are very close to mine and in similar great condition and were also rented for $700) raised 2 of their units to $750. But then those $750 tenants moved out and they had trouble ro re-rent it for that price for 2+ months (and are still vacant).

Since then my PM has changed and the new one is also advising against raising the rent. They said that right now their company experiences 3 times higher vacancy rate comparing to this past summer.

Also I have to add that one of my tenants is always late with rent but had always eventually paid (plus late fees). Both tenants take well care on the properties. Their 1-year leases are up at the end of December.

So, what about the rule to increase somewhat every year? Should I increase just $10? $20? Or nothing at all? If it's already higher than average in the area, should I increase? If I increase too much, will I loose the tenants, which considering my friend's experience plus what PM said about vacancies at the moment which would be a bad thing ?

Is there currently a slight downturn in rentals in Jacksonville ?

Thanks!

Stan C. · Answer

Just to clarify. My friend has two duplexes there, two of four units are rented ot $750 but the other two are vacant for 2 months while they are asking $750 for them.

My units are slightly over most others in the area not because I'm greedy but simply because value of my units is higher, since the property is completely rebuilt. Inflation affects equally owners of old worn out units just the same as ot affects me.

I'm not defending my position to raise a bit, but simply adding some info. In fact I don't have a position. Obviously, if I knew what to do, I wouldn't have asked for your guy's advice here :)

I'm still not sure what to do. I'm afraid if I don't increase even $10 every year, I won't be able to catch up later if tenants stay for long.

Account Closed · Answer

Yes you have to compensate for increases like inflation, taxes and insurance then you increase rents to cover; but if not and you want to increase rents based on the conditions of the property then it is HIT or MISS

Just because you put granite in doesn’t mean you will get an extra $25 or $50No.

All based on your market

I’m not calling you greedy I’m just saying be cautious of your market and don’t over leverage it because once you get use to it and then the economy drops (Jacksonville susceptible) rents will go down! Then what

Know your numbers and stick with what works; I know Turnkey companies that are $10-$25 below market so they have occupancy

Account Closed · Answer

NO, you are not running a charity, but the market dictates your rent and the PM knows the market; you had two PMs say the same thing. Don't be greedy but be fair.

If you are already at the height of the market then where is there to go? You already said the other property increased to $750 and there was vacancy. You should only increase rents if you are below market and you are progressing to meet it.

Jacksonville is not an appreciation market - it is a cash flow only market with military presence that can make or break you. What is the other employer markets? Retail? I am sure you didn't get into that market to get crazy numbers UNLESS it is a BRRRR deal.

Mark Patino · Answer

Stan C. - I agree with Ben. I'm also in the area and this is not going to be a market where you increase rents year after year. If you do that you will have a hard time getting tenants. The slight downturn you were asking about is also something to be concerned with. There are numerous builders constantly building in the area and even Florence only stopped them for a week or so from building. Before Florence, there was a bit of oversupply which we will most likely see again in the coming years. So be prepared for a contraction in the rents as people start renting out their homes as they PCS to another duty station. With COVID-19, we will see how bad this area gets in a few months to a year. Best of luck.

Ben H. · Answer

The Jacksonville market is based solely on sq ft and rent relative to the neighborhood. A nicer property will only get you rented faster at the same rate as the next door run-down house. It is a transitional community where the Marines (mostly) are trying to maximize their housing allotment knowing they will move in the near future. Settling down long-term in a nicer house is not enough for them to shell out the extra $50/mo they could spend on beer. But YMMV.

Stan C. · Answer

Your are right, I'm not. How much would you increase if you were me? $20?

Matthew Meikle · Answer

@Stan C. You need to at least follow inflation. Am I right to assume you're not running a charity?

Stan C. · Answer

Anyone please? At least I'd like to know your opinion on my last question:

Is there currently a slight downturn in rentals in Jacksonville ?

Jacksonville, NC: currently higher vacancy? Raise rent?

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