Rents on the Rise
After vacancy reports showed a decrease in rental rates in the fourth quarter of 2015, the first three months of 2016 are showing a healthy increase. Of course the seasonality of the fourth quarter plays into the decreased rents, just as greater activity in early spring promotes increased rates. Despite this, there definitely appears to be an overall trend in rising rents, as vacancies remain low.
Rent adjustments a Complex Calculation
Raising rent to current levels is a foregone conclusion when turning a rental to a new tenant. However, thorough risk assessment analysis is suggested when proposing an increase in rent to a tenant who has been renting from you for the past year or possibly even longer. It’s an expensive business to move house, so provided the tenant is happy in the property, and provided the rent increase is within a reasonable range, chances are the tenant is likely to renew with the increase. However, if in a rapidly rising market you are tempted to push the limits to what you believe fair rent will be in a few months you may end up pushing a good tenant out. If your tenant can find equivalent housing for less rent they may well decide to move. The feeling of being taken advantage of can override the hard dollars and cents (sense) of the cost of a move.
Turnover Digs into Your Bottom Line
When you consider the added cost of a new lease-up, cleaning and repairs that are often necessary outside of the prior tenants responsibility – usually minimal, but never the less an expense - and then the downtime between tenants, you are looking at a combination of lost income and added expenses which could amount to the equivalent of a months rent. How much of an increase in rent will you need in order to make up one months rent over the remaining eleven?
How To Get The Best Rent AND Maximum Occupancy?
At RMA we employ a rent pricing strategy that has been formulated from over 35 years of experience. We review current market activity and occupancy statistics to determine a rent range. We then market at the high rent, reviewing weekly activity against comparable properties and the overall market making incremental adjustments as necessary until we find the sweet spot for that particular property. For properties where a tenant wishes to renew their lease we have experienced good success with instituting small regular annual increases even in a relatively flat market so that when market conditions push rents high, the necessary adjustment to bring the rent to fair market range won’t be much greater, if at all, than the tenant is used to.
First Quarter STATS!
Average vacancy rates moved down slightly again this last quarter to 2.6%. This is a decrease of .3%. Canyon County was the big influencer in this number coming in with a decrease in vacancies of single-family homes at 2.10%. However, Ada County showed a small increase of .6% in vacancies in this category.
Rental rates increased across the board in both Ada and Canyon Counties.
The number and consistency of reporting property management companies influence accuracy and reliability of these statistics. The survey for the first quarter of 2016 received data from 43% less participants than fourth quarter, 2015 and therefore RMA feels the relevance of the resulting data is marginal. That being said, there is no question that vacancies are low and therefore rents at the high end of fair market can usually be attained.
Rent Rates Have Huge Range
- San Francisco has the highest rents in the country, with an average 2-bedroom apartment costing $4800 a month!
- By comparison the average rental price of a 2-bedroom apartment in Boise will run you $1,000.