Landlords continue to reap the benefits of the greatest shortage in available single and multi-family housing for rent in more than a decade. Demand for new construction and available housing has been increasing rental rates with new construction falling short when compared to the increase in need. This gives landlords a distinct advantage, we now have what you may consider a hot commodity. The increase in demand comes from the recovering job market, those opting to rent rather than buy, and the surge of approximately 75 million millennials (18-34 year olds) that are now of age to move out on their own and enter the rental market. With the increase in fair market value rents and the longer term tenancy we have seen a boost in overall profits, Cha-ching!
It’s expected that rents on both single and multi-family units will continue to rise and see an overall increase of 3.5% by the end of the year. Whereas Zillow estimates that home prices will increase by slow and steady pace of 2.5% this year.
Now is a great time to analyze the rents on your rental properties and determine if your properties are undervalued. I always hesitate to raise the rent on a property that is currently rented because it seems that often times that triggers the current tenants to look at what else is available. If the increase you have suggested is fair then the tenants may stay put if for nothing else to avoid having to move. If some maintenance; carpet cleaning, touching up the paint, replacing worn out appliances, or other capital improvements then the increase may be a bit more palatable to the tenants. On the other end of the spectrum, if you have recently filled a vacancy it may not be a good time to raise the rent as they unpack their last box. This could set a negative tone for the duration of the tenancy.
When analyzing your properties it is best to analyze them against properties that are of course comparable in the amenities offered, size, condition, and age. The neighborhood in which your rental property is located is also going to play a pretty big factor on what you can ask and expect to get for rent. If you have a vacant rental this is the best time to make improvements to the property. Providing a well maintained home will not only get you top dollar for your rental property it will also benefit you and your future tenants relationship and providing a nice home for someone to live in is just the right thing to do.
I hope that an analysis of your properties allows you to get the fair market value and benefits the success of your rental property business in 2015.