“For the first time since 2010, it’s now easier to build wealth over an eight-year period by renting a home and investing in stocks and bonds, rather than by buying and accumulating equity, according to a national rent-versus-buy index of 23 cities produced by Florida Atlantic University and Florida International University faculty. That’s because home prices are high and rising mortgage rates are adding to the cost of home ownership.”

Ouch.

This has serious implications for landlords and investors.  Pretending the current market euphoria will continue forever is worse than irrational….it’s flat out ignorant as the damaging effects can be mitigated by smart landlords and investors.

Read this article about rental rates

So how can you avoid your portfolio being crushed by this likely effect once it reaches your particular market segment?

  1. Know your numbers.  Understand where your market is currently.
    1. Review Days on Market to fill vacancies
    2. Average prices for your rentals
    3. Sale price trends.
  2. Revisit your lease terms.  Determine if you can lock in a longer term lease with your existing tenant at these higher rates.
    1. Enticing them with an incentive such as a half month free rent, or new carpet, new refrigerator, etc.
    2. Remember the popular phrase that everything is negotiable.
  3. Start marketing the vacancies earlier.  If you know your current tenant is not going to renew their lease, begin to market the vacancy earlier than you normally would by a month or two.  This gives you more market time for exposing the property before it goes vacant, which means you can test the market with different price points and/or incentives.

Hopefully you will be able to weather this market shift in the most profitable manner possible.

All the best,

 

Dan Baldini