Gas (NG & LP) prices going up

[Bruce Woodruff]

If, as planned, the President closes the Line 5 pipeline from Canada, propane is expected to double in cost. Natural Gas should follow suit. A tech for one of the largest companies told us that they are expecting shortages and the price to double by Christmas. How will this affect your bottom line and how will you deal with it? Raise rents? Eat the cost?

[John T.]

Lucky for me as a SFR Landlord, my Tenant's are responsible for their own electric, natural gas and other utilities. So, the Tenants get to eat the rising cost of electricity and natural gas; not me.

There are winners and losers in periods of high inflation. Generally tenants and working class people are the big losers. The purchasing power of their paychecks goes down, down and down. The winners are people with money and the owners of tangible property, like real estate. The purchase price and rent of tangible goods, including real estate, increases during periods of inflation. Between 1977 and 1981, during the Jimmy Carter inflationary period, people with money could make up to 7% per annum in a passbook savings account. At the same time, first time home buyers were paying over 15% interest on their home loans. By the end of the Jimmy Carter presidency the prime rate was over 15%. In 1981, Ronald Reagan became president and he had to intentionally put the U. S. into a steep recession (1981-1982) to break the back of inflation.

No matter how compassionate a Landlord is, during times of high inflation a Landlord, who is responsible for the Tenant's cost of heating, must pass the cost on to the Tenant. In setting rents, the Landlord must consider the future diminishing value of the dollar and raise rents at every opportunity. The Landlord must do so just to stay even. Otherwise, the Landlord will be destroyed by inflation.