My current tenant’s lease is coming to an end, and I’m trying to determine how much weight the current economic climate (i.e. inflation, job outlook) should have when deciding on a rent increase. We're currently $300 below the median rent in the area and I want to get closer to market rates. Does anyone look at the economic environment, or is the focus primarily on aligning with local market trends?
I keep my rents near market rates and never negotiate the rent or offer discounts as I only buy in desirable vs affordable areas. Just determine market rate for your property and keep rent near that.
Personally, I’m not too focused on the broader macro trends, since your local market tends to reflect those dynamics anyway. If your pricing isn’t aligned with what’s typical in your area, tenants will simply look elsewhere. On the other hand, if your rent is significantly below market—like it sounds—it might attract a flood of applicants, but not necessarily the most qualified ones.
If you’re aiming to stay competitive, I’d recommend looking closely at current local rental listings. At the end of the day, renters will “vote” with their dollars, and the market will quickly tell you if your pricing is on point.
I keep my rents near market rates and never negotiate the rent or offer discounts as I only buy in desirable vs affordable areas. Just determine market rate for your property and keep rent near that.
@Benson Davis How in tune are you with your market? What is the average vacancy? Often times we can get excited about rental increases and not consider that the unit will sit vacant 20 days and cost ~3-5k to prepare for market. Have you been increasing the rent a nominal amount annually and the demand (value) has simply outpaced your increases? Did you purchase the property with a tenant and now the lease is coming to an end and you want to increase? Personally, we do not consider "current economic climates" every state and city can have its own economic climate, not necessarily the same as what we are seeing on national news. Looking forward to your response.
@Ryan Spath I'll pull the data in few weeks to look at the trends in the market. Wanted to get a sense of how other owners might approach the change in rent.