Are you lowering your rents for new tenants?

[Dannielle Givens]

Hey BP Chicago Fam, 

I recently read this article on redfin and wanted to get feedback from those more experienced than myself. The article basically states that asking rental prices have seen a decrease and areas such as Chicago and Houston, TX are at the top of the list when experiencing a reduction in asking rent prices. 

When running my numbers for a house hack, my sheet accounts for a 3.5% increase year over year for rents to keep up with rising expenses. For those currently owning rentals, have you experienced difficulties increasing your rental rates? Have you adjusted your formulas to account for a lack of increase within the next, let's say 2-3 years?

I'm looking to understand how to accommodate for this information (or if I need to at all) when determining if a property will cash flow within a certain period of time. 

[John Warren]

@Dannielle Givens rent numbers in cities like Chicago and Houston will always be skewed by class A new construction that rents for double or triple what most neighborhood buildings will rent for. Across the areas I invest in, a quality two bedroom will rent for $1150-1350 per month. This is true across a vast swath of NW and SW suburbs. These rents creep up a little each year (2-3% probably on average), and the renters for these units work in jobs making $18-35 per hour. 

The stuff that is more volatile is the stuff where there are dog parks, garbage service, etc. There are rent specials to get people in and all kinds of concessions. When things get bad, the people who can rent for 3k per month can always just go rent a 2 bedroom somewhere for $1350 to save some money (or buy a house).