Friday, July 01, 2005
Rent Increase
Two days ago, my townhousemates and I recieved our renewal letter for the lease on our townhouse. The townhouse that we rent, is located in an inner suburb of Washington, DC. The downtown area of this inner suburb has undergone major redevelopment in the past year. Guess what? The proposed rent increase is a measly 2.22 percent or $50 a month. The rent will go up from 2,250 a month to 2,300 a month. Spectacular. We split the large townhouse four ways so that the bill averages out to be about 560 a person (plus utilities). Anyway, I am going to keep on renting for now. :-) ( A friend of mine who also lives in the DC area said that the rent on his place is going up about 2% as well. )
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When the stock market took the big dump about five years ago, investors began pouring their money into real estate. So what do investors do with the houses they buy? They rent them out for as much rent as they can get. With so many houses now held as rental property, there is a glut of rentals nationwide, thereby keeping rents low in comparison to sales prices. It's a standaard supply and demand relationship.
ReplyDeleteI am a real estate investor and landlord in Las Vegas. We have had a huge influx of investors buying up housing here and offering them for rent. In some newer, 'more desirable' areas I see one out of three houses setting empty with a 'For Sale' or 'For Rent' sign in the yard. This over-supply of rentals means investors can't raise rents even though houses cost substantially more each year.
I'm not knocking it - the real money in rentals is not made on the rent, it's made on the home value appreciation.
My landlord was thrilled I just signed a 2-year lease with no rent increase.
ReplyDeleteWow...I wonder if she'll come and do my laundry next?
In the bubble markets rents are generally not coming close to covering costs. Price appreciation is NOT a given. There will be some very unhappy landlords soon.
ReplyDeleteHere in Las Vegas, my lease was up the end of May. My rent would have stayed the same had I renewed, but I went month-to-month and it only cost $50 more each month. I can rent 1200 sq. ft. for under $1/sq. ft., but to buy now is ~$300/sq.ft. I think the bubble is bursting in Vegas.
ReplyDeleteRent increase is a good thing. Towards the end of the bubble, a slight rent increase indicates that prospective buyers are turned away by the high prices and are renting again. I take this as a leading indicator of a bubble bust very soon. We are still on track to the October crash.
ReplyDelete