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Rental Market across the Nation
I wanted to share some of the trends seen across the nation. At renewal, most tenants are seeing an average rent increase of 3.7%. Homes vacated and then re-rented are seeing an average rent increase of about 6%. And lastly, the rental in the highest demand is a home between 1,400 to 2,000 square feet.
Over the summer, First Rate Property Management, rented most of their single family homes out before the current tenants moved out. Rent increases for single family and small multi-family rentals averaged about 12%, for those rentals that turned over tenants. We saw an average of just over 6% in rent increases on renewals. First Rate Property Management's leases have an 8% increase built in and an automatic renewal clause. So for those who chose to auto renew, their rent increased by 8%. Then we have those tenants who contact us to renew, but state that they will move out before paying 8% more. So the property investor is contacted and generally an increase is negotiated, which is less than the 8%. Lastly, we do have tenants that were already paying above market rent. A good example is where the tenants went to a month-to-month rate for a period of time and then decided to renew.
Some could read this and think that allowing the tenant to vacate to get a 12% increase in rents is the far better approach. In some cases, I would agree, but in most, I disagree. Let’s use an average rent of $1,000 for easy math plus in many cases an over statement of the differences. 6% difference between a renewal rate versus a new tenant is $60 per month or $720/ year. If you have a good tenant, is $720 worth the risk of the next tenant not being as good? All of the screening in the world cannot assure that they will be everything we hope they would be. Also, you will have turnover costs, advertising, utilities while vacant and lost rent. So, I think the 6% increase is higher than the national average and in most cases, the much better approach.
Week 34 – 4.78% vacancy.
Tony A. Drost
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