Comments on: Austin Rental Market Update – Oct 2009 http://crosslandteam.com/blog/2009/11/22/austin-rental-market-update-oct-2009/ Austin Real Estate Blog Sat, 31 Jul 2010 01:04:35 +0000 hourly 1 http://wordpress.org/?v=3.0 By: Steve Crossland http://crosslandteam.com/blog/2009/11/22/austin-rental-market-update-oct-2009/comment-page-1/#comment-104405 Steve Crossland Thu, 03 Dec 2009 03:00:50 +0000 http://crosslandteam.com/?p=1469#comment-104405 Hi Jane, My personal observation has been that anything more $50 increase once a year triggers negative reaction from tenants. Something about the $50 threshhold causes protest, whereas $50 even, or less, seems fair to the tenant I just had a move-out yesterday of one of my own properties. Tenant was paying $900/mo and the market rent (what I am renting the same unit for next door) was $1,000. But my tenant stayed for 8 years. Original rent was $695, so I only went up an average of $25/yr. Figuring the average rental turns over every two years, and costs on average 3 month's rent in vacancy loss, repairs, makeready, etc., that's $12K ($3,000 x 4) that I've avoided in expected turnover in 8 years. And let's say I lost an average of $50/mo. in below market rent for the entire 8 years. That would be $4,800 substracted from the $12K, but I'm still ahead $7,200. keeping rents slightly below, or right at market value provides a better chance for a long term tenant. Long term tenants are more profitable than higher paying tenants who move often. Steve Hi Jane,

My personal observation has been that anything more $50 increase once a year triggers negative reaction from tenants. Something about the $50 threshhold causes protest, whereas $50 even, or less, seems fair to the tenant

I just had a move-out yesterday of one of my own properties. Tenant was paying $900/mo and the market rent (what I am renting the same unit for next door) was $1,000. But my tenant stayed for 8 years. Original rent was $695, so I only went up an average of $25/yr.

Figuring the average rental turns over every two years, and costs on average 3 month’s rent in vacancy loss, repairs, makeready, etc., that’s $12K ($3,000 x 4) that I’ve avoided in expected turnover in 8 years. And let’s say I lost an average of $50/mo. in below market rent for the entire 8 years. That would be $4,800 substracted from the $12K, but I’m still ahead $7,200.

keeping rents slightly below, or right at market value provides a better chance for a long term tenant. Long term tenants are more profitable than higher paying tenants who move often.

Steve

]]> By: Jane http://crosslandteam.com/blog/2009/11/22/austin-rental-market-update-oct-2009/comment-page-1/#comment-104398 Jane Thu, 03 Dec 2009 02:35:25 +0000 http://crosslandteam.com/?p=1469#comment-104398 I totally understand. And I am not in this for positive montly possitive cash flow and I have accepted that I may not break even.. Just get a little nervouse doing the figures trying to figure out the unpredictable tax increase, and how that will affect how much money I'm loosing every month. So I was wondering is it better to raise the rent a little every year by 15$ - 20$ or raise it in one chunk by $100. I totally understand. And I am not in this for positive montly possitive cash flow and I have accepted that I may not break even.. Just get a little nervouse doing the figures trying to figure out the unpredictable tax increase, and how that will affect how much money I’m loosing every month. So I was wondering is it better to raise the rent a little every year by 15$ – 20$ or raise it in one chunk by $100.

]]> By: M1EK http://crosslandteam.com/blog/2009/11/22/austin-rental-market-update-oct-2009/comment-page-1/#comment-104371 M1EK Wed, 02 Dec 2009 21:09:59 +0000 http://crosslandteam.com/?p=1469#comment-104371 Agreed completely with Steve's points above. There will always be turnover no matter what you do, especially in our case where we rent in a submarket dominated by students, so there will eventually be opportunities to catch up to market value - but the worst thing you can do is shoot for +100 and end up with an empty unit for a while. Agreed completely with Steve’s points above. There will always be turnover no matter what you do, especially in our case where we rent in a submarket dominated by students, so there will eventually be opportunities to catch up to market value – but the worst thing you can do is shoot for +100 and end up with an empty unit for a while.

]]> By: Steve Crossland http://crosslandteam.com/blog/2009/11/22/austin-rental-market-update-oct-2009/comment-page-1/#comment-104237 Steve Crossland Wed, 02 Dec 2009 03:55:15 +0000 http://crosslandteam.com/?p=1469#comment-104237 Hi Jane, There are no regulations controlling how much a landlord can or cannot ask for rent or rent increases. It's whatever the market will bear. I generally look at the market value when sending renewal letters and offer the tenant a renewal rent based on market conditions. The market is ignorant of and unconcerned with our carrying costs as landlords. It's foolish to let a good tenant move out over a rent increase, then find that the home won't even rent for as much as the former tenant was paying, so I think, in most cases, turnover avoidance should be a landlord's number 1 objective rather than trying to inch up on rents. I'd much rather lease a good tenant at current rent, or accept a small increase, rather than indur the expenses of a turnover. Steve Hi Jane,

There are no regulations controlling how much a landlord can or cannot ask for rent or rent increases. It’s whatever the market will bear. I generally look at the market value when sending renewal letters and offer the tenant a renewal rent based on market conditions.

The market is ignorant of and unconcerned with our carrying costs as landlords. It’s foolish to let a good tenant move out over a rent increase, then find that the home won’t even rent for as much as the former tenant was paying, so I think, in most cases, turnover avoidance should be a landlord’s number 1 objective rather than trying to inch up on rents. I’d much rather lease a good tenant at current rent, or accept a small increase, rather than indur the expenses of a turnover.

Steve

]]> By: Jane http://crosslandteam.com/blog/2009/11/22/austin-rental-market-update-oct-2009/comment-page-1/#comment-104227 Jane Wed, 02 Dec 2009 03:30:57 +0000 http://crosslandteam.com/?p=1469#comment-104227 What is the avarage amount that a landlord can raise rent. In Los Angeles it's 3% a year. I hear Austin has no limit. that being said what is usually the avarage a landlord normaly raises. With property tax raising 10% a year on the avarage it could be easy to go cash negative if rents are not raised in small fractions every year. Just trying to get an idea. What is the avarage amount that a landlord can raise rent. In Los Angeles it’s 3% a year. I hear Austin has no limit. that being said what is usually the avarage a landlord normaly raises. With property tax raising 10% a year on the avarage it could be easy to go cash negative if rents are not raised in small fractions every year. Just trying to get an idea.

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