I’ve been having a recurring conversation lately and it goes like this: “My landlord is raising my rent again it I think it would be cheaper and smarter if I just bought a place instead.”
Three times in the past month, at least six times since the start of the summer, I’ve had somebody bring this story to me. It is not an aberration. Tenants are upset that landlords are raising rents and good units are harder than ever to find.
It’s not going to change any time soon.Rising rents are a reality, and there is a simple, obvious supply and demand dynamic at work here. When you have 100,000 foreclosures in the Denver metro area, which we have had since the beginning of the housing crisis, you are essentially taking 100,000 households that used to own and converting them back into renters – for at least the next seven years.
And because most of these owners got used to the idea of living in houses, they don’t want to go back to living in apartments.
While apartment vacancy rates are around 5% in the metro area, the vacancy rate for rental is homes is 2%... two percent!!!
In that type of environment, how can you not have rising rents?
For today’s landlords, who are buying foreclosures at discounted prices and locking in mortgage payments with rates in the 4s, there is tremendous long-term upside to this market. For renters, you can see the writing on the wall.
I mentioned at the beginning of this article that I have been meeting with a number of renters who are upset about rising rents. And while I empathize with that, I also want to point out that many landlords have been dealing with years of low rents, high vacancy rates and sinking property values. I’m not going to begrudge them the opportunity to recover some of their losses when the market finally supports higher rents. This is the market landlords have been waiting on for nearly a decade.
Now I understand that some landlords are jerks – tenants have a right to hot water, clean surroundings and a safe environment. And if your landlord is a jerk, then you should move.
But in my experience, the vast majority of landlords (and certainly the ones I have worked with) are good people who are simply trying to invest profitably in the real estate market. They are neither predatory nor cold… on the contrary, they are exactly the types of people you would want as landlords. They simply don’t get the same press that jackasses do.
And for those people, the investors who have hung on through years of depression in the rental market, there is finally some light at the end of the tunnel.
Economies change. Opportunities shift. For landlords, today’s market is the most promising one we’ve seen in a generation. For renters who can buy into today’s market, with discounted prices and low, long-term fixed payments, there is sweet opportunity.
The truth is, I expect to hear from a lot more renters who think that owning is a better option. And I expect to hear from even more investors looking to take advantage of a red hot rental market. If you can get your foot in the door of today's market, chances are there are some excellent opportunities for you.
