Rental Market

[Carlsbadliving]

I know that a majority of the readers of this post are currently renting. I’ve been renting a house in RPQ for the last year. Just found out they are going to raise the rent 8%. I was a little surprised. Does anybody else know what the rental market is currently like? Are we starting to see lots of people fall back to renting and therefore an increase in rents is coming? I thought maybe enough “investment homes” going unsold and then rented would help saturate the rental market?

[sdduuuude]

Interesting question. I’ll give you my perspective as a landlord who raised the rent about 10% in March of 2005.

I raised it because the rent wasn’t enough to cover my costs. I was about 300/month short and expected rents to increase and cover me after 2 years. I just assumed a 10% increase each year. This happened about the same time I stumbled upon Piggington. Interesting thing is, the renters complained about it, which surprised me. I put two and two together (OK, Rich put 2 and 2 together for me) and sold. The house closed in August.

If your landlord has owned the property for years and years and years and they haven’t raised the rent in a couple of years, chances are it is fairly justifiable and they are just being dilligent to ensure they get the most out of their property.

If they are new owners, however, they may be raising the rent based on what they need to make to cover their mortgage, without knowing their rental market.

Important for you to know. Knowledge is power in this case. I would suggest spending a day shopping for a new rental, even if you don’t plan on moving, to get an idea of the market. If you are getting a fair deal, just pay the man. If not, show them some comparible places and suggest they are a little off base, but don’t be surprised if they decide to sell once you do.

Seems like there was an article posted long ago on how rents can increase as a housing bubble deflates. This makes sense to me as more and more landlords NEED to charge a little more rent to help cover those ARMs.

If you have to move, look for a landlord who has owned a place for many years. Their payments and property tax will be lower and they won’t be forced to raise rents in the future. They may also value stable renters rather than those paying a premium price.

HA – 324 words, excluding this line.

[sdrealtor]

I have spoken to several property managers in the last week and all say they have NEVER seen a better rental market. If you are renting a nice place with a landlord committed to owning it a long time don’t balk so quickly at a reasonable increase. It looks like the single family rental market is going to get very very tight unless some who have been trying to sell give up.

[Steve Beebo]

In reality, rental rates for SFRs aren’t set by the owners’ costs. They’re set by the supply of, and demand for rental housing.

[sdduuuude]

I kind of agree and I kind of don’t. Theoretically, owners cost will influence rental rates if it is a cost common to all the landlords and not just one. i.e. if every landlord had an ARM and the rates went up, each could raise rents without fear of being undercut. Or, if the government issued a new tax on rental income, that would affect rents also.

In a deflating bubble, should more and more landlords be stuck in bad loans, I could see it gently bumping rents up.

In reality I suspect you are correct – there probably aren’t enough landlords basing rents on their costs to affect the market price.

I’m sure we agree the key for our carlsbadliving renter is to know the market.

[an]

How much is your rent? How big is the place? The bigger it is, the closer you get to $1/sq-ft, especially in PQ. I’ve been looking recently, and just found a place in Sorrento Valley. It came out to $1.30/sq-ft for a 1610sq-ft townhouse. Right now, there’s a 1650sq-ft house in Mira Mesa, it’s going for $1950. The house is pretty new. So bottom line is, do your research and compare. If it turns out you’re paying more than fair market, then you can just move, else just accept the 8% incrase.

[Jim Brubaker]

Steve hit the nail on the head. The landlord can charge anything he wants. If it takes him 3 months to rent it out, divide his 9 months rent by 12 to get an effective rental rate. So the supply really determines the price not the landlord. $1,700 to $2,000 in SM for 2200 sq ft is about right. Our neighbor took 4 months to rent his at $2200. The owners negative on it and I think he rented it to a relative.

[ocrenter]

that sounds awfully like this place we looked at right next to CSUSM. 2200 sqft, was trying to rent for $2200 for 4 months (guy bought it as an investment in 12/05). finally lowered it to $2000 and found a renter in 4/06.

[Carlsbadliving]

Thanks for the advice. The owner has actually owned since ’78, so there aren’t any issues with him being negative on the property. It rents for 1725 right now, wants to raise it to 1850. The thing is, the house is in horrible condition, needs new yard, roof, everything. That’s why I have such a hard time swallowing the increase. So, I’m going to at least see if we can get some improvements out of it.

[an]

If it’s as bad as you say it is, I think you can find much better place for around that price and around that area. For 1850, you can probably find either newer, < 10yrs, houses with about 1400sq-ft.

[Jim Brubaker]

You have two things to look at, was the rental price reasonable when you moved in, and the other factor, has the landlord been bumping up the rent every year?

A fair size of landlords will bump the rent $25 per year figuring that you won’t move–it isn’t worth the aggravation. If the property is as you say, I would vote with my feet and move.

You could mail the landlord a letter suggesting that you would move unless the rent is dropped because of the conditions that you have listed. Painting, re-carpeting,etc can cost about $2,500, plus he’ll loose about two months rent fixing it up, so the landlord might think twice. Its a game of poker, you can’t loose, only the owner will loose.

Our place here in San Marcos is 2,450 sq ft we pay $1,750 month (figure another $400 for utilities).

Remember one thing, a renter has to come up with a first and last months rent, your landlord isn’t going to find very many of them floating around anymore.

You need $3,000 to $4,600 cash to rent–there aren’t too many landlords that are dumb enough to piss off a good tenant.

hope this is of some help

[KingKong]

As a landlord, I can tell you that the rent increase is negotiatable. If you do not like the 8% increase, tell them. If they are smart, they will counter offer by reducing the increase to 4%.

From the landlord perspective, it does not pay to lose a good tenant. It takes at least a month to get a new tenant in, that’s one month or 8.3% (1/12) without rental income. Addition of any amount is better than substraction of 8.3%!

So my advise is to talk to your landlord and I am sure you will both find a comfortable solution.

BTW, it is renter’s market right now 🙂

[cowboy]

I think rents for homes (at least in Carmel Valley) in the past 6 months have defintely gone up by a good 10% if not more. In the middle of last year in the carmel valley area, I was looking at homes int eh 1800 to 2100 sqft range for $2000 to $2500. The same now can not be touch for the same price. More like $3000. Rents have definitely gone up. Not many homes for rent either.

[KingKong]

This is contrary to my observation. My neighbour’s house had a drop of $200 in rents from last year.

I think the confusion comes from the fact that Carmel Valley has lots of newer, bigger development. When they are on the market, they tends to fetch more $$ and the market looks like going up. For the same house, the rent is even or lower than last year.

[sdduuuude]

I definitely think you should spend a half-day shopping. It is the only way to realy know what YOU can get for your money where you want.

[Author]

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