The pandemic changed our world as we know it, some changes may never go back to the way they were pre-pandemic, and we have to adjust our lives around it.
One of the most noticeable changes in the Real Estate World is the value of property. Typically, as an owner/investor, increased value is a great thing and we did see a lot of owner/investors capitalize on this by cashing out and selling their investment properties to in most cases, make a significant profit. However, for values to increase so drastically in such a short amount of time, the ripple effect it caused has been detrimental to others.
Due to a lot of owner/investors taking the cash out option, this has caused a nation-wide shortage of rental properties. Rental Companies including TopFlight has lost significant amount of business due to owners cashing out. But what is most disheartening is that renters are having a difficult time finding available housing. On the flipside of this issue, owners that have decided to hold on to their investments have less turnkey as their current residents are staying longer than before due to the housing crisis.
Moving into 2023 with interest rates at much higher rates than prior years which is even higher for investment properties the owners cashing out has slowed and the market has stabilized. However now a new problem arises for Tenants, due to inflation of good and services and the increase property value these new higher costs that a property owner faces trickles down to the tenant and rents are higher than they have ever been before.
With increased property values, this increases the cost of taxes and homeowners' insurance which increases the owner of the property's overall expenses. Then there is routine maintenance and upkeep on said investment property. The cost of maintenance on a home has increased by over 30% in the last two years, the uncertain costs of fuel has made vendors charge what we call a trip charge just to assess any needed repairs on top of the cost of material, labor etc. Which again all causes the rents to increase, it doesn't make sense to hold investment property to not make some kind of return on your investment. Which the amount of return in most cases is not quite the picture that is painted of the "Greedy landlord".
TopFlight understands the value of the return on an investment to the property owner and we understand the hardship of such a substantial increase of rent can be to a Resident. Some might ask, so what is TopFlight doing to mediate this possible issue. TopFlight understands that a Resident does not like rental increases. In past years, TopFlight has always increased annually a small amount of 1%-3%, it wasn't enough to make a Resident move and if they do, they were moving anyway but it was a way to allow our clients to see a small increase in income. Doesn't everyone want a raise in their job?
But, now with the inflation the 1-3% is just simply not enough. TopFlight evaluates every rental home in our database that is up for renewal within 90 days of that new lease start date, so that we are able to provide tenants with ample time to prepare for such a large increase in rent. We are also reaching out to our clients and informing them of the substantial increase in market, we want them to hear it from us not their Zillow search. We are involving our clients to make the decision if they want to increase the rent all at one time, not usually recommended for some of the more significant rent increases, or if they want to increase half now for a 6-month term and then the other half at the end of the 6-months. Once we have spoken with our clients and came to a decision on the renewal increase, we are reaching out to the tenants personally and informing them of the increase and the reasons behind it, most of them already know and expected it. This helps ease the shock of a considerable increase, doesn't mean that they are necessarily happy about it but it does show them that we understand and respect them enough to personalize a message versus just sending them a renewal offer and this is the new rent take or leave it attitude.
One thing, we can't ever do is guarantee that a sizable increase of rent whether we break it up over 6 months or not, won't cause a vacancy in your investment property, which could cost more in turnkey expenses, no more than we can guarantee to our Residents that they will be able to renew their lease year after year. But at TopFlight, our door to transparency is always open and want to ensure that both our clients and customers are properly informed, even when it may not directly benefit them. What is your property management company doing for you?
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