Rent is going up. In the last two years, there has been a dramatic increase in the number of new legislation, moratoriums on evictions, and increasing rates that affect owners of rental property. If you own property in the Inland Empire or High Desert, then you have also been subject to some of the biggest price increases throughout the nation. Everyone who has been paying attention is fully aware that inflation has arrived and does not seem to be showing any signs of slowing down even though we are already in the first quarter of 2022.
At the gas station and grocery store, we’ve all seen the impact that rising prices have had on our wallets, but what about the running costs that residential rental property owners face? If you’ve had any recent repairs done on your property, you’ve probably already figured this out: the prices of repairs have also gone up significantly in recent years. Therefore, what can owners of rental properties anticipate for the year 2022, and how can they best be ready?
Finding vendors is more difficult than it has ever been. The domestic repair specialists were likened to the Prom King and Queen in a recent story that appeared in the Wall Street Journal. The piece also included recommendations on how to win them into your good graces. The comedy is a little tongue-in-cheek, but the reality that lies beneath it is genuine, and the scenarios that the author depicts are ones that many homeowners in California can identify with.
Do you believe that you will be able to acquire numerous quotes for simple work on your rental property that is less than $5,000? Good luck. There is more work than the vendors can manage, and they hardly have time to pick up the phone, much less submit a bid for a contract for free in the hopes that they would receive it.
Put yourself in the position of the vendor for a moment: if there are hundreds of projects available with eager homeowners who have cash on hand and are willing to pay up for a decent service, why would you spend your time bidding on yet another work for free? It all comes down to supply and demand, and at the moment, demand is very high while the supply of vendors is quite low. This is because everyone is looking for ways to spend the money they have received as a result of recent stimulus activities taken by our government.
It’s possible that vendors that are ready to bid on larger jobs would need advance payment to cover their time investment in the project. The most important thing to keep in mind is that if you obtain a fair price from a vendor you trust who is competent and ready to do the task, you shouldn’t attempt to negotiate with them or look for another vendor whose price is lower than theirs. You should count your blessings that you truly have someone who can mend your property and get the job done. There are literally hundreds of other homes that want your situation and would do everything to be in it.
Costs of Both Labor and Materials That Are Higher
After what was said about supply and demand before, this one is pretty much self-evident. When there is a greater demand than there is supply, prices will rise, and this is precisely what we are seeing in both the material and labor costs associated with repairs. Therefore, the cost of replacing trash disposal, which used to be $225, is most likely closer to $275 now. The cost of replacing a water heater, which was once $1,100, has increased to $1,600 or more. And while inflation keeps up, these costs will continue to go up as well.
It is not surprising that the final total on the bill will be more than what you are used to paying. This is to be anticipated and considered typical. However, this does not imply that you are forced to do nothing but watch while prices continue to rise.
The Rent Is Higher
The national median rent saw an almost 20 percent increase in the same year (2021). You can guarantee that you will remain one step ahead of price hikes and inflation if you raise the rent in a manner that is proactive, equitable, and consistent. The decision to raise rent is difficult for many property owners, but it should not be difficult to explain to a renter why the increase is necessary given that all of your running expenditures, such as taxes, insurance, and maintenance, have increased. Rent rises are unavoidable if you want to maintain the house you now live in and if you want them to be able to continue providing a roof over their heads.
That does not imply that you should increase the rent by twenty percent for this year. There is a limit of ten percent placed on the amount that prices of products and services may go up if the state of California is declared to be in a “state of emergency.” It is not at all obvious when these laws that prohibit price gouging are in force and when they are not in effect.
Since the CAA is presently working to pass legislation that would clarify the state’s anti-price-gouging statute, I am keeping my fingers crossed that we will soon have some further clarification on this matter. You should do a market study on an annual basis to ascertain the true worth of your property in the current market and then set the rent at a level that is pretty near that value. Always bear in mind the current state of the house as well as the remaining time on the lease. You don’t want to increase the rent so much that your renters walk out since then you won’t be able to rent out the property for as much as you thought you could get for it.
Increased Amount of Time Spent Vacant
Last but not least, if rents continue to climb, we will most certainly see an increase in the number of homeowners who convert their houses into rental properties. This results in an increased supply, which might mean that it takes longer for your property to rent out. Previously, it would take days, not hours, for a house to be rented out, but now we’re seeing that number creep back up to several days or even a couple of weeks in some cases. The price of rent can’t continue to rise forever, which means that soon we should start to see the ceiling of what people are prepared to pay. At that point, landlords will have to begin lowering their asking rates in order to rent out their properties.
In Conclusive Term
The presence of inflation results in an increase in the overall cost of owning rental property. We didn’t even touch on the subject of the higher cost of actual homes, but it goes without saying that their costs have skyrocketed as well. Don’t give up hope, and don’t act astonished if your insurance and repair bills go up as a result. Maintaining a positive connection with your renters while also keeping up with the necessary rent hikes to meet rising expenses is essential to your business’s long-term success. Keep in mind that the number one expenditure rental property owners may encounter is a vacancy, thus it is of the utmost importance to ensure that your rentals are always full.