Rental rises paint mixed multifamily picture

Rental increases may complicate the multifamily market.

Many commercial property managers and investors earned significantly higher amounts of money from the increased rental levels. However, according to National Real Estate Investor, this trend could cause trouble, as well.

Rising rents can help in the short-term, but if the figures continue to jump – especially higher than inflation levels – this could turn off some tenants from renewing leases, the news source explained. Tenants may notice the prices are going outside of their price range, and this could force them to look at competition in the area, as they may have more affordable rates for comparable offerings.

"Landlords need to be careful," Brad Doremus, senior analyst for Reis, told the news source. "They can't raise rents forever or they come up against that budget constraint."

Rental prices already inflicted damage on many renters, but this was partly because owning a home became significantly less affordable. The news source noted that housing prices rose more than 50 percent from 2001 to 2010, while transportation expenses jumped by one-third. This became more of an issue because incomes for families increased by one-quarter during that time.

Rental expenses continue increases
While rental prices haven't skyrocketed out of control, they still are slightly ahead of the government's consumer price index. Citing Reis, the news source noted that in the past two years, rents have picked up the pace. Specifically, during the third quarter, the figure rose nearly 3 percent over the previous 12 months. This was close to one percentage point than the inflation rate during that time.

While that was the rental average during that period, some areas' rental costs rose significantly higher, according to NREI. Some parts of California had extensive rental hikes. San Francisco rose nearly 6 percent year-over-year during the third quarter, while San Jose spiked more than 4 percent.

Scott Bernstein, president of CNT, told the news source that there are still some positives to the rental situation, especially if they own property in or near a city. With many areas increasing rents, some property management companies may benefit from stressing the ability to use public transportation in the area. Being vocal about these options may help some tenants use their vehicle less, or even get rid of one, which could make them better afford the rent at the property.

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