Residential Lease Rates ... Increase?

[Craig]

We hold part of our investments in 3 rental properties, and the lease rates have been stagnant for the last couple of years.

I expect that to remain the case, until either the rise in real estate values abates, and / or higher interest rates steal the punch bowl from the party.

Years ago, I heard an old saw that rental rates should be 1% of the real estate value per month ... an amount now far in excess of what our properties command.

So, for those of you who hold rental real estate, what are your expectations, and have you too been looking foward to a tighter, less homeowner-friendly market in which you can finally increase rents a bit?  

Also, we'd like to buy another rental or two, but the appreciation rates have been so high the last couple years that we think we're best off to keep our powder dry a little longer.  Are you waiting, or investing more in RE right now?

Thanks.

 

[soupcxan]

A bit of a tangent but...everyone is talking about how REITs are overvalued right now given their run up in the last two years. Yet if interest rates continue to rise, mortgage payments will increase making rental units more attractive and possibly leading to rent increases. On the other hand, I'm guessing that REITs use debt to finance their property, and higher rates means that they'll face increased interest expense, which means less cash to pay those fat dividends.

 

[brewer12345]

A bit of a tangent but...everyone is talking about how REITs are overvalued right now given their run up in the last two years. Yet if interest rates continue to rise, mortgage payments will increase making rental units more attractive and possibly leading to rent increases. On the other hand, I'm guessing that REITs use debt to finance their property, and higher rates means that they'll face increased interest expense, which means less cash to pay those fat dividends.

Actually, most REITs have fixed rate debt, so increases in rates won't necessarily increase interest expense on existing debt. What rising rates will do to REITs is increase the discount rate investors use to value REITs.

 

[soupcxan]

Thanks brewer...once again I bow before the master.

Now, back to studying cost accounting and FIFO revaluations...fun!