“A life spent making mistakes is not only more honorable but more useful than a life spent doing nothing” – George Bernard Shaw
Of course; none of us spend our lives just making mistakes, but we all make some. If you think about it sometimes they can be the best learning experiences. When I look back at 2022, I think the biggest mistake that many apartment owners make is NOT RAISING rent. I know the Statewide rent control (SB 1482) it limits what you can raise them, but it is important to take advantage of the yearly allowable rent increase unless you are still under the moratorium. If you are under the moratorium, keep track of the latest changes so that you are ready when it is finally lifted in your area. I see so many clients who don’t do the simple annual rent raise and it costs them in a number of ways.
MONTHLY INCOME
When you raise the rents you increase your monthly income obviously. This will help offset rising utility, repair, gardening, insurance, and many other expenses you, as an owner, are responsible for.
PROPERTY VALUE
As you know the appraised value of your building is computed by several methods. There are comparable sales, replacement value, and NET OPERATING INCOME. You owe it to yourself (and your partners if you are a group investment) to maintain the highest possible value for your property by increasing its NET OPERATING INCOME. This can be important not only if you decide to sell, but also in case you refinance.
TENANTS ARE PREPARED
I once handed out a rent raise notice to a woman who was carrying an armload of items. When I handed her the notice, she threw everything up in the air and started screaming. She did some checking on comparable units and decided to stay. This past year, for the first time in my career, I handed a tenant a rent raise notice (he knew it was that time of year-I usually raise rents in Mid -January) and he THANKED me! Maybe he was expecting something higher, but I was a little shocked!
The point is, you do yourself a disservice by under-renting your units and when you have normal annual rent raises, tenants have an idea they are coming and can adjust their budget. So I know we will all make mistakes in 2023 as we did in 2022, but don’t let not raising your rents be one of them!
What we at PRS PROPERTIES CAN DO. We can discuss with you the current rents in your area and supply you with comparable rental prices for similar properties. Before you hire a manager, make sure the compensation is fair to you! We can also look at your building for changes that might allow you to get a higher value in order to create value without huge expenses for your building. We can help you to get the maximum value for your property, should you decide to sell, or the maximum return if you are planning to keep your building.
We always have many investors who are looking for “as-is” properties and are willing to purchase with low rents, a moratorium, or even with a problem tenant in place. We have put together numerous transactions over the years which involve properties that are not listed for sale. Many investors are in 1031 exchanges and need to identify a replacement property before their 45-day identification period runs out.
Should you decide to put your property on the market, we will put together an aggressive, targeted, and professional campaign to get your property sold fast. We have been doing this for over 40 years, and we will use all the tools available to bring you the most dollars at closing. If you are thinking of selling or are just curious about the value of your property, don’t hesitate to give us a call.
Remember – KNOWLEDGE IS POWER!
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