Real estate investors in San Diego have recently made huge profits on multifamily properties. However, do multifamily property rents appreciate, allowing for investors to maximize profits? More specifically, can rental rate raises be counted on and how can they be manually driven up significantly?
Investors often debate the advantages of multifamily property rents contrasted against single family properties. When deciding what real estate investing strategy to apply in San Diego, and in order to craft accurate financial projections, it is important to familiarize yourself with both approaches. Many recognize that single family rents can be raised faster and more efficiently than multifamily property rents. However, that doesn’t necessarily mean your investment will continually see falling returns or dip into negative cash flow territory. Multifamily property rents can result in long term cash flow if approached with the right plan.
Rents on all types of properties do need to be raised and tenants should expect them to be raised every year (even if landlords choose to give them a break or reward great tenants). Think about it; property taxes to insurance to labor and living costs will go up for those engaged in real estate investing in San Diego. If they don’t increase rents, they’ll soon be out of pocket.
In reasonable economic times that are witnessing average inflation, appreciation, and job opportunities; a 5 to 10% increase per year is not out of the question. Of course, financial projections should remain conservative to be on the safe side. Greed needs to be tempered while providing a good service. Using common (and financial) sense can help landlords maintain tenants without experiencing high turnover rates. Stay within the boundaries you are comfortable with and do not get too creative, as it may lead to losses over time.
At the same time, there are many ways of forcing larger leaps in rental rates. Property improvements and interior or exterior makeovers can enable landlords to substantially increase asking rents upon renewal. Some great marketing, along with a change in positioning, can turn low end housing into trendy digs for tech entrepreneurs. Doing so may result in excellent returns on your investment.
