economics Me

Rent Inflation

As many of you will recall, a rental property that I own is coming up for renewal. Right now, I am renting that two bedroom, 1900 square foot house for $1700 a month. That price includes a washer/dryer, pest control, and lawn maintenance. Two years ago, when we began renting to this couple, that rent level put us near the upper end of the area rental market. We didn’t raise the rent last year when they renewed.

A month and a half ago, we looked and decided that rent was probably going to be increased by $100 to $1800 a month when the time came. That was a month and a half ago. The time has come, and things are a bit more complicated than they were in October.

Zillow has a useful tool that landlords can use to compare their rental property to other rental properties in the area. Looking at the recent rental listings, there are only a handful of rentals available in the area. Houses are renting as quickly as they are being listed, and that is driving up prices. The ones that have recently been listed indicate that our home should be renting for somewhere between $2,200 and $2,700 a month. This means that, in the last 5 months or so, rents have increased by about 25% in my area!

If this keeps up, by the time of lease renewal on Feb 1, my house will have a rental value of $2400 to $2900 a month. In a year, who knows?

My wife says that she doesn’t want “to screw them” by renting the place for market, and wants to stick with no more than $1850 a month. She also says that too large of a rent increase will cause them to move out, and then the home will require cleaning, painting, etc. on top of being empty for a month or two. I must admit that it would make be feel guilty to raise rent by $400 or more dollars month. On the other hand, if rents keep increasing like this, every dollar that we don’t increase the rent now is two dollars of an increase that we will have to make next year.

Not matter what, inflation is hitting the rental markets in a big way. Rents are increasing at an astonishing 40 percent per year, at least in this area. Real estate is skyrocketing. We bought this rental two years ago, with the idea that we wanted a passive income stream. We put $150,000 down on the purchase price of $250,000. Every dime that we have collected in rent over and above expenses has gone to paying down the mortgage. We now owe $45,000 on that house. We were just contacted by a real estate agent and were offered $350,000 on that house. A $155,000 profit in 24 months corresponds to more than a 50% annual ROI. That house is increasing in value by $4400 a month. We are increasing equity at double the amount we are collecting in rent. That is going to be reflected in our property tax bill next year, and needs to be factored into the rent.

The only reason we don’t boot the tenants out and sell is that we don’t want to covert income producing real estate into dollars that are decreasing in value every day, thanks to President Biden and his insane economic policies.

Setting rent is tricky. If you rent at too low of a price point, not only are you leaving money on the table, but you are running the risk of getting tenants who will trash the place. (Sorry, but people without money don’t value your rental as much. They are more likely to destroy the place.) Too high, and the place sits empty for an extra month or two, and that costs you more than simply renting for a bit less.

The kitchen countertops need to be replaced in that unit, and that will cost around $3000. The renewal letter goes out this week, so we need to make the call. I think that we are going to offer the renewal at $1850, unless they want the countertops replaced. If that happens, I will have to raise rent to $2000. If they don’t want to renew and instead move out, then I will relist the place for rent at $2300. I am sure that I will get it.


Happy Thanksgiving

Thanksgiving is traditionally a holiday where family and friends gather to appreciate each other’s company and be thankful for their good fortune. While I will be working today and can’t gather with my friends and family, I can still reflect on my good fortunes.

I am thankful that I am relatively healthy, in a decent financial position, and that I have a wonderful, loving woman by my side.

I hope that this day finds each of you who read this blog in similarly happy circumstances.


Last Week

Posts were short and not as frequent last week because I was out of the country. We travelled to St Marten (the Dutch side of the island). While we were there, we talked to the locals, who were more than happy to give us their opinion on COVID, the vax, and American politics. Since I love doing my “man on the street” intel reports, here goes:

The Dutch citizens on the island were surprisingly conservative. After a few drinks, the people there were more than happy to tell you what they think. The people we spoke with overwhelmingly felt that the vaccine was responsible for quite a few deaths, and once that rumor got started, the people who had yet to be vaccinated began refusing the jab.

Only 60% of the island has been vaccinated. We didn’t see any locals wearing masks. Despite all of that, the COVID infection rate on the island stands at 7.1 per 100,000. That is, 0.00071 percent of the people there are infected with COVID. Even so, the CDC claims that there is a “high risk” of catching COVID on the island. I say “bullshit.” The locals hate Biden, they don’t trust the leaders, and they pointed me to a sign that was put up by the government, pointing out to me that it was suspicious. The people I talked to believed that there was a plot afoot:

They felt that the use of the same slogan from country to country was suspicious as hell.

fun Me

I need the lift

The world catches up with us. We all need a lift, including me. Lately, all of the talk of our nation’s collapse has gotten to me. So today is going to be a break from that.

One of my favorite things each November is that the holiday music channels begin broadcasting Christmas music. I spend most of November and December listening to old Christmas music from the greats: Louis Armstrong, Frank Sinatra, Bing Crosby, and others. I drive my coworkers nuts with it.

I find it to be uplifting and a great relief from the problems of today’s world. With that message, I leave you with my favorite Christmas song:

Glory Days Military

Veterans’ Day

Today is November 11, veterans’ day. As a veteran, I can tell you that I don’t need or want a holiday to honor what I did. I don’t even stand when places ask us to. My wife doesn’t understand why. I just don’t think that I did anything special. If you want to honor someone for their service, please wait for Memorial day.

Blog News Me

My muse

I could make all sorts of excuses as to why my post count is down this week: I have been watching the Rittenhouse trial every minute that I can, even while at work. I have also been working quite a few hours. I have several projects going on, etc.

But the fact of the matter is that I just haven’t felt like writing a whole lot. Maybe tomorrow.


USPS lost $$

I recently ordered some Gold Eagles. The company sent them USPS. The package tracking showed that it was making good progress, until it left a distribution center that is about 50 miles from my house on October 27 at 6:06 am. That is the last time it was tracked. The status now reads “In Transit, Arriving Late. Your package will arrive later than expected, but is still on its way. It is currently in transit to the next facility.”

I emailed the company that sold it. They are saying to wait a few more days, and if it still doesn’t arrive, they will file a lost package claim. It’s a reputable company that I have done business with before. It’s still maddening.

economics Me

Rental Inflation

It isn’t just food. The hardship that was imposed upon landlords during the COVID eviction moratorium, combined with the massive migration of migrants from the large cities of the north, who are fleeing lockdowns and high taxes, is affecting rents in lower cost areas of the country. For example, South Florida is seeing skyrocketing rents.

Even here in North Central Florida, rents are rising. In the area where I own my rental, there isn’t much to rent. What there is, is becoming more expensive. I am renting out my three bedroom, 1,900 square foot home with a fenced in yard and two car garage for $1,700 a month ($0.89 per square foot). That rent includes lawn maintenance and a washer/dryer.

A new apartment complex that is nearby recently began renting a three bedroom 1,000 square foot apartment for $1,600 a month ($1.60 per square foot), and that doesn’t include a garage or washer/dryer). They are fully rented with a waitlist at that price.

My current tenants have been living in my rental for two years without an increase. In that time, my costs for insurance, property tax, and lawn maintenance have increased by about $120 a month.

What this means is that I should be increasing my rent by at least $200 a month. I could probably get $2,000 a month. The tenants would have little choice- it isn’t like they could go anywhere else and find a better deal. My wife and I have discussed it, and we don’t want to do that. At the same time, we have a business to run. We decided to compromise and will be raising the rent to $1,800.

Inflation continues.


Taking what they’re giving

‘cuz I’m working for a living. (Hat tip to Huey Lewis…)

I didn’t post yesterday, because my phone rang at 0500 with my boss on the other end of the line. They offered me a cash bonus to get out of bed and come immediately to work. A cash bonus plus time and a half was enough to get me out of bed, so no blog post yesterday.


HOA battle

I own rental property in a neighborhood that is deed restricted and covered by an HOA. Three years ago, that HOA tried to make a rules change. This is the rule that they wanted to change:

Leases – All Leases of a home shall be restricted to residential use. All leases shall be in writing and shall provide that the Association shall have the right to terminate the lease upon default by the tenant in observing any provisions of the Declaration of Covenants, Conditions and Restrictions for [neighborhood]. A copy of any such lease shall be delivered to the Association upon request. Each lease shall contain the following provision:

The lessee hereby acknowledges that this lease is subject to the Declaration of Covenants, conditions, and Restrictions for [neighborhood], that lessee has read the same and agrees to be bound thereby, and that failure to comply with the same may result in certain remedies being applicable to lessee including, without limitation, termination of this lease without further notice, and personal liability of lessee and lessor for damages, including reasonable attorney’s fees.

I had a number of problems with this. The first is that the HOA wanted to have the power to evict my tenants, but expects me to assume all liability and expense. No fucking way. So I went to the HOA meeting and told them that not only was this illegal, but that it would expose the HOA to liability if a person they ordered to be evicted was part of a protected class and decided to sue under the Fair Housing Act. The HOA lawyer agreed. I figured I had won that round, but took that as a warning and become involved in the HOA, eventually making it onto the board.

I am on the board as the treasurer, and I represent the interests of several property owners who own rental property in the neighborhood. Collectively, we own as rental property more than a third of the properties in the neighborhood, or more than $10 million worth of rental property. The rules of the neighborhood cannot be changed unless 2/3 of the property owners vote to do so, and we have the votes to block any rule change that we choose to.

So now here we are, three years later, and apparently this rule was put in place without our knowledge. One of the landlords showed me a letter where the HOA is telling her that they want a tenant evicted within ten days because that tenant has been parking a boat in the driveway of the rental house.

This all stemmed from an argument with a petty tyrant in the HOA. Another HOA board member lives across the street from the rental property in question, and told the tenant to move the boat out of the driveway. The tenant told him to mind his own business, a screaming match ensued, and now the board member is demanding that the tenant be evicted.

I am not going to allow that to stand. I will sue if I have to, but for now I am advising the HOA to meet with an attorney before pushing this any further, because litigation can be expensive.