Depending on who you ask, you’ll get a different answer regarding whether renting a home right now is a good idea.
We all know it’s a seller’s market right now, but property managers are also seeing an increase in rental rates. This makes it a good time to be a landlord, but maybe not the best time to be a renter.
Breaking Down the Boom in Rates
Just like any good or service, demand dictates the cost. As we face shortages of products and labor nationwide, we see price increases across a variety of markets. Rentals haven’t been left untouched, with some cities seeing significant rental hikes. The Wall Street Journal reported in December 2021 that the median cost of rent increased by almost 20% since the year prior. In Salt Lake County, median rent rates increased 12% in one year.
While this seems like a big jump, it’s nothing compared to the appreciated value of homes for sale on the market. The average cost of a home in Utah has increased by 29% as of September 2021, and that estimate is expected to continue rising.
How Much to Spend on Rent
It can be tempting to snatch up any available property on the rental market these days, but it’s still important to keep housing costs in check. A good rule of thumb in rental property management is to ensure tenants are only spending ⅓ of their monthly income on the rent; otherwise, you run the risk of having tenants who are financially overextended and unable to cover all their expenses.
As a renter, if you’re not sure whether you’re getting a good deal or are paying too much, you can turn to sites like Rentometer, Trulia, or Zillow. They show estimates for median rent in your desired location so you can compare properties and make an informed decision.
When’s the Best Time to Sign a Lease?
Much like the housing market, the rental market has good, better, and best times to sign on the dotted line. Since leasing a property often coincides with school schedules, there’s often a lot more inventory on the rental market between May and September. This accounts for people relocating during the summer months in order to settle down before starting a new school year.
People are less likely to move in the dead of winter, so inventory dips during this time while people stay put. In contrast, while inventory is limited, data shows that the best rates can be found between October and April. Because landlords and rental property management companies know fewer people are looking for rentals in this “offseason, they’re eager to draw tenants with more competitive rates.
As for convenience, it’s always best to give yourself more time than you think you need to find a rental. Waiting until the last minute could leave you with a gap in housing, or paying rent in two places at once. In a regular market, experts suggest beginning a house hunt two weeks before your desired move-in date which should, ideally, be the first of the month. In today’s market, however, if you can’t sign a lease the day a unit becomes available, you’re likely to miss out. As a result, you may need to give yourself closer to 30 days to hunt for your next rental.
How Much to Ask for Your Rental
On the flip side, how much should you be asking for rent? If you’re using a property management company in Utah, your average rental rate hovers at $1,478 per month. This is based on an average apartment size of less than 900 square feet, however, so a larger unit or single-family home can pull in more rental income.
Let’s take a look at some Salt Lake Counter neighborhoods and their average rent rates:
- Sugar House – $1,603
- Capitol Hill – $1,575
- The Avenues – $1,568
- East Bench – $1,537
- Cottonwood Heights – $1,504
- Holladay – $1,497
- Downtown SLC – $1,493
Data from RENTCafe also indicates that 49% of homes in Salt Lake City are renter-occupied. Right now, this puts the odds in a landlord’s favor; you know there’s a large number of people ready and willing to rent, so you can price your property competitively. And although it’s the norm for rent to cost more than ever, you might want to consider maintaining a reasonable rate to cover your expenses and resist the urge to inflate your rate. Sometimes owning a rental property is just about the bottom line, but many of us have the opportunity to help regulate the rental market.
In Utah, it is legal to increase rent yearly, but if it’s not necessary in order to cover the cost of maintaining the property, you can be a part of the solution many renters are currently seeking: affordable rentals with reasonable amenities in desirable locations. We know rental property management can be tricky to navigate, and that’s why Rhino is here for you. You can refer to our blog HERE for more insight on owning a rental property, or give us a call today.