Oh, Those Rents!

In the last Anfield Realty e-mailer, I emphasized the effect of the recent property “appreciation” in our real estate market. The key take-away was that evaluating appreciation is always a thing, no question. But what about rents? Or more specifically the direction of rents?

Nary a week goes by where I don’t get amazed by some new milestone when it comes to rental rates. The headline article in the Idaho Press Tribune on Feb 26 chronicled the plight of the tenants of a 2-bdrm apartment in SE Boise. Apparently, the nice couple recently received notice of a pending rent increase which was going to take them from $1,175/mo to $1,625/mo. That’s a nearly 40% increase. Sure, it’s a nice place and the new owners of this property are upgrading amenities and such, but come on man… amirite?

Another factoid about that particular case is that the investor group that owns the building hails from Beverly Hills. So, what do they know about Boise Idaho that we don’t? Well, it might be that on a macro level they sense that Boise is simply undervalued. When I moved back to Boise in late 2014, it wasn’t that unusual to see a reasonable 2-bdrm apartment rent for $700-$800/mo while other markets in the NW were renting 2bdrm apartments above $1,500/mo. So, the direction of rents was definitely up!

Guessing what might happen to rental rates travels the same road as projecting overall property appreciation. Very difficult to do. But it’s also very important to any investment in real property. Let’s call it an educated guess, but Boise and the surrounding areas will continue to be a great value for renters compared to other cities in the great Northwest.

As for including this in an evaluation, I’ve written previously about how using exclusively “current” rents in a property proforma is not a good idea. Most landlords, including experienced property managers and Realtors, are simply not staying up with the market the way they should. I recently met a couple renting a single-family home in a nice neighborhood and they were chuckling that their property manager had informed them that their rent was set to increase from $2,000/mo to $2,020/mo. Seriously… only a $20 increase. Too funny and very uninformed.

I’ve never been a crystal ball reader and I’m not about to start now, but people continue to move to Boise and there are a ton of metrics supporting this growth/progress, whatever you want to call it. Anfield Realty is well positioned both as Realtors and investors, to advise and “coach you up” with the end goal of optimizing profit and most definitely evaluating those all-important Rents!

Walk on!