Are Rising Rents Too Much of a Good Thing? via NREIonline.com

It seems like such good news—apartment rents are rising faster than inflation. That means more profits for real estate investors.

But there’s also a risk. When rents rise faster than the paychecks of your residents, then that puts pressure on their budgets. Eventually they may look for other options. If you’ve carefully marketed your apartment community to a certain set of residents—say retirees or workers at the local hospital—it’s bad news for you if those people can longer afford to live there.

“Landlords need to be careful,” says Brad Doremus, senior analyst for data firm Reis, Inc., based in New York City. “They can’t raise rents forever or they come up against that budget constraint.” Property managers should worry about competition from new rental housing, cheaper rental housing and even for-sale housing. Eventually it will become clear to everyone that the for-sale housing market has bottomed and prices are rising, and residents paying sky-high rents will start looking seriously at homes or condominiums.

Read more...Are Rising Rents Too Much of a Good Thing? via NREIonline.com