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Every era has a different approach to real estate. Keeping up with the trends and understanding the inner workings of the market can help you continue innovating and to be successful in this tough business.
There are two main things you need to understand about today’s housing market:
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The global pandemic came to turn the world upside down, and the real estate market is no exception.
With rising prices and the competition each purchase offer faces, a lot of people are choosing to rent instead of buying. Changes to the supply chain, surges in raw materials for building homes, and mortgages skyrocketing have had a lasting effect which has made it hard for people to think about being homeowners.
The needs of renters also changed because of Covid. People are looking for more space and amenities in-house because of the rise of home office jobs. As a chain effect of home office, citizens began moving, making Texas the 1st sought-after state to live in in 2021.
Easy access has also become a huge asset thanks to people needing to receive goods via delivery services.
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Millennials officially became the USA’s largest adult generation, according to the U.S. Census Bureau, so it is really important to understand how they live and rent.
One of the things millennial renters look out for most is pet-friendly properties since 76% of them have a pet. Convenience is also a big thing millennials look for. Providing services like software that make handling a maintenance issue easy and figuring out how you can help them have it easier can go a long way.
Millennials also tend to eat out less and enjoy cooking, so you need to think about providing an appealing kitchen that allows them to do so.
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Adapting can be tricky, but really necessary. A great way to keep up to date and make sure you are making the best of your investments is to find the perfect property management company with the experience needed to help you make the best decisions and handle the tenants you want in a professional manner. |
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Jay Hartley MPM®, RMP®
Owner - Managing Partner
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Office | 817.377.3190
Direct | 817.288.5546
Frontline Property Management, Inc.
3000 Race Street, Suite 132
Fort Worth, TX 76111
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Increases in the minimum wage can be good for landlords.
A stand-out benefit is that renters are less likely to default on their monthly rent payments. This equals more financial security for you and your tenants.
But while your tenants may have the ability to afford rent much better than before, you could also raise your rates.
How does minimum wage affect rent prices in the grand scheme of things?
Overview of minimum wage in the United States
According to reports, 26 states will increase their minimum wage in 2022, but unevenly.
For example, the minimum hourly wage in Colorado increased by as little as $0.22 to $12.56 per hour on January 1. More substantially, in Florida, the minimum wage rose from $8.56 to $10.00 per hour this past September.
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Minimum wage has been a topic of discussion for a long time, with proponents on each side arguing that it’s either essential or debilitating to the economy as a whole. Overall, $15 per hour is viewed as the gold standard by most minimum wage increase supporters. So far, the only state that has achieved a state-wide $15 minimum wage is California, which also happens to be one of the most expensive states to rent in.
How a higher minimum wage affects the ability to pay rent
One factor of a higher minimum wage that’s beneficial in the real estate industry is the greater ability of tenants to afford housing costs.
A study published in the Journal of Urban Economics analyzed rent payment data from 14 states from 2000 to 2009. Researchers found that one of the benefits of increasing the minimum wage was that renters found it easier to meet rent obligations. For example, several months after the increase in wages, there were 10.6% fewer rent defaults than in states where wages remained the same.
However, the 2022 study found one caveat — higher minimum wages also resulted in an average rent increase. On average, it took landlords three months to raise rent. However, increasing the price of rent didn’t drive missed payments. According to the data, the boost to tenant incomes was enough to cover the rent hikes.
What does this mean?
How to raise the rent when the minimum wage increases
Suppose you’re a landlord. Of course, you want to maximize your property’s potential if the rental market is “red-hot”. But the conversation about increasing rent can be tricky and stressful to have with your tenants.
Maintaining a competitive rental price is critical to running a successful rental business. However, state laws typically dictate when you can raise rent and by how much. For example, you can specify the period for a fixed rent price in the lease in some cases. Or, if you rent to Section 8 tenants, you can only increase rent annually. But there may be a cap on the annual rent increase you can charge in a rent-controlled area.
However, you cannot raise rent prices in some cases — even if you face increased maintenance and utility costs. Here are a few instances where it’s impossible to increase rent:
- You want to increase rent before the lease ends
- You didn’t give proper notice about the raise in rent
- Local rent control laws cap the allowable rent increase
- There is no provision in the lease for a rent increase
- The increase could be interpreted as retaliatory or discriminatory, making it an illegal rent increase
Let’s suppose you can increase rent — how should you go about it?
First, it’s vital to communicate openly with your tenant. You can explain why the rent increase is necessary and why it’s still competitive with the rental rates in the local area. In general, it’s good practice to keep reasonable, consistent rent prices in line with the local market.
Finally, if you have a rent increase policy in the lease agreement, it becomes much easier to increase rent.
You can start the process of increasing rent by sending your tenants a rent increase notice letter.
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A rent increase notice is a written document or letter where a landlord informs the tenant about a planned change in rent. You must send the rent increase notice at least 30 days in advance if the tenant is on a month-to-month tenancy or a fixed-term lease has provision for it.
Before preparing and sending the rent increase notice letter, get advice from a real estate attorney to ensure compliance with local laws and the terms of your rental agreement.
State laws typically regulate the method of sending a notice of rent increase. It’s standard that the notice is in writing, and you have proof that the tenant received the letter. Therefore, it’s best to send the rent increase letter by certified mail. But in some states, a sheriff must deliver the notice.
Regardless of which state you live in, the letter should always be friendly and courteous. You should include the standard information for any legal document: name, address, and date. However, the rent increase notice should include the rent increase date, the current rent amount, and the increased rent rate.
The amount of notice to give tenants before increasing rent depends on the type of rental agreement and local laws. At a minimum, you must provide official notice at least 30 days before the increase. However, you must wait until the lease expires in some cases before negotiating an increased rental amount with the tenant.
Closing thoughts
We’re set to see a flurry of minimum wage increases across the United States over the next few years. We’ll wait to see the true impact these increases have on the rental market.
Until then, continue to track your market’s data and plan for rent increases in accordance with the market’s movement.
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Construction of a $63 million luxury apartment complex is underway at a master-planned community about 15 minutes south of downtown Fort Worth.
Titan Development and Aberg Property Co. Inc. broke ground Tuesday on the 284-unit The Trailhead at Chisholm Trail Ranch. The project is expected to be complete in the first quarter of 2025.
“The Chisholm Trail Parkway is exploding with growth, and The Trailhead is positioned to deliver much needed multifamily to this vibrant neighborhood,” Josh Rogers, senior vice president at Titan Development, said in a statement.
The project site is on 13.5 acres at the northeast corner of McPherson Boulevard and Brewer Boulevard in Fort Worth.
The apartments, spread across seven buildings, will include one-, two- and three-bedroom floor plans along with studios. Amenities will include garages, covered parking and bicycle storage as well as a pool, a dog park and a pickleball court.
Links Construction, based in Denton, will build the project designed by HEDK Architects. Lincoln Apartment Management will operate the property.
The complex will be part of the 625-acre Chisholm Trail Ranch, a community of single-family homes, retail space, a park, a community center and a trail system just west of Chisholm Trail Parkway.
Design features such as artwork and landscaping pay tribute to the Chisholm Trail, the major route used to drive cattle out of Texas in the late 1800s.
“The Trailhead in the historic Chisholm Trail Ranch area is our first multifamily project in Fort Worth, and we especially enjoy creating a distinctly Western theme,” said Kurt Browning, partner at Titan Development.
“As the fastest-growing large city in the country, we’re excited to see the Trailhead at Chisholm Trail Ranch taking shape to support our booming population and thriving economy,”
“As the fastest-growing large city in the country, we’re excited to see the Trailhead at Chisholm Trail Ranch taking shape to support our booming population and thriving economy,” said Robert Sturns, director of economic development for the city of Fort Worth, in a statement. “With its proximity to the new Tarleton State campus and other nearby amenities, this multifamily development is a welcome addition to the new growth happening in southwest Fort Worth.”
The project is a joint venture between Titan Development and Dallas-based Aberg Property Co., with investment from Olympus Property. Aberg Property Co. has been involved in the development of the Chisholm Trail Ranch master plan for more than a decade.
This is Titan’s first apartment project in Fort Worth. The development and investment firm with offices in Austin and Albuquerque has completed more than $2.5 billion of projects since 1999, ranging from multifamily housing to industrial and self-storage properties.
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Disclaimer: This is designed to provide general information regarding the subject matter covered. It is not intended to serve as legal, tax, or other financial advice related to individual situations. Consult with your own attorney, CPA, and/or other advisor regarding your specific situation. |
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