It may be time to reevaluate your rents -- at least on your apartment buildings. According to a new report from Apartment List, today's apartment hunters have some serious cash. In fact, the average income is about 5% higher than it was prior to the pandemic.
All in all, the typical renter can now afford a $1,335 rent -- up from about $1,250 in the first quarter of the year and from less than $1,200 in the first quarter of 2019.
It begs the question: Should you be raising your rents? Let's take a look.
What to consider before raising your rent
Clearly, renters are wealthier than they were a few years ago, and if you haven't increased your rents in a while, it may be time to consider it.
Before pulling the trigger, though, you'll need to take a few things into account, like:
Local economic and market conditions
Not every market will have wealthier renters, and in some areas, you might actually have the opposite trend going on. Is unemployment up? Are employers closing? Are wages decreasing? These factors will all play into what your tenants can afford.
You should also look at the housing market. If for-sale homes are in short supply, it will likely mean more demand for rentals -- and make charging a premium rent easier. If the opposite conditions are true, you'll probably need to hold off on any rent hikes for a while.
Your location and target tenant
Taking your audience into account is critical, too. Obviously, if you own a building in a college town or near a college campus, you're catering to students -- and most of them aren't seeing these higher incomes reported in the study. If your building is in the suburbs, downtown, or in an area near lots of employers and businesses, these incomes may be more accurate.
How permanent is the trend?
If you use annual leases, then raising rents is a long-term move -- and not one you should base on just today's conditions. Fortunately, it seems wealthier renters may be here to stay.
According to the report, this jump in renter income and budget stems from two conditions: increasing workplace flexibility (remote work) and incredibly low housing inventory.
"The pandemic unlocked new geographic flexibility for workers at the highest end of the income distribution, thanks in large part to the widespread adoption of remote work," the report explained. "Moreover, historically low inventory in the for-sale market is keeping many of these high-income renters in the rental market longer."
As long as these conditions persist, these higher apartment budgets should, too.
The Millionacres bottom line
Post-pandemic conditions have ushered in a wealthier breed of renters, and for the right landlord, that may mean a rent increase is in the cards. If you're considering increasing your rents and wondering how much to raise them, here are some general guidelines. You should also prepare a detailed rent increase notice for your tenant well ahead of time.