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did well, however, was pumping a lot of liquidity into the economy.
Lawmakers were very generous with doling out funds and inventive with new programs such as unemployment benefits tailored for the “gig” community and independent contractors like Uber and Lyft drivers, hairdressers, consultants, and the like.
The concerning question we have now is what will happen when the federal safety net is scheduled to be pulled back to normal on Labor Day and some people will lose their benefits altogether.
THE FREE-MONEY PHENOMENON HAS PUT PEOPLE DEEPER INTO DEBT
An enormous amount of debt has been accrued during the pandemic and these IOUs will become due. According to this article, mass-forbearance has swept credit problems under the rug and now there is a big mess under that rug.
The era when consumers could stop making payments without having their credit dinged or experiencing other consequences will soon end.
WE SAY ALL OF THIS TO SAY WHAT?
Some economic indicators, coupled with a skeletal tech workforce and remote learning and migration to the suburbs, suggest that Bay Area rents need time to breathe and reset. We do not expect rents to surge in 2021. Assuming the delta COVID variant does not wreak havoc, there should be improvements in 2022, but realistically, our community should not harbor any illusions that rents will return to the levels we’ve been accustomed to before 2020.
Of course, there are exceptions to every rule and our strong preference is to evaluate the unique characteristics of a property. While landlords and
property managers can easily point and click to get a feeler for comparable rents, not all market comps are created equal. We use a variety of sources to right- size the rent amount and take into account many intangibles - technology cannot be used as a crutch.
A BIRD IN THE HAND IS WORTH TWO IN THE BUSH, WE’VE MAINTAINED THROUGHOUT THE LONG, DARK WINTER OF COVID
It’s been reported that “asking rents” are heading higher, but asking rent is just that - asking. Landlords know their numbers and should engage in a cost/ benefit analysis to weigh the pros and cons of raising rents in a vacant unit.
If the rent is set too high, the unit can languish for months with no rental income. This can be especially painful for owners who have been hemorrhaging money throughout the pandemic. By finding the just-right rent amount to charge, landlords can begin to get cash flowing again and that should be the paramount goal during very difficult times.
We want to avoid situations where prospective renters would ink a lease if the rent was a few hundred dollars lower but instead, the unit is overpriced and it results in many months of no rent. If you do the math, it could take a very long time to recoup the lack of revenue by letting the unit sit on the market for an extended period.
PARTING THOUGHTS
This has been a little bit of our soliloquy on where rent prices might be headed and how to think smartly and strategically about optimizing the income of investment properties. Bornstein Law cannot predict the future, nor can anyone, but we can do the next best thing by providing sound counsel in managing landlord-tenant relationships and helping you power through your real estate challenges.
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