Archive for the ‘Budget’ Category

September 19, 2011

Landlords love a good tenant.  You know the tenant that pays his rent on time and rarely complains.  In fact, maybe the tenant even takes care of minor repairs without involving the landlord.  An owner doesn’t want to lose a tenant like that so he may offer rewards to stay.  The most common incentive is not raising the rent.  Though this is a good thing for a renter, it could create a financial trap for him in the future.

In the Conejo Valley, the median rent for single family home with three bedrooms and two bathrooms was $2,200 in 2005.  Currently, it is now $2,500.  This is a two to three percent annual rent increase for the area.

If a tenant leased his home in 2005 and had no rent increases during the last several years, his budget may be squeezed if the landlord did decide to bring the rent to market value or to sell the house requiring the tenant to find another place to live.  For a home based on the median values, the tenant would now be required to pay an additional $300 a month ($3,600 a year) for a similar property.  For a tenant that has rented his current residence for ten or fifteen years with minimal or no increases, the bite can be financially devastating.

We believe tenants need to stay abreast of the rental market even though they are comfortable in their current homes.  We recommend to our rental clients that, if their rent is not increased each year, each month they put aside an amount equal to what a rent increase could have been.  This way, once the tenant is facing a higher cost, he has already budgeted for it.  He will even have accumulated some savings to help with the additional costs of a move if necessary.

If a tenant does have their eye on buying someday, this Rent vs. Buy website can be helpful in deciding if it is time to go from being a Tenant to a Homeowner.

Rich and Jan McMillen