- Vendor and labor costs are increasing due to increased prices for things like appliances, capital improvements, parts and supplies.
- Anticipate inflation by adjusting your rent appropriately to cover greater expenses.
- Remember, rent can only be increased once every 12 months in Colorado
In this video, Marc Cunningham discusses the current impact of inflation on real estate investors. Are we experiencing inflation? Should we expect increased inflation?
There are pros and cons to inflation in the real estate market. As property values increase, so do expenses. But a problem occurs when expenses outpace rental income gains. Increased costs of ownership and maintenance upkeep of rental properties is happening now, and is expected to continue. Real estate investors should be prepared for more increased costs. Please be sure to take into consideration each of the following ways that expenses will be increasing for rental property owners:
Vendor Labor: Quality vendors are difficult to find. On top of this, vendor rates have been increasing due to the recent employee shortage.
Appliances / Capital Items: Because of the increase in shipping costs, gas costs, service costs, etc, the cost of appliances and capital improvements is increasing. In addition to these cost increases, many projects are experiencing delays in getting work completed.
Parts and Supplies: Plastic parts (manufactured overseas) are very difficult to find and are increasing in price. This shortage leads to increased vendor costs.
Turnover Costs: In this climate of inflation, it is important to avoid tenant turnover, because tenant turnover costs are the biggest expense landlords incur.
Property Insurance, Property Taxes, HOA Dues: We at Grace Property Management anticipate an increase in each of these expenses in the next year. Insurance and taxes are tied to the value of your property, which is increasing. HOAs are experiencing higher costs, which in turn results in higher HOA fees.
The only way for a landlord to offset these increased expenses is by increasing rent. Due to the recent Colorado law passed, landlords may only increase rent on their tenants one time in a 12 month period (click here for information on this law). Because of this, Landlords should be diligent in calculating rental rental rates increases. Clients of Grace Property Management should expect that we will be working diligently to make sure expenses are kept as low as possible as well as closely analyzing rental rates on a property by property basis.
If you have any questions, consider us a resource. Give our team a call at 303-255-1990 or visit our website at rentgrace.com for more resources.