Paying an arm for groceries and a leg for gasoline has many people feeling like their financial security is falling apart. Add in rising costs for other things like cars, travel expenses, electronics, and a morning latte, and this rising inflation is really starting to step on everyone’s toes.
Practically nothing is exempt from inflation’s wrath. That includes rent. According to the Multifamily Outlook report from Freddie Mac, annual rent growth is forecasted to be 3.6 percent in 2022, with rising rent expected in every primary U.S. housing market.
This news may not be received well by your friends, family, and others who might have been renting apartments or townhomes for the past few years. This might be the time for you to provide recommendations on how they can partially offset these increased housing costs.
Shop around for rentals
Even though they may have gotten comfortable in their current residence, the prospects of a higher rent payment may be the nudge your potential clients need to start shopping around for another rental.
Depending on a rental property’s location, condition of the buildings, living space, amenities, and other factors, rent can vary widely. If your contact can relocate to another rental somewhere else that’s not a huge step down in quality in exchange for a lower rent payment, let them know they should at least consider it.
Perhaps when your contact first started renting, they needed more space for younger kids, but now those children may be grown and living elsewhere. That means they could downsize to a smaller space, either within the same housing complex or elsewhere, resulting in a lower payment.
Negotiate rent payments
For some goods and services, consumers can negotiate the value. That’s sometimes the case when buying a car, providing freelance work, purchasing at a flea market or auction, or establishing salary and benefits at a new job.
This approach might sound intimidating when talking to the landlord about lowering the rent, but it’s worth giving a try. The worst they can say is no. So, how should they go about it? It’s called bartering.
Maybe the landlord or property manager would be willing to give a discount on rent in exchange for doing some landscaping, light maintenance, or snow plowing work around the property.
If that’s not possible, you could recommend that they ask the landlord to delay the rent increase a few months to give them time to come up with the extra money through a raise at work, a part-time job, or borrowing from family or a friend.
One other idea you can recommend is for them to offer to sign a two-year rental lease instead of the typical one year in exchange for a lower rent increase. This gives the landlord the security that they won’t have a potential vacancy to fill in a year, and your contact only has to deal with a minimal rate increase now.
Buy a home
Homeowners can manage high inflation rates because they can lock in their housing payments for a more extended period through mortgage financing. No rent increases here.
For that reason, and others, now might be the time for you to suggest homebuying to your prospects who have been holding off on a home purchase. Although they are starting to rise, mortgage interest rates are still near historic lows, and there are various types of home loans to choose from to ensure affordability.
In fact, in some situations, home buyers end up paying less in a monthly mortgage payment than they did in rent (even before it increased). Even better, they are putting that money toward something they will own at the end rather than a borrowed place to live.
To make sure your clients know the pros and cons of renting vs. home buying, share these resources:
- No More Rent: Longtime Renter Achieves Dream of Homeownership
- Fannie Mae Underwriting Change Paves the Way for Renters to Become Homeowners
- Renting vs. Owning – the Misconception is Intensifying
2022 multifamily outlook – mf.freddiemac.com. (n.d.). Retrieved February 3, 2022, from https://mf.freddiemac.com/docs/2022_multifamily_outlook.pdf