Property Management Blog

Effects on rental market

In 2011, Legerity Property Management was able to implement small rent increases on many units throughout Boise, Meridian, and Eagle - primarily those in the more desirable areas of the valley and those units with above-average finishings; however many other homes did not command rent increases. Among all landlords throughout the valley, rents as a whole turned out to be relatively flat(compared to the change in vacancy) on average, with Ada County outperforming Canyon County in pretty much every conceivable measure. With the 2011 decrease in available inventory and lower vacancy rates, we would expect rent increases to be greater than they actually turned out to be. The populace's ability to pay is always a factor of course and a probable cause for the overall less-than-expected rental rate increase in 2011. Improvement in the unemployment rate, should it continue, would likely be a factor in rental rates increasing for 2012 as the competition for good workers, and thus wages, increases, bringing our expectations into alignment, however gradually, with what we can usually infer within the relationship of vacancy and rental rates.

Legerity Property Management employs a couple databases used by Boise property managers in addition to our own inventory data to first establish an average or baseline rental rate within the past year for the property in question. 

Much to my personal dismay, rental rate data is almost always organized by number of bedrooms with a corresponding price per square foot for each. In an ideal world, I would much prefer the information be organized by homes within a certain square footage range for greater accuracy. The reason being that for instance a 3-bedroom, 1400 square foot home will always command a considerably higher price per square foot than a 3-bedroom, 2500 square foot home. Which makes sense economically since after you have paid for areas such as the garage/utilities, bathrooms, and kitchen - areas common to both houses that cost quite a bit per square foot to construct and finish, you're then left with lower-cost areas such as a relatively simple bonus room which requires no special finish work. 

As such, after the baseline rate is established, the individual details and condition of the home are applied to determine what should be its fair market rent. Finally, an evaluation of other homes that are currently for rent is done to assess the current competition factor. Given that homes are nearly always listed 30 days in advance of vacancy, if the competition is currently slightly lower than what was determined to be the fair market rent, we may actually still list it at the previously determined rate if it is likely to be rented with minimal turnover time. In all instances, the measure of prospect and advertising traffic are used to both gauge a potential error in setting the rental rate and, far more commonly, confirm that the rental rate was appropriately set to maximize return. 

Brandon Morgan 

Legerity Property Management, Inc.