Dear Owner/Clients –
Winter greetings from the Treasure Valley in March! It has snowed here at some point each day during March, and our average temperatures have been 10-15 degrees below average this month. This has not helped us rent properties thus far in March, as cold temperatures force many people to stay inside instead of getting out and looking for new rental properties.
We wanted to briefly discuss our current efforts in “tenant retention”, and why we feel this is necessary during 2023. In late 2019, and early 2020, the U.S. economy was strong and chugging away at a record pace. In Spring of 2020 COVID19 hit, and everything came to a screeching halt. In an unprecedented effort to stop a financial crisis, the US Government and Federal Reserve made a series of decisions to print over 6 trillion new US dollars. It was distributed into the money supply through a series of programs such as the ERAP program, PPP program, tax credits, etc. The consequences of this measure have arisen in full strength in 2022 and early 2023 as inflation has been anywhere between 6% and 9%.
In combination with general US monetary inflation, growth of the Treasure Valley population and construction base has stayed very steady over the last years. The amount of industrial, commercial, and residential properties and structures in this Valley has GREATLY increased during the
last 5 years. Costs of lumber, metal, siding, windows, roof shingles, appliances, paint etc. (everything!) have kept pace in high costs in the Treasure Valley due to the combination of general inflation and high demand of materials. In addition, labor costs have gone up rapidly due to high demand for employees, and our valued vendors that we rely on daily for maintenance, cleaning, painting, roofing, lawn care, etc. have all increased prices each year over the last 3 years.
The same gallon of paint from our local Sherwin Williams stores that cost $24.99 in 2019 now costs $41.97. The same GE basic dishwasher from Home Depot that cost $219 in 2019 now costs $419 or more. Handyman labor that was $30 per hour in 2019 now costs $50 per hour on average in 2023. It seems “out of control” that costs have risen so much, so quickly.
The direct effect from the above stated facts on your rental property, is that 2023 is currently the most expensive time in history to turn over rental units in the Treasure Valley. To bring an average sized 2 bedroom rental unit back to good condition, with new flooring, interior paint, and any general repair needed, what cost $2,800 in 2019 in labor and materials now costs $5,000. In many cases these are NOT optional upgrades such as upgrading appliance finishes, or installing stone countertops. These are NECESSARY maintenance items such as paint, flooring, repair items needed to effectively and efficiently re-rent properties to prospective tenants that may look at 5-15 potential properties before choosing one to apply for. Finally, with all of the new construction residential properties that we are now competing with for qualified applicants, our units need to be in as good of condition as possible to attract a demographic of qualified applicants.
Due to this, JPM is under the strong belief that it is worth doing “anything and everything” possible to keep tenants in place in 2023. The extra $50 in monthly rent that may be achieved from turning over a unit at the end of an existing tenant’s lease is not worth the thousands of dollars it will take to update the unit. In January, JPM began contacting each resident that inquiries about, or provides, a 30-day Notice To Vacate, and asking them directly what we can do to keep them as a resident. We are also adding features to our website that will serve the same purpose. In most cases the vacancies are unavoidable due to domestic splits, out of state moves, or house purchases. However, in some cases we have been able to “save” the residents, and keep them in place, avoiding costly turnovers. JPM will continue this process through 2023, and until we see labor and materials costs coming down, OR until we see rent prices rising again to the point where turning units over makes more money sense. As always, we work diligently to secure the lowest possible prices on parts & labor, while maintaining the quality level needed to ensure that your investments stay updated and competitive.
If you receive an email or call from Andrew, Matt, or Angie asking to negotiate on a tenant’s rent rate, lease term, etc. please consider the high turnover costs that we are dealing with in 2023. Please understand that we use the Best Priced local vendors that are available for materials and parts to work on your rental property, but “good” prices do not exist here at this time.
- Matt Johnson
- Johnson Property Management, LLC