Blue Sage Blog

Jomar is our new Property Manager Assistant

Investing in rental real estate offers numerous benefits, making it a smart choice for building wealth and financial stability. 1. Steady Cash Flow : Rental properties provide a consistent monthly income, which can offer financial stability, and is helpful for planning. 2. Appreciation : Over time, real estate values generally increase, potentially yielding significant profits when selling the property. 3. Tax Benefits: You can deduct expenses like repairs and mortgage interest, and use depreciation to offset rental income, thus reducing your taxes. 4. Inflation Hedge: As inflation rises, so do property values and rental incomes, preserving your wealth. 5. Leverage: You can purchase property with a mortgage and use rental income to pay off the debt. After it's paid off, the rental income can be a brilliant part of your retirement income stream. 6. Diversification: Real estate adds diversification to your investment portfolio, spreading risk and enhancing stability. 7. Control: Owning rental property gives you control over management, improvements, and rental rates, directly influencing profitability. 8. Cheating Uncle Sam : Your heirs do not have to pay capital gains taxes nor recaptured depreciation. Their basis is stepped up to its current value instead. Rental real estate can offer steady income, tax advantages, and long-term growth. It's an attractive option for diversifying portfolios and achieving financial goals. 

Why are rents so high? High rents perplex both tenants and policymakers alike. Casual reading in social media makes one think it's all about greedy landlords, or losses of inventory due to short term rentals. The surge in rents stems from several key factors: Population : Population growth outpaces construction in Clallam County by far. Population growth was 9.5% in the last census (10 years). Our current population is roughly 78,000. Household size is an average of 3, so the number of new units per year should be about 2,600. Construction : Expenses for land, permitting, materials, and labor inflate housing development costs. Building permits for the past 4 quarters added up to 212, about 90% less than the new households moving in. Interest rates : The costs to carry a mortgage roughly doubled in 2023, not to mention "healthy" increases in taxes and insurance. Investors need to earn enough money to pay their expenses, or they will sell to owner occupants. There is a significant segment of our population who still enjoy 3% interest rates, and aren't moving as they might have done before. This is reducing inventory for both rentals and sales. Income : Rents become unaffordable, as wage increases lag behind the cost of living realities. Doesn't everyone know by now that inflation rates as quoted by the US government are wrong? Check out www.shadowstats.com to see data closer to reality. Government : Interventions like the Covid mandates, just cause tenancy and not-passed-yet rent controls drive landlords out of business. Some of them indeed have opted for vacation rentals, with their perception of it as a safer investment. But from personal experience, these furnished and burnished rentals will not return to "affordable housing" ever again. If a landlord is stuck with a bad tenant, it can sometimes take years and 10's of thousands of dollars to remove them. Fortunately, with the high demand-low supply issue, your faithful property manager has set extremely high standards for application approval. Summary : Rising rents are a function of population, housing supply, carrying costs, and legislation. Improving the situation may involve moving the pendulum back with respect to building costs and landlord-friendly legislation. I do not know how we can limit population growth or interest rates.

HB 2114, known as the Rent Control bill, was given a a short public testimony period where many RHAWA and NARPM members expressed their concerns for the future of rental housing should the bill pass.  2114 would have imposed a 7% rent increase cap, limit late fees to 1.5%, and restricted security deposits. We beat every pro-tenant bill this legislative session. There were no pro-landlord bills. Lucky us!

The importance of a well-maintained residential systems cannot be overstated. Home appliances and systems need regular upkeep to ensure efficiency, cost savings, repair savings and a safe, comfortable living environment. We are talking about HVAC, fireplaces, dryer vents and septic systems here in particular. Regular maintenance ensures optimal efficiency; it's a smart financial move that benefits both owners and tenants. Maintenance extends the life of your system, preventing unnecessary wear and tear, and avoids HVAC breakdowns in the middle of a weather event. A clean HVAC system promotes better indoor air quality, runs better and more efficiently. Routine inspections identify potential safety hazards such as carbon monoxide, gas leaks or electrical issues. Addressing these early on ensures the safety of occupants and the home. Tenants appreciate regular servicing, and will be more likely to do their part: pay rent on time, take care of the home and renew at the end of the term. Guests will have less reason to complain, or even cancel their booking, if all systems are working.

Giving back to our community is part of our mission

Our renewal rate for last year was 80%, which is very good. On average, our tenants move every 5 years. We don't track our vacation rentals that go monthly during the winter months. The median number of days a place was on the market this year was 14. Days vacant was similar. Doing the math, our vacancy rate for Blue Sage was under 1%. Next year, we will work to reduce the vacancy days, by pricing them right and marketing them earlier.

Reasons why it will disappoint most people

Nationwide, rents are trending down. One of the hallmarks of a recession is people doubling up on their housing, whether it be roommates or moving back in with parents. With supply increasing, rents start heading down. We are in a summer-happy area. And we are also reducing prices in our vacancies at this moment. I expect strengthening demand next year. Below is a relevant article: shorturl.at/cQT59