Is rent control good or bad? As a property owner, I loudly say, it’s bad! It’s bad because the government shouldn’t say that I, the property owner, have to lower my price. The price is determined by the market. If the guy across the street from me charges more and people pay it, why shouldn’t I charge more? And by the same token, if I can’t get renters, I have to lower my rent. In this episode, I do a deep dive into why the market should determine the price, not the government, and why any attempt to manipulate the market by the government is doomed to fail.
[00:00:00] Capitalism Isn't Perfect, but Under the Circumstances, You Cannot Control and Suppress Income Coming from Rental Units and Expect the Properties to Operate Efficiently, Be Managed Terrifically, Be Well Maintained. You Can't Have Control With Rents Without Having All Sorts Of Other Issues.
[00:00:28] Welcome to the Heartland Multi-Family Show, the shorter, more profitable path to multi-family ownership and investing. Hey everybody, it's Darin with Isaiah. Hi Isaiah. Hello Darin. We are here with this next episode of the Heartland Multi-Family Show, the place for all things multi-family.
[00:00:57] So Darin, you've been an owner of multi-family properties for a long time. What do you think about that rent control? So this has been around for decades and it's nothing more than government intervention and government control to make things more affordable. And gee whiz, it can't be more affordable unless they put a cap on things.
[00:01:21] And anytime you have caps on things, especially from the government, it flies in the face of the real decision maker on where most prices should be with almost everything. The real decision maker is one place and one place only, and that's the market. The market will tell you how much rent you should pay.
[00:01:48] The market will tell you how much rent you should charge. And how it tells you is whether or not you have people showing up at your apartment communities, gladly willing to pay rent to rent your apartment. If you don't, if they go down the street somewhere, that's competition. That's the way it should be. Things should be as competitive as possible. And so if I'm charging 900, I'll just use a number. I don't know. Let's just say $900 a month for an apartment.
[00:02:18] And you decide you want to charge $800 an apartment and people are renting more from you than they are me. I got a decision to make. Do I lower my price? Do I keep it the same? On the other side of that, let's say I'm charging $900 a month. I've got a full apartment community. I got a line out the door. If you're charging $800 a month, you see my line out the door, what do you think might not be a bad idea for you to do? Raise some rent. Raise rent. Yeah, exactly.
[00:02:47] And that's how the market works. And people get all sensitive about this because, oh, it's housing and you can mess with... It's the same in everything. Let's say you and I want to buy an automobile. We've got an auto dealership right next door to the office. Their most expensive vehicle they got sitting on the lot is probably $130,000. Okay? You could go over and you could buy that today, $130,000. All right?
[00:03:12] Or they probably got a $10,000 vehicle sitting on the lot too. You could buy that. What predicts what's going to happen? The market. Supply, demand, capitalism predicts that. That's what makes the decision and should make the decision when it comes to rent. The market should be making the decision because the market will correct if rents are too high in one place, they're too low in one place.
[00:03:41] The market will correct that in time. So you and I have talked about this. Capitalism isn't perfect. But under the circumstances, you cannot control and suppress income coming from rental units and expect the properties to operate efficiently, be managed terrifically, be well maintained.
[00:04:07] You can't have control with rents without having all sorts of other issues that you're going to have. And the folks that believe in this rent control thing, they don't understand that that's the case. It's got to be up to the market. And look, as a landlord owner, and you know this, you and I have had this conversation. I'm willing to accept whatever the market tells me.
[00:04:35] Some years, the market isn't so great. Some years, the market's pretty good. So the controlling factor should always be the market, not the government, not the city, not the state, not a bunch of legislators that, by the way, don't own any multifamily properties, but they want to make the decisions that rent should be controlled by them, it should be the market. Okay.
[00:05:00] And again, with the optimism going on out there, I think that people, more and more people understanding it's about the market, not control of things that the government wants to control. And I think that's part of, you know, some of the optimism that you, you know, that you might see there as well. And then you talked about Graystar and RealPages earlier. Oh, about the lawsuit, the Justice Department lawsuit. Yeah.
[00:05:26] It's so funny because the media and the Justice Department, I mean, they're painting this as you've got these evil cabal of people sitting in the back room of RealPage and of Graystar. And they have somehow obtained or developed this evil software that's got this algorithm that just fixes the prices in such a terrible way that people, oh, they're getting priced out of the market.
[00:05:56] They can't afford the rents. It's just absolutely awful and terrible. That's the picture that's being painted. And it's the exact opposite that's going on. That's the funny thing. The media lies? It might surprise you. I never would have guessed. Yeah. It might surprise you that that happens out there. There's no propaganda or agendas either. So just know that too. Okay. But here's all that's going on. They're using software to take a look at the market to say, okay, what are apartments kind of renting for right now?
[00:06:26] Okay. Here's what they're renting for. Here's what the two bedrooms over here, one bedrooms over there, studios over here. Here's kind of what they're renting for. And based on what they're renting for, here's pretty much where we suggest you price your vacant apartments. That's all that's going on here. Okay. It's no different than me telling you this.
[00:06:47] Isaiah, we've got four two-bedroom units vacant at the Continental Apartments community that we own. And can you do kind of a little market research and find out what other two-bedroom apartments are renting for so we can get kind of an idea what kind of rents might be in line or what we should be charging? That's what we typically do anyway, right? We do market research. What are apartments renting for? What's going on? How old are the properties?
[00:07:16] What kind of amenities do they have? Where do ours kind of fit in there? And how, as a business, can we be competitive with what else is going on out there? All that's happening with this software, it's doing three or four days of work that we would do, and it's doing it in about 30 seconds. That's all it's doing.
[00:07:33] But because of that, and because it is a really great headline, because we're still, again, attacking the evil landlord, this makes news, and it's something that the Justice Department is going to pursue. By the way, here's my prediction on this. They're both going to be dropped. And it might cost Graystar and Real Page some money to drop it.
[00:08:00] They may settle a little bit on this just because they'll do the math, and it's like, okay, we're better off just writing this check and moving on and running our business versus being involved in this litigation. For that and only that reason, they may settle. But this isn't going anywhere other than worst case, it's being settled because it's BS. It's BS.
[00:08:22] All it is, is market research, finding out what's going on out there, taking in the information, and applying it to your business. That's it. That's all that's happening. And we hope, I know you and I have talked about what we're going to be doing as a company, where we're going, what's going on. And, you know, obviously we've got to be aware of these things that are happening.
[00:08:48] But this is not anything that's going to slow us down and keeps us continually being that O word. What's that O word? Operating. Operating and optimistic, right? Optimistic. Yeah, optimistic, right? So, yeah, I think it's going to be a great 2025. Our investment partners think it's going to be the case.
[00:09:10] There's a lot of great optimism out there, great optimistic environment, despite, you know, some of the questions you had about rent control and, you know, this lawsuit. We're really looking forward to what's to come and what's going to be happening with the things that we're involved in. I know a lot of you feel the same way. All right. You know, I think that's probably pretty. Why don't we wrap up this episode of the Heartland Multifamily Show. The place. For all things multifamily.
[00:09:40] For all things multifamily. Thank you, Isaiah, for joining me. Good discussion with you today. Thank you very much. Appreciate it. Appreciate you. If you want to get your hands on more great multifamily real estate content, make sure you click here. If you want to invest passively in great multifamily real estate, make sure you click here. Thank you.