Monday, December 29, 2014

Apartment Rent Prices after the Crash‏

Hi Fernando!
Have been following you for several years now and now I have one question.
How did financial crisis influence rental prices for small apartments?
I am thinking of buying loft to create small apartments (30 to 60m2) to rent them out. Therefore I am interested to know, how how rental prices were doing during the initial crash, during “recovery” and how they are doing now.
Maybe you have some links to rental price graphs or something similar.
Thanks in advance for your answer!
Thanks a lot for the job you are doing! It really helps people around the world. And unfortunately – the further we go, the more it helps!
Kind regards from small country – Latvia ;),

A small apartment is actually a good investment

Hello JA!
In the case of Argentina, the prices pretty much followed inflation, and by this I mean they followed the real inflation, not the much lower official one. This is important when you consider that we’re talking 30% to 40% inflation each year in Argentina. In most modern day economic collapses and crisis we see something similar going on. It’s interesting to notice that while property prices may drop, in some areas more than others of course, you rarely see rent prices drop much. Especially for the kind of property you are thinking of, an apartment or condo, probably in a larger city center.
Sometimes people are surprised by this but when you think about it, it does make sense since its closely related to the rule of 3: You cant live 3 minutes without air, 3 hours of exposure to extreme conditions without shelter, 3 days without water or 3 weeks without food. Rent is basically modern-day shelter and unlike selling prices it’s something that the lower income class will depend more on. Of course there are squatters and such but in general you get the picture. When it comes to food, water and shelter (housing) those are pretty basic necessities so it’s usually considered a pretty solid investment. With bigger houses, and further away from town, there’s usually more offers and more room to bargain, but if you need to be in town for work or study then you’re already talking about a more limited segment. Of course, it has the advantage of eliminating the need of commuting, which in hard economic times is a valuable asset. A small apartment for rent in town in a good area makes for a good investment in my opinion.

Fernando “FerFAL” Aguirre is the author of “The Modern Survival Manual: Surviving the Economic Collapse” and “Bugging Out and Relocating: When Staying is not an Option”.


Chief Instructor said...

A follow-up question if you don't mind: Was there any rent control by the government? One of the items regularly discussed about a US economic collapse is that food and other commodities will skyrocket, but the government imposes price controls on housing. Did this happen at all, during any of the phases of the collapse?

FerFAL said...

In the case of Argentina, no there wasnt, but I cna see how it can happen elsewhere. Having said that, even the rent control, if there is one, will have to somewhat adjust to inflation or else people will simply go around the law one way or another so as to keep it fair. This has also happened whenever there was unfair regulations that went too far from market prices.

Anonymous said...

But you most not forget that investing into real estate still has its risks. for example i know a guy who had bought two small apartment near a small university to rent it out for students. This worked perfectly for some years, but recently they made some change in the schooling system and this university closed, so now he has two empty apartment which he can only sell for almost nothing( but keeping it still has it costs).