Rent Control and Labor Unions
If your apartment units are under threat of rent control legislation, it’s helpful to notice the similarities between rent control and labor unions. There are valuable insights to gain by studying what happened to manufacturing in America when labor unions were at their strongest. In order to maintain margins and stay in business, manufacturers closed down domestic plants and built new ones in foreign countries, like Mexico and China. They found the labor markets that were willing to work for less. Margins increased and so did profits. Problem solved.
For landlords, what’s the equivalent of outsourcing to Mexico? Obviously, you can’t move your apartment to a non-rent controlled neighborhood. The answer is to look more closely at the customer you serve. Who says you have to market your product to a customer base that is price sensitive and looking for long-term leases within a 5 mile radius of your apartment?
Airbnb and Homeaway seem like the obvious platforms to outsource your tenants. It comes with more work and a whole new skillset to be learned. But if you really hate rent control… there you go.
The challenging part is determining who your ideal customer is based on property characteristics and location. Each landlord will have to answer this question for themselves. Seems like a great opportunity for a small landlord trying to get to the next level. Maybe squeak out a few more dollars from the few units you own. Maybe you can retire this way.
Ultimately, I’ve always wanted to own medium to large multifamily properties. They are far easier to own and manage. You need great management to scale up in size. But try to avoid those rent controlled areas!