Wednesday, November 28, 2012

The Rent Creep

If you have ever had an apartment or pay for rent, then you may know of this phenomenon I like to call the "rent creep".  To give you a little background, I'll use a legitimate story from my own experience.  Awhile back, I too was renting my own little apartment of sheer bliss.  Things were going great, and I had locked in a pretty decent rent for 1 year.  The rent I was paying for a 1 bedroom apartment within walking distance to a grocery store and my employment was $800/month.  A little high, but the cost savings from hardly ever driving more than made up for it. 

After my first year in the apartment, I received a notice from my landlord saying that they were going to increase my rent by $50 citing inflationary expenses.  Being the ever avid cost saver, I decided to do a little research.  It didn't seem right that my rent would be going up by 6.25% just because money became a little less valuable.  Luckily, the Federal Reserve keeps track of this information here, and I was able to quickly discover that inflation only occurs between 2-3% per year.  Armed with my new found knowledge, I quickly set up a meeting with my landlord, showed him my research and demanded that they not increase my rent.  Without much of a fight, they agreed, and I managed to ride out another year.

You see, landlords (like most everyone else), are opportunistic folks, and many of them have a standard policy of increasing your rent by a certain amount each year.  In an apartment building with 100 units, if they can get just half of them to accept the new terms, then they have increased their revenue by $60,000.  Subtracting an inflation rate of 3% and they just achieved a net profit increase of $31,200.  This is what I call the "rent creep", and landlords are hoping you don't put up much of a fight or even care. 

Often times, this type of price increase can occur across many different industries, notably the cable or phone bills.  If armed with the proper information, you too can intelligently make your case and avoid paying unnecessary prices.  A little data can go a long way.

Wonderful Moment of the Day: While playing a board game with my wife, a question came up as to which of the 7 dwarfs would she most be like.  She replied without hesitation "Cheapy"!

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