HOw is rent affected in a downward Real Estate Market?

Question

Is it possible to own a home that has active renters in it, but the value of the home goes down?

would that mean you ask for less rent, or does that simply mean you have less money in the home, but still generate that cashflow?

Answer 1

There are two effects here. Since renting and owning are alternatives, the lower the cost of owning, the lower will be the equivalent rents. On the other hand, in a market where more people are unable to purchase, demand for rental properties increases. Where this nets, is highly location dependent.

Answer 2

Question 1: Yes. Renters will not guarantee a home's value.

Question 2:  there is no absolute direct correlation between the housing market (what a house is worth) and the rental market (what rent a landlord can get for a particular unit).  Often lower home values lead to lower rents, but not always.  Here in Seattle, for example, even though homes have ticked down, they are still so much more expensive than renting, that rents continue to rise.

In your particular case, I think it's pretty unlikely that your tenant would try to negotiate lower rent.  You just may not get the rent increase that you'd like.  The best way to keep track of fluctuation in rental rates is to compare with other similar properties in the area.  If your tenant could get the same thing or better for $50 less or more, then you might find yourself needing to lower rents.  Craig's list is a good way to get that information and calling on "For Rent" signs when you see them.

Question 3: Whether a property produces positive cash flow is not affected by changes in the value of the home.  Positive cash flow is the difference between the rent and other income coming in  and the mortgage and other expenses going out.  If the home value goes down, your mortgage payment won't go down.  However, if you have to reduce your rents to attract tenants, that will affect your cash flow.