Rising Costs of Hershey Bars & Rental Homes: Is Your Lease Keeping Up?

I was in the Harris Teeter grocery store the other day and was waiting in line at the register.  As I perused some magazine covers (Prince Henry is doing what??), my eyes wandered over to the candy bars ($3.99 for a king-size Hershey bar??).  That price point stuck in my mind.  Weren’t these things $1.50 - $2.00 a few years ago??

 

The first inclination I typically have when I’m personally shocked at the expense of something for sale is to point the finger at myself.  “You’re getting old, my old boy.  Hard candy doesn’t cost a nickel anymore and the days of .99 gas (while getting it pumped by someone else in NJ!) are long gone.  Calm down, son…  In the modern world, things just cost more.  Relax.” 

 

Once I was able to get my emotions in check, I Googled the question and was met with an AI response: “Candy bars are more expensive due to a surge in cocoa prices, driven by supply shortages from poor harvests and diseases in West Africa. This has led major manufacturers like Hershey to raise prices or reduce package sizes to reflect the high cost of the primary ingredient.”

 

Hmmm…  Makes logical sense.  Recent cocoa price surges due to issues in West Africa is the answer to my candy bar conundrum.  This is why the Hershey king-size candy bars cost 50-75% more in Charlotte now than five years ago!  Maybe…  So if that logic holds, then things calming down in West Africa will make my Hershey’s bar go back to costing 2 bucks at some point?

  

I think the answers provided for some price increases are tough to comprehend or believe.  Whether we buy the reasons or not, the price increases themselves are very real nonetheless.  And experience shows that the prices rarely come down after the crises pass.  Businesses and consumers typically just need to adjust to paying more.

 

This factors into rental homes.

 

As a Charlotte property manager, I remember meeting with a new owner client a decade or so ago and the topic of what to charge for rent came up:

 

Me: It’s a nice- looking home!  I think we could get the top of the market price for it- probably around $1,350.00/month.  Would that work?

 

Client: Well, I’d prefer not to charge that much.  I own the house and my costs are relatively low.  I think with taxes, insurance, and the HOA fee my all-in costs are $500.00/month (oh, the good old days of low costs…).  And when repairs come up, I’d like to have some extra rent to cover them.  I’d prefer to keep the monthly rent under $1K to keep it affordable for the tenant.

 

Me: Wow- sure! 

 

I don’t hear anything like that much anymore.  It’s tougher to find margin between the actual costs of owning a rental home and the rent.  All the cost components of rental home ownership have shot up: mortgage (home values & interest rates), taxes, home insurance, HOA fees, & repairs.  “Things just cost more” is the simple real estate explanation for Hershey’s “runaway cocoa prices”.

 

With higher monthly costs, leases need to keep up with market-rate rent increases to avoid consistent losses.  This doesn’t even factor in inevitable, higher costs for a new HVAC or roof which (since COVID) usually cost upward of $8K for smaller homes.  Unfortunately, these cost increases are probably not going away.  This means that even leases with great, long-term tenants need to be scrutinized if they are kept at an artificially low rate.

 

Much like Hershey passing on their cost increases to consumers (to my chagrin!), landlords need to factor in their increased costs when setting their rental pricing.  Smart landlords will keep close tabs on market rental rates and make adjustments at periods of vacancy or lease renewal.

 

Happy Landlording!