Property Management Blog

CONNECTING THE DOTS FOR LANDLORD PLANNING 3 Residential Rental Touchpoints Plus, Proof of Profitability by an Expanding Class of Well-Paid Tenants

KRS Holdings - Monday, April 17, 2023
Property Management Blog

Regular readers of this newsletter know that I maintain a non-conformist position to that of the “legacy” economists and their advisors. Specifically:

  1. Increased wages don’t drive inflation;
  2. Wage inflation has outstripped inflation statistics;
  3. Unemployment is at lowest level since 1969; 3.4%

Let's take a quick look at each … followed by a remarkable growing source of accelerated rental revenue.

Increased Wages Don’t Drive Inflation

Fed economists and their independent advisors embrace the notion that economic growth is the cause for inflation which then drives lower unemployment … and vice versa. This orientation is expressed in the questionable basis for Fed decision-making to curb inflation.

To say rising prices cause inflation is akin to saying snow drifts cause blizzards. Clearly, the relationship between cause and effect is precisely the reverse. That said, the Fed pursues solutions to inflation that puts people out of work and hamstrings business expansion.

Inflation drives rising pay … not the opposite. Wage inflation occurs when employers agree to increased compensation demands to attract and retain quality workers as part of the equation to boost profitability. So, wage inflation drives growth as more workers are employed and produce goods and services that generate a bump in employers’ ROI. Why else would an employer pay more?

The source for the following analysis is the U.S. Bureau of Labor Statistics (BLS). It confirms that wage inflation and employment gains are compatible

Here’s a 5-Year Summary … 2018 to 2022.

  • The number of non-government employers increased from 267,153 to 305,484 … a bump of 38,331, or 14.3%.
  • Other than a slight dip at the height of the pandemic in 2020 & 2021, employment increased each month.
  • The average weekly wage rose from $1,168 to $1,390 … an increase of $222, or 19%.

Clearly, the facts do not support the theory that an important way to fight inflation is to weaken the labor market. Inflation during these periods was sustained with the only intervention being Fed interest rate increases.

I agree with inflation defined as currency devaluation … which means it has nothing to do with economic growth. In fact, inflation has eaten into wage gains … not the other way around. In many cases worker raises have been cut, if not wiped out altogether, by price increases.

Good economic times occur in concert with greater earnings.
Economic Growth Drives Higher Prices.

Wage Inflation Has Outstripped Inflation Statistics
The annual core inflation rate (excludes food & fuel costs) edged up to 5.6% in March.  Click here for an interactive chart tracking the history of wage inflation … highlighting a consistent positive spread over and above core inflation.

By year end, I’m betting the nominal minimal hourly rate (not the state mandated rate) will be $25.

Unemployment Is at Lowest Level Since 1969
The BLS announced that the economy had added 236,000 jobs in March … a slight dip from prior months. That said, it is broadly viewed by experts as a continued strong boost to the labor market …  especially when coupled with a decline in the unemployment rate to 3.4 percent … its lowest level in over 50 years!
Here in Virginia our labor market remains robust. The Virginia Worker Shortage Index registers a gap of 54 available workers for every 100 open jobs. That is a 15% “shrinkage” from 47 since January of this year indicating considerable upside potential for job growth as people find good jobs with good wages on good terms.   
Blue-Collar & The Trades Are Job Growth Sectors
Blue-collar and the trades sectors are enjoying enhanced employment prospects. Increasingly, four-year college programs steadily lose appeal with emphasis on shorter, more affordable paths to a well-paying career … the skilled trades.
Skilled trades workers, such as electrical, welding, HVAC, and CDL truck drivers now enjoy starting salaries as high as $66,000 … often with signing bonuses and prospects for rapid advancement.
As the economy continues to gain steam, so will the need for essential blue-collar trades like plumbing, construction, electricity, landscaping, cleaning, maintenance, repairs and renovations. Apprentices in these fields earn while they learn … and avoid financially crippling student debt to finance their career training.
Employers competing for quality workers will bid up compensation to attract the best candidates.
Residential landlords win from a growing class of well-paid renters seeking housing. With increasing pay and no student debt repayment drain, rents are likely to keep pace with wage inflation.  
Real World Proof: KRS Holdings manages multi-family as well as single-family homes. Here’s a brief history of rents for a representative sampling of working-class/blue-collar residences that we serve. All are 3-bedroom, 1-bath units.


  • Monthly Rent in 2020 … $840;
  • Monthly Rent in 2023 … $1,245
  • Monthly Increase … $405 = 48% boost to revenue

Single Family

  • Monthly Rent in 2021 … $725
  • Monthly Rent in 2023 … $1,195
  • Monthly Increase … $470 = 65% boost to revenue.

So, how is wage inflation likely to affect residential landlords like you and me? I’m convinced there will be robust gains in employment, wages and spending power. The net effect for residential rental investors will be an expanded tenant pool of workers enjoying sizable bumps in income … delivering positive upsides for us in rental income, tenant quality and enhanced asset values.   

Whether you are a DIY landlord or someone that needs property management services … or a combo of the two, KRS Holdings is here to help!