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> rent will not drop, because the developer has to make payments on loans and maintain a profit So, you're saying that if the developer has costs of X $/mo mon
by Epenthesis 8y ago
> rent will not drop, because the developer has to make payments on loans and maintain a profit
So, you're saying that if the developer has costs of X $/mo month, then in a oversupplied market, rather than take, say 0.8X $/mo in rent and have losses of -0.2X $/mo, they'll refuse to rent at all and take losses of -X $/mo?
Why?
- bluGill 8y agorenting for a large landlord is complex. Often landlords do this today for zoning reasons. There are places that are in theory for rent, but the landlord built just because the zoning required it - they knew very well it would never be rented so they cut corners and pretend to have it for rent while in practice it will never be occupied. They make up for the loss with the other properties that went up at the same time. Assuming we eliminate that, landlords will still sometimes not rent at all. When you have a lot of properties you reach a point where raising rent and causing someone to leave because they cannot afford the rent nets more money than the smaller rent fully occupied. In addition the non-occupied property is available for rent should someone want it - since tenants move all the time you better always be in the process of getting more. Last, over the course of the year 10 months at full rent is worth more than 12 months at .8 rent. So landlords are always trying to figure out if it is better to lower the rent and long term make less, or hold out for another month.