4 ms·

This kind of thinking astounds me. What kind of margins do you think landlords are making so that they can afford to ‘eat’ 3-6 months of rent?

tmnvix 7y ago
Talking residential here (but probably a very rough proxy for commercial): In Wellington NZ, a 3 bed house is almost NZD700k on average, having risen almost 15% in the past year. That property might earn a bit less than NZD3k/m. Capital gains have been outstripping income (rent) for property here for some time. Many investors have the luxury of not even bothering with the hassle of tenants for this reason. A 3-6 month rent holiday would not be an issue for many.
- bequanna 7y ago
  Since most commercial properties are leveraged, this would definitely be an issue. Theoretical ‘capital gains’ don’t mean much when you have no income but still have mortgage, taxes, insurance and utilities.
linsomniac 7y ago
What do you think the alternative is? What kind of margins do you think most businesses run on? I think it's a very real possibility that many or even most businesses will simply cease to exist if they have to pay 3-6 months of rent on a space they are making 0 revenue on. My statement was not based on margins, but on these alternatives: eating 3 months of rent and getting 9 months of rent after that, or asking for (and possibly not getting) 3 months of rent, then getting 9 months of NO rent because the business is closed. 9 months of rent being better for margins than 0 months of rent. But, I'm not of the opinion that landlords get screwed here. There's probably going to have to be this sort of deferment on a massive scale to really jump-start coming out of this. I'd imagine the landlord would also be getting breaks from their upstream.
fgonzag 7y ago
He's saying if they don't, they will have to eat those rents permanently.
- linsomniac 7y ago
  Well said.

tmnvix 7y ago

Talking residential here (but probably a very rough proxy for commercial): In Wellington NZ, a 3 bed house is almost NZD700k on average, having risen almost 15% in the past year. That property might earn a bit less than NZD3k/m. Capital gains have been outstripping income (rent) for property here for some time. Many investors have the luxury of not even bothering with the hassle of tenants for this reason. A 3-6 month rent holiday would not be an issue for many.

bequanna 7y ago
Since most commercial properties are leveraged, this would definitely be an issue. Theoretical ‘capital gains’ don’t mean much when you have no income but still have mortgage, taxes, insurance and utilities.

linsomniac 7y ago

What do you think the alternative is? What kind of margins do you think most businesses run on? I think it's a very real possibility that many or even most businesses will simply cease to exist if they have to pay 3-6 months of rent on a space they are making 0 revenue on. My statement was not based on margins, but on these alternatives: eating 3 months of rent and getting 9 months of rent after that, or asking for (and possibly not getting) 3 months of rent, then getting 9 months of NO rent because the business is closed. 9 months of rent being better for margins than 0 months of rent. But, I'm not of the opinion that landlords get screwed here. There's probably going to have to be this sort of deferment on a massive scale to really jump-start coming out of this. I'd imagine the landlord would also be getting breaks from their upstream.

fgonzag 7y ago

He's saying if they don't, they will have to eat those rents permanently.

linsomniac 7y ago
Well said.