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I don’t think that’s true. The landlord can cancel this “option” reasonably easily so it is quite different from selling a call. I look at it like: the fair va
by dan-robertson 6y ago
I don’t think that’s true. The landlord can cancel this “option” reasonably easily so it is quite different from selling a call.
I look at it like: the fair value for rent is x. The current rent is y > x. If the landlord nominally lowers the rent, they cannot raise it to as high a value next year, and they do not want to do this. Therefore they are incentivised to (effectively) give the tenant money along with the rent to decrease y without changing the nominal rent and giving up on the right to increase it.
- holdenk 6y agoExcept in places like San Francisco with rent-controlled housing.
- dan-robertson 6y agoThat’s exactly the case I’m describing in the second paragraph. I don’t understand what this has to do with the “option” scenario claimed by the post I replied to. It maybe looks like the landlord is selling a years rent for x and buying a put for the next years rent at y (and recursively options for the later years), but it isn’t really like a put either because it’s really a right-to-try-to-sell rather than a right-to-sell.
- gpm 6y ago> The landlord can cancel this “option” reasonably easily so it is quite different from selling a call. Theoretically in a rent controlled market the landlord can't cancel the call option. In practice they might be able to by jumping through some (expensive) hoops, but it should be a reasonable approximation still. I'm not quite sure what sf/Cali law looks like so I am just taking in generalities about rent controlled markets.