5 ms·

Yeah it’s weird. I haven’t seen for rent signs before but now I see them on every single building but rents are same. It probably means landlords are basically

by e9 6y ago

Yeah it’s weird. I haven’t seen for rent signs before but now I see them on every single building but rents are same. It probably means landlords are basically charging too much and making too much money and not paying enough in taxes(1-2% tax increase per year is probably nothing compared to increases in rent prices)

MAGZine 6y ago
if you do the math, it's expensive to let a unit sit for more than a couple months as opposed to offering a discount on the rent. This assumes your tenant will turnover in a couple years time, mind you. I did the math for SF and IIRC ~2mo was equal to a 15% discount. if it sits empty for longer than 2mo, you should have just given the 15% discount. if you let is sit for 2mo AND have to give a 15% discount, now you've really fucked your finances up.
- cnst 6y ago
  You're ignoring the fact that SF has rent control; it resets only once a vacancy hits. If market rate was 3k a few months back, but is only 2k now, if you take a 15-year view, it's still cheaper to let your rent-controlled unit sit unrented for 12mo than rent it at just 2k for 15 years provided the 3k/mo rates recover in two years. Basically, that's one of the major reasons why rent-controlled units aren't going down in prices. Bundle in Prop 13, and you aren't even paying any real property taxes on those units to sting your finances.
  - MAGZine 6y ago
    No, I'm not forgetting that. In my experience, most market rate units turn over every 2 or 3 years. 15 years in sf apartment leases are unusual except for people who cannot afford to move out. If you assumption, as a landlord, is that the next person into your unit isn't moving for 15 years, then yes, the cost calculation moves. However, that calculation is very different from a 7 year calculation, which is very different from a 2 year calculation. So how much are you going to hedge against not losing money in the future, when you're losing concrete money right now?
    - cnst 6y ago
      > 15 years in sf apartment leases are unusual except for people who cannot afford to move out. I'm a little confused here. If your rent is 1.2k for a 2bd in SF (because resident since 2000s), whereas market rate for a 2bd now is 3.9k in SF -- what is your determination -- is a person able or not able to move-out? Why would anyone move out every 2 to 3 years if they're rent-controlled, and they'd have to pay significantly more for any new place? Likewise, if you've been owning a property since the old times, and it's fully paid off, the property tax liability in Cali is tiny, and for older owners perhaps entirely a wash-off due to infamous Prop 13. Which is part of the reason that many owners don't even bother renting their properties.
- asdff 6y ago
  I think properties are somehow valued based on the rent potential, so landlords are disincentivized to move base rent and would rather offer 1-2-3 months free and keep rent at standard rate.
  - MAGZine 6y ago
    you can easily take this into account too, and my calculation did. Assuming your tenant is staying for 2-3 years, you can really only afford to let it set empty for a few months. Your yearly rent increases are just a couple percent (tenths of pecents a month). Every month it sits empty is 8% of your yearly income for the unit.
    - asdff 6y ago
      The yearly income isn't what's important to these landlords, it's the real estate value of the property. Loosing out on a full year or more of rental income is the cost of doing business if it keeps the underlying valued high and appreciating.
asdff 6y ago
Considering prices have surged over the last two decades, landlords are making money hand over fist. Tax is teensy thanks to prop 13.

by e9 6y ago

MAGZine 6y ago

if you do the math, it's expensive to let a unit sit for more than a couple months as opposed to offering a discount on the rent. This assumes your tenant will turnover in a couple years time, mind you. I did the math for SF and IIRC ~2mo was equal to a 15% discount. if it sits empty for longer than 2mo, you should have just given the 15% discount. if you let is sit for 2mo AND have to give a 15% discount, now you've really fucked your finances up.

cnst 6y ago
You're ignoring the fact that SF has rent control; it resets only once a vacancy hits. If market rate was 3k a few months back, but is only 2k now, if you take a 15-year view, it's still cheaper to let your rent-controlled unit sit unrented for 12mo than rent it at just 2k for 15 years provided the 3k/mo rates recover in two years. Basically, that's one of the major reasons why rent-controlled units aren't going down in prices. Bundle in Prop 13, and you aren't even paying any real property taxes on those units to sting your finances.
- MAGZine 6y ago
  No, I'm not forgetting that. In my experience, most market rate units turn over every 2 or 3 years. 15 years in sf apartment leases are unusual except for people who cannot afford to move out. If you assumption, as a landlord, is that the next person into your unit isn't moving for 15 years, then yes, the cost calculation moves. However, that calculation is very different from a 7 year calculation, which is very different from a 2 year calculation. So how much are you going to hedge against not losing money in the future, when you're losing concrete money right now?
  - cnst 6y ago
    > 15 years in sf apartment leases are unusual except for people who cannot afford to move out. I'm a little confused here. If your rent is 1.2k for a 2bd in SF (because resident since 2000s), whereas market rate for a 2bd now is 3.9k in SF -- what is your determination -- is a person able or not able to move-out? Why would anyone move out every 2 to 3 years if they're rent-controlled, and they'd have to pay significantly more for any new place? Likewise, if you've been owning a property since the old times, and it's fully paid off, the property tax liability in Cali is tiny, and for older owners perhaps entirely a wash-off due to infamous Prop 13. Which is part of the reason that many owners don't even bother renting their properties.
asdff 6y ago
I think properties are somehow valued based on the rent potential, so landlords are disincentivized to move base rent and would rather offer 1-2-3 months free and keep rent at standard rate.
- MAGZine 6y ago
  you can easily take this into account too, and my calculation did. Assuming your tenant is staying for 2-3 years, you can really only afford to let it set empty for a few months. Your yearly rent increases are just a couple percent (tenths of pecents a month). Every month it sits empty is 8% of your yearly income for the unit.
  - asdff 6y ago
    The yearly income isn't what's important to these landlords, it's the real estate value of the property. Loosing out on a full year or more of rental income is the cost of doing business if it keeps the underlying valued high and appreciating.

asdff 6y ago

Considering prices have surged over the last two decades, landlords are making money hand over fist. Tax is teensy thanks to prop 13.