5 ms·

> By definition, the income from renting a property is greater than the taxes one could have deducted, because tax rates are not over 100%. I think the issue i

> By definition, the income from renting a property is greater than the taxes one could have deducted, because tax rates are not over 100%. I think the issue is more with capital appreciation. Yes, month to month you're still losing nominal dollars for not having a tenant, even with lower taxes. However, that land/building are likely still seeing appreciation, even in markets that aren't "hot". Some friends of mine recently bought a building to open a restaurant. I'm pretty sure it had been vacant for more than half its lifetime, yet trying to negotiate with the owner was a nightmare. They simply didn't want to budge and were apparently very content with saying 'No' to offers and letting it sit there for well over half a decade empty.

awillen 5y ago
It still appreciates if it's rented out, so that doesn't change anything. When it's rented, you get appreciation plus income, and when it's not rented, you get appreciation only.
- kflzufkrbzi 5y ago
  If appreciation is 99% and rent is 1% does it change anything?
  - djrogers 5y ago
    That’s a bit of a straw man, as that degree of market imbalance would completely end renting.
    - nend 5y ago
      Isn't that what this thread is about though? The complete end of renting in this downtown strip. The buildings are sitting empty and not renting.
      - alisonkisk 5y ago
        Why are they appreciating so much if there's no rent to collect? Are storefronts NFTs?
        pstuart 5y ago
        Lots of money out there looking for home, so to speak.
        IG_Semmelweiss 5y ago
        There are hordes of SBA dollars floating around, looking for a home. Havent you seen the fed's balance sheet?
        ethanbond 5y ago
        Because land is finite. Land within an established city even more so. Not only is there rent to collect should they want to, but it’s almost a guarantee that there will be rent to collect indefinitely into the future.
  - 55555 5y ago
    The risk-adjusted return differential is much less than appears at first glance.
  - awillen 5y ago
    That's not a real situation that will arise, so it doesn't matter.
- anigbrowl 5y ago
  Appreciation only + tax deductions can be a great combo in a hot market. why deal with the hassle of tenants when you can have rapid appreciation, and the more property is off the market, the higher the prices become?
  - awillen 5y ago
    You can employ a professional property manager to deal with the hassle of tenants. Your one property (or a few properties) being empty isn't moving the needle enough in terms of the price of real estate to make up the difference from lack of rent.
    - anigbrowl 5y ago
      But many landlords (especially corporate ones) own a lot of property, and furthermore landlords can and do cooperate. I think you're assuming perfect competition, where all pricing is transparent and all market participants interact with each other exclusively through price signals. In reality landlords compete but also cooperate, and their associations are more integrated/coordinated than those of tenants. There are far fewer landlords than tenants, and a non-rental motivated by collective/cooperative solidarity means a lack of profit maximization for the landlord but often lack of a place to live for the tenant, so the incentives as well as the market structure are wildly asymmetrical.
franciscop 5y ago
The thing I learned recently that happens in Spain is that if you have a property sitting empty, the government will calculate a "virtual rent" so to speak and charge you based on that (normally lower than actual market rate, but not much). If you rent it out, you get taxed based on what you actually make and not on this potential rent. Real estate taxes are apart/independent. This makes people really want to rent out places, and you see a much higher occupancy than in other countries (you still have squatters, which is a big issue, pushing in the opposite direction so it's still not perfect).
- 6510 5y ago
  It should be much more harsh. If you own a building where a store should be but aren't using it as such you should be made to pay an insane tax for lowering the value of the entire shopping area.
  - 6510 5y ago
    I live in a block with around 6000 people and no stores. That what should be the mall was held hostage for decades by a supermarket chain who have a store 10 km from here. They didn't want their competitors to have it. Eventually the entire thing was changed into a giant day care.
- infogulch 5y ago
  Oh that's a great idea. Especially if the owner is insisting at only renting at a ridiculous price per area -- ok, fine, set your rates at whatever you like even if nobody is remotely willing to pay that, but you'll pay taxes at that rate so best not inflate it too much, hm?
- hanniabu 5y ago
  Sounds like a good opportunity for a business to get paid to rent out your place for a profit that's a fraction of the virtual rent. The owner saves money ahead can kick you out when they find a good client
  - 5y ago
ransom1538 5y ago
"I think the issue is more with capital appreciation." From the commercial landlords I have talked with SF, the lease term length is the main contributor to vacant retail spaces. When a retail shop moves in the lease term can be 5-7 years. Retail shops invest up to 50-100k fixing up the space - they need the guarantee they can rent the place for a lengthy time. Thus, the landlord needs to be sure the retail tenant has the capital and credit to last. So, landlords will hold out - rather than risk a bad tenant for 7 years. And quite frankly, there just aren't enough business models that work in retail spaces. If you have a brand new tenant with a 7 year long lease - this could also wreck your chances of a sale if the new owner wants the space cleared out. Also! Commercial tenants have the protection of LLC (or c-corps, etc) - so if their "Grape vape LLC" doesn't work out - they can just walk - and as a landlord you can't go after them personally.
- Aeolun 5y ago
  How is this a problem? As far as I can see the landlord takes on zero risk there. In the best case scenario the landlord gets a 7 years of steady rent. In the worst case, they get a few months and the store goes out of business (breaking the lease). I see no reason why you couldn’t repeat that ad infinitum?
  - fredophile 5y ago
    Some commercial real estate deals will expect the landlord to contribute some amount for tenant improvements. So if you get a bad tenant you might be out that money. In addition, before they go out of business they probably stop paying rent. So if the business fails in the first year that could easily be a net loss to the landlord compared to waiting for a better tenant.
  - IG_Semmelweiss 5y ago
    Transaction costs. Everytime a lease is signed there are transaction costs and they are not immaterial.

awillen 5y ago

It still appreciates if it's rented out, so that doesn't change anything. When it's rented, you get appreciation plus income, and when it's not rented, you get appreciation only.

kflzufkrbzi 5y ago
If appreciation is 99% and rent is 1% does it change anything?
- djrogers 5y ago
  That’s a bit of a straw man, as that degree of market imbalance would completely end renting.
  - nend 5y ago
    Isn't that what this thread is about though? The complete end of renting in this downtown strip. The buildings are sitting empty and not renting.
    - alisonkisk 5y ago
      Why are they appreciating so much if there's no rent to collect? Are storefronts NFTs?
      - pstuart 5y ago
        Lots of money out there looking for home, so to speak.
      - IG_Semmelweiss 5y ago
        There are hordes of SBA dollars floating around, looking for a home. Havent you seen the fed's balance sheet?
      - ethanbond 5y ago
        Because land is finite. Land within an established city even more so. Not only is there rent to collect should they want to, but it’s almost a guarantee that there will be rent to collect indefinitely into the future.
- 55555 5y ago
  The risk-adjusted return differential is much less than appears at first glance.
- awillen 5y ago
  That's not a real situation that will arise, so it doesn't matter.
anigbrowl 5y ago
Appreciation only + tax deductions can be a great combo in a hot market. why deal with the hassle of tenants when you can have rapid appreciation, and the more property is off the market, the higher the prices become?
- awillen 5y ago
  You can employ a professional property manager to deal with the hassle of tenants. Your one property (or a few properties) being empty isn't moving the needle enough in terms of the price of real estate to make up the difference from lack of rent.
  - anigbrowl 5y ago
    But many landlords (especially corporate ones) own a lot of property, and furthermore landlords can and do cooperate. I think you're assuming perfect competition, where all pricing is transparent and all market participants interact with each other exclusively through price signals. In reality landlords compete but also cooperate, and their associations are more integrated/coordinated than those of tenants. There are far fewer landlords than tenants, and a non-rental motivated by collective/cooperative solidarity means a lack of profit maximization for the landlord but often lack of a place to live for the tenant, so the incentives as well as the market structure are wildly asymmetrical.

franciscop 5y ago

The thing I learned recently that happens in Spain is that if you have a property sitting empty, the government will calculate a "virtual rent" so to speak and charge you based on that (normally lower than actual market rate, but not much). If you rent it out, you get taxed based on what you actually make and not on this potential rent. Real estate taxes are apart/independent. This makes people really want to rent out places, and you see a much higher occupancy than in other countries (you still have squatters, which is a big issue, pushing in the opposite direction so it's still not perfect).

6510 5y ago
It should be much more harsh. If you own a building where a store should be but aren't using it as such you should be made to pay an insane tax for lowering the value of the entire shopping area.
- 6510 5y ago
  I live in a block with around 6000 people and no stores. That what should be the mall was held hostage for decades by a supermarket chain who have a store 10 km from here. They didn't want their competitors to have it. Eventually the entire thing was changed into a giant day care.
infogulch 5y ago
Oh that's a great idea. Especially if the owner is insisting at only renting at a ridiculous price per area -- ok, fine, set your rates at whatever you like even if nobody is remotely willing to pay that, but you'll pay taxes at that rate so best not inflate it too much, hm?
hanniabu 5y ago
Sounds like a good opportunity for a business to get paid to rent out your place for a profit that's a fraction of the virtual rent. The owner saves money ahead can kick you out when they find a good client
- 5y ago

ransom1538 5y ago

"I think the issue is more with capital appreciation." From the commercial landlords I have talked with SF, the lease term length is the main contributor to vacant retail spaces. When a retail shop moves in the lease term can be 5-7 years. Retail shops invest up to 50-100k fixing up the space - they need the guarantee they can rent the place for a lengthy time. Thus, the landlord needs to be sure the retail tenant has the capital and credit to last. So, landlords will hold out - rather than risk a bad tenant for 7 years. And quite frankly, there just aren't enough business models that work in retail spaces. If you have a brand new tenant with a 7 year long lease - this could also wreck your chances of a sale if the new owner wants the space cleared out. Also! Commercial tenants have the protection of LLC (or c-corps, etc) - so if their "Grape vape LLC" doesn't work out - they can just walk - and as a landlord you can't go after them personally.

Aeolun 5y ago
How is this a problem? As far as I can see the landlord takes on zero risk there. In the best case scenario the landlord gets a 7 years of steady rent. In the worst case, they get a few months and the store goes out of business (breaking the lease). I see no reason why you couldn’t repeat that ad infinitum?
- fredophile 5y ago
  Some commercial real estate deals will expect the landlord to contribute some amount for tenant improvements. So if you get a bad tenant you might be out that money. In addition, before they go out of business they probably stop paying rent. So if the business fails in the first year that could easily be a net loss to the landlord compared to waiting for a better tenant.
- IG_Semmelweiss 5y ago
  Transaction costs. Everytime a lease is signed there are transaction costs and they are not immaterial.