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You know what makes my blood boil? My apartment complex is currently leasing me a 700 sq.ft. one bedroom for $940 a month. I decided to move because the rent is

You know what makes my blood boil? My apartment complex is currently leasing me a 700 sq.ft. one bedroom for $940 a month. I decided to move because the rent is being raised to a whopping $1,524 a month before other fees. Parking used to be free but now they are charging a flat $10 for an unreserved stall, $30 for a reserved one. Oh, and they added "Valet Waste" where we are forced to pay $30 a month for someone to pick up trash at our doorway. There are no doubt other fee increases I'm not aware of yet. What's worse is that the complex is full of unoccupied and newly vacated units. You can tell because the lights are kept on 24/7 and they installed new LED bulbs. This makes me wonder why they would treat current tenants so badly by raising rents so much when so many of those units that are being vacated remain empty?!? Surely it would be better to be less aggressive and have a higher occupancy, no?

sokoloff 5y ago
If they raised the rent successfully on 2/3rds of the units to just over 3/2’s of its old value, then it seems like they could afford to keep 1/3 of units vacant and available for new tenants who are willing to pay that higher rent. (They’re no worse off on a cashflow basis and they have vacant inventory that represents possible upside.)
- izend 5y ago
  This strategy only works because vacancy rates are low and interest rates are low.
  - sokoloff 5y ago
    I don’t think the second condition is even needed. As long as you can raise the rent by over 50%, you can keep 1/3 of units vacant and be better off than last year; that’s probably only possibly if overall vacancies are low.
    - mistrial9 5y ago
      companies that profit well in high inflation environments are studied in some business schools. Part of the equation you describe is the (assumed) constant demand, and the ability to adjust frequently compared to life of the asset.
lumost 5y ago
It’s only better to have high occupancy when you care about cash flow. Low/negative cost of capital means you only care about theoretical cash flow for valuation purposes. Given the rate at which home prices have been increasing landlords will make more money from appreciation than from rent.
refurb 5y ago
Come to Asia. Apartments with 500 units and 2 tenants. It’s all about appreciation. Rent is nice but tenants are a hassle.

sokoloff 5y ago

If they raised the rent successfully on 2/3rds of the units to just over 3/2’s of its old value, then it seems like they could afford to keep 1/3 of units vacant and available for new tenants who are willing to pay that higher rent. (They’re no worse off on a cashflow basis and they have vacant inventory that represents possible upside.)

izend 5y ago
This strategy only works because vacancy rates are low and interest rates are low.
- sokoloff 5y ago
  I don’t think the second condition is even needed. As long as you can raise the rent by over 50%, you can keep 1/3 of units vacant and be better off than last year; that’s probably only possibly if overall vacancies are low.
  - mistrial9 5y ago
    companies that profit well in high inflation environments are studied in some business schools. Part of the equation you describe is the (assumed) constant demand, and the ability to adjust frequently compared to life of the asset.

lumost 5y ago

It’s only better to have high occupancy when you care about cash flow. Low/negative cost of capital means you only care about theoretical cash flow for valuation purposes. Given the rate at which home prices have been increasing landlords will make more money from appreciation than from rent.

refurb 5y ago

Come to Asia. Apartments with 500 units and 2 tenants. It’s all about appreciation. Rent is nice but tenants are a hassle.