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For a large operation it is complicated. The profit maximizing strategy starts to become more entwined with interest rates and taking out loans with properties

For a large operation it is complicated. The profit maximizing strategy starts to become more entwined with interest rates and taking out loans with properties as collateral. The price of your rent can be higher than the market rates on housing because housing is more or less a byproduct of a financial services scheme.

nradov 4y ago
Huh? Large landlords are unable to raise rents significantly above the local market rate, unless they have an effective local monopoly or collude with other landlords. Rent prices are not byproducts of a financial services scheme. When landlords ask for rent much higher than the market rate, tenants eventually just move out.
- lotsofpulp 4y ago
  Unless all rent prices are made public in real time, buyers (and small sellers) do not have sufficient information to determine what market price is.
  - nradov 4y ago
    Huh? Buyers (renters) have real-time information on asking rents through sites like Craigslist and Apartments.com. Have you not seen those sites?
    - lotsofpulp 4y ago
      Asking price is not the sale price. It is apparently valuable enough for landlords to provide to RealPage, and then in return get a pricing suggestion.
      - jeffbee 4y ago
        In my city we have a rent registry. Tenants have perfect market information if they want it. This does not give them pricing power. Objectively, Berkeley has one of the worst housing crises in the nation. 3Bd/1ba 1000sqft apartments are advertised at $7200/mo. Rents have quadrupled in real dollars in 25 years. This is a result of government strangling the construction market and nothing to do with collusion or hidden pricing.
        lotsofpulp 4y ago
        Of course, real time price information only conveys movement of supply and demand curves, it does not alleviate insufficient supply and/or demand.
        runnerup 4y ago
        Yeah I think this would work much, much, much better in a city that didn’t have a complete housing emergency crises like Berkeley.
        raegis 4y ago
        > This is a result of government strangling the construction market and nothing to do with collusion or hidden pricing. Actually, many apartments near prestigious UC schools (Berkeley, UCLA) are priced to be affordable for two students per bedroom. This is how some undergraduate students have been renting for decades, from my own personal observations. A $7200/month 3 bedroom can house 6 students in bunk beds. So at $1200/month per student, this is more than affordable for their upper middle class parents.
        jeffbee 4y ago
        You've just circumscribed the population of students eligible to attend those universities to include only members of upper-middle-class American families. Perhaps you can see that is problematic. Again, these prices have quadrupled in real dollars in only 25 years. Any notion that this is normal for a college town is incorrect.
        nradov 4y ago
        Berkeley, Los Angeles, and surrounding areas are hardly college towns. It's just unrealistic to expect cheap market-rate housing near Cal and UCLA. The solution should be for the UC Regents to build more on-campus dormitories, reduce enrollment at overcrowded campuses, and build or expand campuses in areas with fewer geographical constraints and lower housing costs. Costs are much lower around UC Riverside and UC Merced. There ought to be another campus in Fresno or Bakersfield.
- bombcar 4y ago
  Landlords can get a bit above market (basically market + cost of annoyance at having to move) but not much beyond that. But a substantial percentage of the population seems to think they could charge $10m a month and everyone would just have to take it.
  - jeffbee 4y ago
    People just abandon the whole concept of supply and demand when talking about housing, even though it clearly applies. Landlords can’t charge more than a market-clearing price and they won’t charge less. Tenants can’t pay less and won’t pay more. Collusion, either by landlord syndicates or tenant strikes or whatever, doesn’t materially affect the market rents. The only things that really matter are local supply and demand. Is there a growing industry, an expanding population, and a lot of immigration into your area? Prices will increase if housing isn’t built to compensate. Plain and simple.
    - bobthepanda 4y ago
      The shape of housing also really matters. The modern chunky 5+1 is only really affordable to build for big landlords. Smaller landlord apartments are much smaller, often the size of a subdivided house.
    - polygamous_bat 4y ago
      > Collusion, either by landlord syndicates or tenant strikes or whatever, doesn’t materially affect the market rents. Why? What is the logic behind this statement?
      - jeffbee 4y ago
        There are just way too many landlords to make it work. There is no single dominant landlord and no number of landlords small enough to fit around a conference table that controls a significant portion of the housing stock. Staying with my city of Berkeley, the notoriously abusive (seriously, Google it for some extreme horror stories) Everest Properties holds only 354 units. There are 30 different apartment owners who hold at least 100 units and 6000 total landlords. There's just no way with that diversity of ownership that collusion would amount to anything.
refurb 4y ago
Not really. Landlords are price takers. If their financing costs are higher than market rent, then they have to live with it. Plenty of landlords are negative monthly cash flow. Rent in SF dropped by 20% during Covid. They had no choice and it didn’t matter if it didn’t cover their holding costs.

nradov 4y ago

Huh? Large landlords are unable to raise rents significantly above the local market rate, unless they have an effective local monopoly or collude with other landlords. Rent prices are not byproducts of a financial services scheme. When landlords ask for rent much higher than the market rate, tenants eventually just move out.

lotsofpulp 4y ago
Unless all rent prices are made public in real time, buyers (and small sellers) do not have sufficient information to determine what market price is.
- nradov 4y ago
  Huh? Buyers (renters) have real-time information on asking rents through sites like Craigslist and Apartments.com. Have you not seen those sites?
  - lotsofpulp 4y ago
    Asking price is not the sale price. It is apparently valuable enough for landlords to provide to RealPage, and then in return get a pricing suggestion.
    - jeffbee 4y ago
      In my city we have a rent registry. Tenants have perfect market information if they want it. This does not give them pricing power. Objectively, Berkeley has one of the worst housing crises in the nation. 3Bd/1ba 1000sqft apartments are advertised at $7200/mo. Rents have quadrupled in real dollars in 25 years. This is a result of government strangling the construction market and nothing to do with collusion or hidden pricing.
      - lotsofpulp 4y ago
        Of course, real time price information only conveys movement of supply and demand curves, it does not alleviate insufficient supply and/or demand.
      - runnerup 4y ago
        Yeah I think this would work much, much, much better in a city that didn’t have a complete housing emergency crises like Berkeley.
      - raegis 4y ago
        > This is a result of government strangling the construction market and nothing to do with collusion or hidden pricing. Actually, many apartments near prestigious UC schools (Berkeley, UCLA) are priced to be affordable for two students per bedroom. This is how some undergraduate students have been renting for decades, from my own personal observations. A $7200/month 3 bedroom can house 6 students in bunk beds. So at $1200/month per student, this is more than affordable for their upper middle class parents.
        jeffbee 4y ago
        You've just circumscribed the population of students eligible to attend those universities to include only members of upper-middle-class American families. Perhaps you can see that is problematic. Again, these prices have quadrupled in real dollars in only 25 years. Any notion that this is normal for a college town is incorrect.
        nradov 4y ago
        Berkeley, Los Angeles, and surrounding areas are hardly college towns. It's just unrealistic to expect cheap market-rate housing near Cal and UCLA. The solution should be for the UC Regents to build more on-campus dormitories, reduce enrollment at overcrowded campuses, and build or expand campuses in areas with fewer geographical constraints and lower housing costs. Costs are much lower around UC Riverside and UC Merced. There ought to be another campus in Fresno or Bakersfield.
bombcar 4y ago
Landlords can get a bit above market (basically market + cost of annoyance at having to move) but not much beyond that. But a substantial percentage of the population seems to think they could charge $10m a month and everyone would just have to take it.
- jeffbee 4y ago
  People just abandon the whole concept of supply and demand when talking about housing, even though it clearly applies. Landlords can’t charge more than a market-clearing price and they won’t charge less. Tenants can’t pay less and won’t pay more. Collusion, either by landlord syndicates or tenant strikes or whatever, doesn’t materially affect the market rents. The only things that really matter are local supply and demand. Is there a growing industry, an expanding population, and a lot of immigration into your area? Prices will increase if housing isn’t built to compensate. Plain and simple.
  - bobthepanda 4y ago
    The shape of housing also really matters. The modern chunky 5+1 is only really affordable to build for big landlords. Smaller landlord apartments are much smaller, often the size of a subdivided house.
  - polygamous_bat 4y ago
    > Collusion, either by landlord syndicates or tenant strikes or whatever, doesn’t materially affect the market rents. Why? What is the logic behind this statement?
    - jeffbee 4y ago
      There are just way too many landlords to make it work. There is no single dominant landlord and no number of landlords small enough to fit around a conference table that controls a significant portion of the housing stock. Staying with my city of Berkeley, the notoriously abusive (seriously, Google it for some extreme horror stories) Everest Properties holds only 354 units. There are 30 different apartment owners who hold at least 100 units and 6000 total landlords. There's just no way with that diversity of ownership that collusion would amount to anything.

refurb 4y ago

Not really. Landlords are price takers. If their financing costs are higher than market rent, then they have to live with it. Plenty of landlords are negative monthly cash flow. Rent in SF dropped by 20% during Covid. They had no choice and it didn’t matter if it didn’t cover their holding costs.