3 ms·

Occupancy is important, but price per square is more important. What will make the most money in the long run? Having a unit sit vacant an extra 2 months at a h

by judge2020 3y ago

Occupancy is important, but price per square is more important. What will make the most money in the long run? Having a unit sit vacant an extra 2 months at a higher price might be more profitable than "completing the transaction" at a low point in the market.

jpalawaga 3y ago
that is a very easy price to calculate, and if you've done the calculation, you've noticed that landlords are not being realistic about things. at this point, a lot of them are not adjusting rent down because it will reflect on their property value, which is an additional hidden variable in the equation. It should not be profitable to keep property empty. It is a drain on society.
- CapstanRoller 3y ago
  >It is a drain on society. This does not factor into any calculation about housing prices, unfortunately, and will likely never be factored in until there's a literal revolution (highly unlikely). Just like pollution, the homeless are either ignored or bulldozed out of sight and out of mind.
- michaelmrose 3y ago
  Here is a fun factor. A property's value is largely driven by how much rent it can bring in and its loan is based on that value. If rent goes down enough it could effect the value and ultimately the loan which is premised on its value. Nobody wants to be the bank with a 5M loan on a 4M property. In fact normally they don't want to loan more than 70% of the value of the property. https://www.c-loans.com/loan-to-value-ratio-for-commercial-loans https://www.c-loans.com/loan-to-value-ratio-for-commercial-l...
sangnoir 3y ago
> Having a unit sit vacant an extra 2 months at a higher price might be more profitable [...] You can only be certain this strategy works when you know the competition is doing the same. If you have a formal arrangement to coordinate pricing with competitors, you are deep in collusion territory.
UncleMeat 3y ago
> Having a unit sit vacant an extra 2 months at a higher price might be more profitable than "completing the transaction" at a low point in the market. Yes. And it is also amoral. There is a limited supply of housing. Holding it vacant is restricting access to one of the very most critical human needs there is. It might look better on the balance sheet but it is worse for humanity. Thus, the need for regulation and legislation that prevents this sort of thing.

jpalawaga 3y ago

that is a very easy price to calculate, and if you've done the calculation, you've noticed that landlords are not being realistic about things. at this point, a lot of them are not adjusting rent down because it will reflect on their property value, which is an additional hidden variable in the equation. It should not be profitable to keep property empty. It is a drain on society.

CapstanRoller 3y ago
>It is a drain on society. This does not factor into any calculation about housing prices, unfortunately, and will likely never be factored in until there's a literal revolution (highly unlikely). Just like pollution, the homeless are either ignored or bulldozed out of sight and out of mind.
michaelmrose 3y ago
Here is a fun factor. A property's value is largely driven by how much rent it can bring in and its loan is based on that value. If rent goes down enough it could effect the value and ultimately the loan which is premised on its value. Nobody wants to be the bank with a 5M loan on a 4M property. In fact normally they don't want to loan more than 70% of the value of the property. https://www.c-loans.com/loan-to-value-ratio-for-commercial-loans https://www.c-loans.com/loan-to-value-ratio-for-commercial-l...

sangnoir 3y ago

> Having a unit sit vacant an extra 2 months at a higher price might be more profitable [...] You can only be certain this strategy works when you know the competition is doing the same. If you have a formal arrangement to coordinate pricing with competitors, you are deep in collusion territory.

UncleMeat 3y ago

> Having a unit sit vacant an extra 2 months at a higher price might be more profitable than "completing the transaction" at a low point in the market. Yes. And it is also amoral. There is a limited supply of housing. Holding it vacant is restricting access to one of the very most critical human needs there is. It might look better on the balance sheet but it is worse for humanity. Thus, the need for regulation and legislation that prevents this sort of thing.