9 ms·
By leasing at $10/mo to your shell corp?
by ethanbond 3y ago
By leasing at $10/mo to your shell corp?
- bsder 3y agoThen you would violate your financing agreement as the rent would be below the capitalization threshold and you would have to cough up money to the bank. I don't think you understand the issue. The issue here is that many of these financing agreements specify a minimum rent and if you fall below that you are in violation of the capitalization requirements and you owe the bank money. By contrast, missing rent is considered a temporary condition and can be tacked onto the back end of the financing agreement. So, zero rent does not cause capitialization issues, but lower rent does. Thus, landlords have a perverse incentive to leave a place unrented rather than lower the rent. An occupacy tax breaks that perverse incentive. The goal isn't to grind up landlords. The goal is to cause rents to come down when they should. Right now, the back end financing agreements are keeping rents artificially inflated.
- ethanbond 3y agoHmmm... how many of these financing agreements specify a minimum rent? I've never seen this or heard of this (but this is way outside my wheelhouse, so I'm 0% confident I would've). My initial searching doesn't give me the impression it's common.
- userinanother 3y agoVery common that’s why many places would rather have high occupancy than lower rent.
- ethanbond 3y agoThere are plenty of other reasons too, and I can’t find any evidence of minimum rents being common in financing agreements, so without that this reasoning looks really flawed.