6 ms·
You're assuming a single property and a rational Landlord. Imagine the Landlord owns 10 properties and sets the rent to $2k/mo on all of them with 1 property r
by Jochim 2y ago
You're assuming a single property and a rational Landlord.
Imagine the Landlord owns 10 properties and sets the rent to $2k/mo on all of them with 1 property remaining empty. Maybe that last property could be rented out at $1.7k/mo but from the landlords perspective that puts downward pressure on the rents of his other properties.
If one of the landlord's existing tenants moves into the cheaper property it's even worse. He loses $300/mo and now has to consider reducing the rent on an additional property. Should he find a new tenant at $1700/mo, he still feels like he's losing because he believes the rent should be higher.
From the landlord's perspective, it's better to squeeze if he has sufficient cash flow. Especially given the belief that lowering the rent will negatively impact the value of the property.
While you're correct that mortgage and tax are fixed costs that need to be met, you haven't considered that landlords have multiple options to offset those costs. When interest is low they'll use equity release and interest only mortgages.
- davidw 2y agoIn a city of any size, holding one unit on or off the market is not going to affect the overall price. It's in the landlord's interest to rent it out rather than have it vacant.
- seanmcdirmid 2y agoSome tenants aren't worth the rent, so it is in the landlord's interest to find reasonable tenants rather than have it vacant, but you don't want to take someone as a tenant who will trash the place and then not pay rent for several months until they are evicted. Additional laws can make who to accept as a tenant even more stringent. For example, if you make below 80% of median income in Seattle, landlords have to pay your relocation costs if you raise rent more than 10% in one year. This means not many landlords are interested in renting to anyone who makes less than 80% of median income anymore.
- Jochim 2y agoThe landlord feels that he's losing money by renting it out at a lower costs, so he holds out for more. I used small numbers for the sake of example, scaled up to a city it'd represent 10% of the city's housing stock sitting empty.