You're saying that if a unit has two 500 square foot bedrooms, and one is in the basement with no windows next to the furnace and the other is upstairs with bay windows on two walls facing a garden, there is always someone willing to pay half of the overall rent for the basement unit? How exactly are you arriving at this extremely counter intuitive conclusion?
The huge problem with dividing rent this way is that it's effectively saying that a house is only as good as its bedroom. It puts the price of the kitchen, bathrooms, common spaces, yard, etc. at exactly $0. Meanwhile, those rooms are what most people use most of the day!
E.g., if one bedroom is a tiny 70 sqft and the other a whopping 210 sqft, your algorithm would have the smaller pay only 25% of the rent! Is their home life really 66% worse/cheaper just because their bedroom is small? They have equal access to the TV, couch, oven, fridge, laundry, etc. etc. etc.
I don't think people think about rental pricing from first principles. In general, they look around, see what everyone else is charging, maybe nudge it up a bit, and charge that. If they don't get any tenants, they lower the rate until someone leases the apartment.
So maybe a dumb question but how can this possibly be true without landlords losing their shirt? If it is cheaper to rent the building then to own it? They only thing I can think is this not and apples to apples comparison i.e. maybe the average rental was 900sqft apartment vs 1300sqft condo or something.
How often is it the case where a house is split into many units though? They're all for rent, but none are for the whole house. Yet the whole house is being rented in pieces.
Getting 80% of what you're paying for space you don't need is much better than getting 0%. Then you get to claim a big cost reduction this year and a big cost reduction when the lease expires and you can dump the unneeded space entirely.
No, I don't think you understand. I'm not charging below market rate, I'm charging at cost. Whatever it takes to maintain the building and provide utilities, etc. The space is worth, perhaps, $2400 a month. My last tenant paid $600 a month. She needed a place to stay for a year while she built up a down payment. Being able to stay with us meant she could save tens of thousands and she was able to embark on her own.
Could I have charged $1000 and pocketed a little profit? Of course. But it would have come directly at her ability to succeed. I think that's deeply unethical. I think it's morally repugnant to profit from housing.
Yes I think you are right. There are people who would be interested in renting probably relatively small spaces under certain conditions that are not full leases.
For example a spare room to a friend for a beer, or indeed, a basement to a startup they thought was cool. Because in these situations it isn't about the money.
The size of this market is probably fairly small and not very profitable - it isn't about the money.
Also I wonder how long people would be happy with this arrangement. After a few months they might start to think it would be nice to have the basement back or that someone who pays the rent would be nice.
If half the houses on a given street have at least one room available to rent at all times, renting a room on that street should be cheaper due to plentiful supply.
I like how you first do the math to show how cheap these units are. "It's a bargain!"
Then you wonder it the $400k is gross profit or revenue.
Wouldn't it be useful to know if the units were being rented for $254 a month or if the owner was renting them at rates that would generate in excess of $254 a month in revenue?
Doesn’t everyone try to take advantage? I’ve never heard of renters offering to pay more than rent, it’d be like haggling with a street vendor to pay a higher price.
Something that has always annoyed me in my local area is that, when renting, the cost of an apartment is relative to its size, not to its quality. So you could have an apartment that is twice the cost, twice the size, but still has the same crappy washing machine and no dishwasher.
I would happily pay double the rent for a similar sized apartment but one with lots of nice touches, such as luxury appliances and such. I've often thought that if I ever rent out a property, I'd fill it with nice things and then charge more - high end coffee machines, in-wall speaker systems, nice furniture, etc. Perhaps there's a reason that landlords don't do that, though.
Why not just divide the total rent by the total square footage to get a rate for the space and then have each person pay for their private space plus a their share of the common space?
My landlord recently put up a rental for $9,500/mo. The backstory is interesting: he told me someone had been staying at the place paying $700/mo. He cut a deal with that tenant where the tenant moves to a much smaller unit and instead of paying $700, only paying $300/mo. So overall, tenant gets to pay less and the landlord has a chance to make additional 5-6K/mo.
If you pay rent on your building you pay the same rate all the time, even if you're not open.
If you open up, the cost of powering your appliances, lighting, heating, etc. is all essentially the same whether or not you feeding 100 people a day or 1000.
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