Quote:
Originally Posted by TiltonBB
I will respectfully disagree with your business strategy. Your business expenses should have nothing to do with what is charged for a service other than knowing that you need a certain amount to keep the business prosperous.
If the market rate rent for an apartment was $1,500 per month but you had tenants paying $1,000 and the CPI went up 3% you would only raise their rent to $1,030? You would not ask for the other $470 per month you could get? So if it was a 100 unit apartment building you would leave behind an additional $47,000 per month that you could have collected?
I had tenants once, that complained when I raised their rent to the fair market value, saying I should only collect what my expenses were and make a profit when I sold the building. I responded that if I was using their thought process, if I was a wealthy man and had paid cash for the building, should I let them live in it for free and run a home for little wanderers?
Any business owner is entitled to charge what the market will bear. Putting away reserves when times are good, for the low income years, market slumps, and assorted other expenses is just good business.
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I agree with you on business strategy. What you describe maximizes profits, at least short term. I do this regularly.
But having grown up in a town with a lot of people who were just scraping by--if I owned an apartment building and property values were roaring while costs were pretty much flat, I would not raise rates in a way that would squeeze (good) tenants who were barely making it. Keep in mind that if a person is paying 30-50% of their income on rent, and prices go up by 50%, as you suggest, they cannot possibly afford the jump--you'll turn over the entire building at once. But that's just me making a personal choice. Maybe it's why I don't own an apartment building? (haha)
Back on topic-- can I infer from your post that you and all the folks who thanked you are cool with slip prices jumping by 64% in a single year?