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Comment by electricslpnsld | Hacker News Reader

> Normally landlords are so loathe to reduce rents

What's the reasoning here? I've tried to talk landlords down by less than a month's rent when taken over the course of a typical year lease, been told to shove off, only to watch the unit go unrented for months until they finally drop the price.

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AFAIK, at least for large residential complexes, the reason is that you can borrow against the base rent, mostly regardless of the vacancy rate.

So if you are renting 60% of your units at $4k per month, you can borrow against the income you'd make if you had all 100% rented out. But if you had to lower the rent on the other 40% by $1k to get 90% occupancy -- you'd have a larger income, but be able to borrow less money.

If your goal is to use leverage to borrow as much as you can and cash out before the cycle ends (which I think is what most people are doing in RE) then this is how you do it.

Something I've heard a landlord argue was that if he lowered his rent that would mean his property value would go down which would mean his loans/mortgages would not be covered. He would rather take a couple months of losses than devalueing his property.

I have no idea if the math works out for that, and he was negotiating, but he didn't budge a cent and we took our business elsewhere so it did seem like his hands were tied the same as your example.

I have heard similar arguments from developers in Sydney. They will give you a car, or guaranteed rental income for x months, rather than dropping the price of the property.

As the other reply mentioned, the value of commercial rental property is a multiplier of the rent you can charge. If you lower your rents then not only are you lowering your cash flow but you’re lowering the value of the property overall which can impact resale value and the ability to take out loans.

The cap ratio is based on base rent, rather than rent times occupancy. Especially if you have multiple properties, lowering the rent on any of them will negatively affect the rent on the others.

This is especially true in commercial real estate, where your other tenants (e.g. in the same mall) sometimes have a "most favored nation" provision - if anyone else gets lower rent, they do too.

Landlord’s are much more likely to kick money back, but keep the rent the same.

I’ve even seen it in SF lately - sign a 12 month lease and your first month is free.

I got out of the landlord game a couple years ago because I was tired of the drama, but my biggest source of resistance to lowering rent was the constraints on raising it. Beyond that, I never had a single unit go unrented for more than a single month, and in that case it was because we had some hiccups around upgrades to the unit. That may be unique to the Vancouver market though.

Conversely, I have never had any problems negotiating rent down by pointing to comparable listings for units at lower prices. It's a hassle to find another good tenant, and there's a decent chance of losing a month's rent to vacancy.

The flip side to it is that I'm actually willing to move if they say no. I would rather not, because moving is a pain, but if you're not willing to take the other listing, it wasn't really comparable.

edit: However, I have only negotiated with individual landlords in AB. I have not tried in BC.

Was it in a multi unit building? A guy renting out one condo has an incentive to avoid letting it sit. But a person renting 100 units in a building would rather have it sit than rent it out for $100 less and then having every future (and perhaps existing) tenant expect to pay that new rate.

BC has rent control so to some degree that landlord could be locked into that lower rent regardless of market changes.

If they can report it as "lost income" then there could be tax benefits

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