[EMAIL PROTECTED] wrote: > A thought on landlords: > > Why should a landlord expect that rents will cover the entire cost of their > investment?
Because there's a little thing called "cash flow" that you need to run a business, which renting property is. If you can't generate enough revenue to pay your expenses (mortgage, maintenance, insurance, taxes, etc.) you can't run the business. Sure you "own" a building and land, but that's not liquid and that won't pay the bills. And, you've got cash invested in that property -- cash that might be earning more over the long term if it were invested in say, the stock market (this equation depends on the quality of the property owned). So, you might have to make up for that, too. Here's an analogy. Think of it like a movie theater (another business structured around a huge fixed asset -- the theatre property). If the number of tickets sold don't cover the cost of owning the property plus salaries and expenses, the business can't run. Even if on paper it is still solvent. Just because the fixed asset is worth a lot of money doesn't mean there is wealth creation going on -- the value of the asset could be deteriorating -- the neighborhood could be in decline, the adjacent properties poorly maintained, etc. -- or it could be appreciating. The question is at what rate is it appreciating? And, just because there is money there -- some percentage the landlord's, the rest the bank's -- doesn't mean the owner is getting rich quick or that they will get a huge windfall when they sell the building -- usually landlords are making a reasonable amount of money, but not fabulous windfall profits. As to how much do properties appreciate, and is it comparable to other places you could put your money, I think realtors use a rule of thumb that real estate, on average, increases in value at 1.5 to 2 per cent per year. The last few years of rapidly rising property values in Minneapolis are an abberation, and that's not how it usually is. Depending on the quality of the property, you might be better off in the stock market over the long term. To sum it up: if the intake doesn't exceed the outgo, at least slightly, you can't stay in business. You're right, it does take money to make money. And, life ain't fair. Barbara Nelson Burnsville, formerly Seward _______________________________________ Minneapolis Issues Forum - A Civil City Civic Discussion - Mn E-Democracy Post messages to: [EMAIL PROTECTED] Subscribe, Unsubscribe, Digest option, and more: http://e-democracy.org/mpls
