It sort of is. When a property owner has loan against a commercial property, the lender uses the monthly rent to calculate how much they will loan you. The rent number they use is the last paid rent.
So you, the property owner, end up in a situation where if you lower rent to attract a new tenant, the bank will recalculate your loan, potentially ending in a margin call.
Because you are a heavily leveraged house of cards, a rug pull on a few of these loans could cause a cascade liquidating your commercial inventory. Your business is buy a property, take a loan against it, use that loan to buy a property, etc etc.
Therefore it becomes worth it to carry vacant properties, because they are acting as the stilts holding up your money making properties. The vacancy becomes a cost of doing business, and gets factored into the rent of places that are getting leased.
The current location my office is in, was vacant for 12 years before we signed a lease, owned by a big name commercial real estate firm.
Given what seems like a high rate of vacancies in a lot of markets maybe its time for those landlords to be wiped out, the loans defaulted, and the buildings sell to get back to their real valuations.
But no, we can't have wealthy people lose some money or the banks take a loss, that'd be terrible. We'll just continue crushing the middle class and poor with high rent costs and empty properties.
That might help a little, but you won't notice. Beating such taxes is done with low value businesses. A mattress store is a typical case, good for holding larger spaces with almost no capital cost: a low overhead business used to hold a retail property until values appreciate. Smaller spaces are held with little clothing stores nobody shops at, or wire transfer shops and such. There is a plethora of such operations holding real estate everywhere, barely breaking even or losing modest amounts of money.
It's compelling to imagine there is some brilliant tax fix for every ill, but investors are a lot more agile than tax authorities; they make their living solving these impediments. Handling food is one the costliest ways to hold a commercial property, so that's rarely how its done.
Workaccount2|1 month ago
So you, the property owner, end up in a situation where if you lower rent to attract a new tenant, the bank will recalculate your loan, potentially ending in a margin call.
Because you are a heavily leveraged house of cards, a rug pull on a few of these loans could cause a cascade liquidating your commercial inventory. Your business is buy a property, take a loan against it, use that loan to buy a property, etc etc.
Therefore it becomes worth it to carry vacant properties, because they are acting as the stilts holding up your money making properties. The vacancy becomes a cost of doing business, and gets factored into the rent of places that are getting leased.
The current location my office is in, was vacant for 12 years before we signed a lease, owned by a big name commercial real estate firm.
vel0city|1 month ago
But no, we can't have wealthy people lose some money or the banks take a loss, that'd be terrible. We'll just continue crushing the middle class and poor with high rent costs and empty properties.
fzeroracer|1 month ago
topspin|1 month ago
That might help a little, but you won't notice. Beating such taxes is done with low value businesses. A mattress store is a typical case, good for holding larger spaces with almost no capital cost: a low overhead business used to hold a retail property until values appreciate. Smaller spaces are held with little clothing stores nobody shops at, or wire transfer shops and such. There is a plethora of such operations holding real estate everywhere, barely breaking even or losing modest amounts of money.
It's compelling to imagine there is some brilliant tax fix for every ill, but investors are a lot more agile than tax authorities; they make their living solving these impediments. Handling food is one the costliest ways to hold a commercial property, so that's rarely how its done.