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> In its statement, RealPage said landlords are free to reject any rent recommendations made by the software. “Hm this software we pay lots of money for says w

> In its statement, RealPage said landlords are free to reject any rent recommendations made by the software. “Hm this software we pay lots of money for says we could be charging more money? No no, let’s ignore this suggestion for the good of our tenants”

JumpCrisscross 2y ago
> this software we pay lots of money for says we could be charging more money? No no, let’s ignore this suggestion for the good of our tenants But the software doesn’t make the number go up. Landlords’ privileged bargaining position does. Collusion requires some prohibition on undercutting; otherwise it’s just markets being markets.
tevon 2y ago
A landlord gets absolutely crushed by vacancy. If they accept the higher price suggested by the software, they risk being vacant for longer. A month of vacancy is generally not worth 100 extra dollars a month. So if the price is too high, the landlord has a strong incentive to drop it. The price suggestion isn't the issue, the lack of stock absolutely is.
- mint2 2y ago
  My understanding is that with the way commercial loans work, the landlords are actually incentivized to keep things vacate rather than lower rents. Is that wrong?
  - acchow 2y ago
    This is/was a real loophole which I believe was created by low interest rates. The abundance of cheap money encourage lenders to tell their clients to make up approximate rental values. But with tightening credit, I can’t imagine this practice can last
  - lotsofpulp 2y ago
    Correct, that is wrong. Lenders aren’t stupid, they want to see cash flow. Commercial mortgages will come with terms requiring a minimum debt service coverage ratio (DSCR) to avoid default: https://www.investopedia.com/terms/d/dscr.asp https://www.investopedia.com/terms/d/dscr.asp If a landlord leaves units empty, their income drops, so their DSCR drops, and the lender can consider the property in default. That does not mean a lender will foreclose or otherwise take control of the property, they also might not want to get involved. But it does give them negotiating power, and is something borrowers want to avoid.
    - mint2 2y ago
      But the DSRC doesn’t contract my understanding, it just shows there’s a floor to the number of unrented units. Actually considering the DSRC it seems a large landlord would be more unlikely to lower rents unless desperate. Otherwise as people renew or lease at the lower rate, they’ll have less and less buffer
      - lotsofpulp 2y ago
        You claimed landlords are incentivized to keep spaces empty. Empty means zero income. DSCR with zero income is less than DSCR with some income.
FireBeyond 2y ago
Did they forget the lawsuit on the east coast, where their own documents said that they required 95% compliance, and that landlords had to write a reason for non-compliance, and they had their sales staff go above the heads of PMs who weren't following the software's advice. "So, technically yes, you can reject the recommendations, but if you work for a PM company we will probably tell your boss you're ignoring the software they pay for".

JumpCrisscross 2y ago

> this software we pay lots of money for says we could be charging more money? No no, let’s ignore this suggestion for the good of our tenants But the software doesn’t make the number go up. Landlords’ privileged bargaining position does. Collusion requires some prohibition on undercutting; otherwise it’s just markets being markets.

tevon 2y ago

A landlord gets absolutely crushed by vacancy. If they accept the higher price suggested by the software, they risk being vacant for longer. A month of vacancy is generally not worth 100 extra dollars a month. So if the price is too high, the landlord has a strong incentive to drop it. The price suggestion isn't the issue, the lack of stock absolutely is.

mint2 2y ago
My understanding is that with the way commercial loans work, the landlords are actually incentivized to keep things vacate rather than lower rents. Is that wrong?
- acchow 2y ago
  This is/was a real loophole which I believe was created by low interest rates. The abundance of cheap money encourage lenders to tell their clients to make up approximate rental values. But with tightening credit, I can’t imagine this practice can last
- lotsofpulp 2y ago
  Correct, that is wrong. Lenders aren’t stupid, they want to see cash flow. Commercial mortgages will come with terms requiring a minimum debt service coverage ratio (DSCR) to avoid default: https://www.investopedia.com/terms/d/dscr.asp https://www.investopedia.com/terms/d/dscr.asp If a landlord leaves units empty, their income drops, so their DSCR drops, and the lender can consider the property in default. That does not mean a lender will foreclose or otherwise take control of the property, they also might not want to get involved. But it does give them negotiating power, and is something borrowers want to avoid.
  - mint2 2y ago
    But the DSRC doesn’t contract my understanding, it just shows there’s a floor to the number of unrented units. Actually considering the DSRC it seems a large landlord would be more unlikely to lower rents unless desperate. Otherwise as people renew or lease at the lower rate, they’ll have less and less buffer
    - lotsofpulp 2y ago
      You claimed landlords are incentivized to keep spaces empty. Empty means zero income. DSCR with zero income is less than DSCR with some income.

FireBeyond 2y ago

Did they forget the lawsuit on the east coast, where their own documents said that they required 95% compliance, and that landlords had to write a reason for non-compliance, and they had their sales staff go above the heads of PMs who weren't following the software's advice. "So, technically yes, you can reject the recommendations, but if you work for a PM company we will probably tell your boss you're ignoring the software they pay for".