Price elasticity of rentals - Posted by John Knowles

import · January 30, 2001, 7:05am

Posted by Wayne-NC on January 30, 2001 at 08:38:42:

This sounds like an economist point of view but I think it is a valid question but try telling that to the bank. I feel it’s just another way for the banks to protect themselves and justify more loan denials due to dept/income ratios. However, 10% maybe a nationwide average where in your area it may be less but it may be tough to prove. I have single family homes and the bank will only credit me with 75% of my rental income and say it’s for vacancy and expenses of which is much less in my area. So the bank says I’m losing money when I am really making money consistently. The bottom line is that I can’t qualify for as many loans as I could really use. I wish I had the answer that you are looking for.

import · January 30, 2001, 7:05am

Posted by John Knowles on January 30, 2001 at 08:05:29:

I see that when banks consider financing for a multi-units, they allow for a 10% vacancy - has anyone done research into the price elasticity of rentals for multi-units? In other words, does one know what impact on vacancy, a specific percentage reduction in rental would have? Let’s say for example we have a 10% vacancy and we then offer a 5% reduction in monthly rental (5% lower than the competition) - would this loss of 5% income result in a more than 5% increase in income due to decreased vacancy? Could this be something new to consider, or is this old hat?