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Comment by bombcar | Hacker News Reader

All of the above makes total sense (to me) when you realize that people don't know how to price rentals at all - just like the average person doesn't know how to price restaurant food.

When you know truly how to price (and cost!) something, you know when and where you can offer discounts. If cost to acquire a tenant is $2k, then the discount to preserve a good tenant should be about $2k per tenant turnover time.

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Almost like Uber was marketed, AirBnB was not initially sold as a "make primary income off this". It was a way for people with excess assets (spare car and some time, spare room in a big house, etc) to make some money and the companies were the broker.

Turning Airbnb into a full-blown rental market with people and LLCs buying houses just for AirBnB was the downfall. At least, that's my interpretation.

I think Paris tried to curb this buy allowing Airbnb, but you can only rent out max 50% of the year. This makes it so local owners can make some money, but corporations wouldn't be able to get the yield they need at 50% occupancy.

And did it work?

I ask because corporates usually figure out how to use the rules to their advantage and I am now trying to sniff through how they would play this.

Yeah, doesn't this just end up increasing short term rental prices across the board? It's not like there is a shortage of demand for lodging in Paris.

Can I buy a property, rent it out for six months, then re-sell it to this other, totally independent corporation I own?

This seems both obvious and difficult to prevent.

Usually there are large and unavoidable transaction costs involved in selling/buying properties. It's a liquidity event on a large amount of capital so it's pretty much inevitable that government want to get involved with taxes, duties, fees etc.

You got it the wrong way around. The goal for both was to offer full time incomes and compete with taxis/hotels.

The “offer a spare room” and “pick up someone going the same way as you” narratives were about skirting regulations.

There's a great meme image I refer to all the time for people pricing their stuff on the Internet:

https://imgflip.com/i/8j0n0r

I'm on one collector group on Facebook and people come and list their items for thousands of dollars even though the average price on eBay is about $1. You'll point them to the sold items and they will say "OK, I see that, but I really think you are wrong and mine is worth $6500 + shipping, and also you are very rude telling me my price is wrong."

> the average person doesn't know how to price restaurant food

Could you be more specific?

"It would cost less for me to buy the groceries and make this at home".

Not that I always could or would care to go to the effort for a fancy meal, but in general it's going to be a lot cheaper to prepare most meals at home. Or maybe I'm misunderstanding you.

Of course it'll be cheaper to make most meals yourself. Especially since the imagined price doesn't tend to include rent, kitchen labor, service staff labor, or depreciating costs of kitchen appliances, which all go into the price of restaurant meals.

I'm living in a house anyway. I'm not paying myself. Appliances last decades. It would cost me money to drive to a restaurant. With rare exceptions (e.g. high end kitchen you don't use much and eating out really cheaply) there's no world where the costs of preparing meals at home are higher than eating out every meal.

The point is that many people expect them to be priced similarly because they think of the ingredients as the main costs (because those are the only costs they actually see when cooking for themselves), which they are not.

I'm not sure many people actually think that restaurants are or should be as cheap as eating at home except maybe some fast food loss leaders.

When going to a restaurant you should include transport costs and time wasted with transport and waiting. Cooking at home can be an efficient pipeline where you have full control of inputs while saving money and time. I was frustrated because I wanted to pay for convenience but in my case I found it to be non-convenient.

Perhaps it's a bit pedantic, but that seems less like pricing restaurant food and more like pricing food in general, which is totally valid if you're on a fixed budget and considering how much to spend for food.

I think they're referring to estimating what restaurant food "should" cost, based on what it is. Rule of thumb I heard years ago was aiming to sell for about 3x what your ingredients cost you plus tax, but that may have increased since.

You should raise prices until you are not quite sold out. If you are at max capacity, you are by definition not charging enough.

There's a lot more to it than that.

Such an approach can give you a long-term unsustainable clientele.

Such an approach can lose you the marketing cachet of being sold out for months.

etc.

Almost no restaurant is ever sold out.

At peak times. There's a reason lots of restaurants have happy hours and lunch specials. And a weekday night tends to be less in demand than a Friday or Saturday.

> people don't know how to price rentals

And "helping" them is a lawsuit magnet: Big landlords are colluding to raise rents, D.C. lawsuit alleges https://news.ycombinator.com/item?id=38155840

If I had a group of graduate students at my beck and call I'd love to try to factor out what effect single-family rentals have had on the rental market in toto - because once you remove appreciation, they're often losing money each month, which means they're subsidizing the renters (and willing to do so because they're making it up on highly-leveraged appreciation).

Why would the math be different for apartment buildings? They also appreciate and they usually have better accountants to make sure no money is left on the table if it's available.

Apartment buildings get handled in a business-like manner, but are also apartments (which have downsides for the renters).

My theory is that single family homes get rented below what it costs to rent them and the landlords make it up via appreciation.

It's pretty obvious that there are places like this, where the rental prices are substantially below 1% of the purchase price (one of the "rule of thumbs").

I think it’s safe to call this a fact in markets like the Bay Area.

In college three friends and I rented a 1000sqft 2 bed 2 bath apartment with one parking spot for $X, then the next year a 2000sqft 4 bed 4 bath 2 car garage for $1.15X. Per zillow, the owner was renting it to us for 0.3% of the purchase price. The only way for them not to be losing their shirt is crazy appreciation.

> because once you remove appreciation, they're often losing money each month

I'm curious if you have a source for this? Intuitively, it makes sense, but I haven't actually seen any figures that support this. Although my guess is that data would be hard to come by.

The lawsuit is about helping them using non-public data from other companies. Nothing stops the platform from making all the rental data public and giving the same recommendations.

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