Expense and Rent Strategies in Real Estate Management
A model of the real estate market is developed where the rent-vacancy trade-off also embeds selections on expenses. High expenses and rents or low expenses and rents are explicit strategies, positioning properties along an efficient isoprofit frontier. Instead of a rent-vacancy trade-off, the operator can select either gross or net rent, or some combination as an offset for vacancy. This macrostructure is more in keeping with observed real estate markets, where some managers focus on net operating income, and others on effective gross income. Empirical results for apartments in Portland, Oregon supports the hypothesis that expenses and rents are positively correlated. An aggressive expense-increasing strategy pays off in higher rents, though in not all cases is net operating income positive. There are two implications. First, incentives in management create strategies to maximize gross as opposed to net income. Second, rent-vacancy trade-offs that use gross income may misstate the adjustment toward equilibrium.
Volume (Year): 15 (1998)
Issue (Month): 3 ()
|Contact details of provider:|| Postal: American Real Estate Society Clemson University School of Business & Behavioral Science Department of Finance 401 Sirrine Hall Clemson, SC 29634-1323|
Web page: http://www.aresnet.org/
|Order Information:|| Postal: Diane Quarles American Real Estate Society Manager of Member Services Clemson University Box 341323 Clemson, SC 29634-1323|
Web: http://pages.jh.edu/jrer/about/get.htm Email:
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Denise DiPasquale & William C. Wheaton, 1992. "The Markets for Real Estate Assets and Space: A Conceptual Framework," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 20(2), pages 181-198.
- Benjamin, John D & de la Torre, Cris & Musumeci, Jim, 1995. "Controlling the Incentive Problems in Real Estate Leasing," The Journal of Real Estate Finance and Economics, Springer, vol. 10(2), pages 177-91, March.
- Arthur A. Eubank & C. R. Sirmans, 1979. "The Price Adjustment Mechanism for Rental Housing in the United States," The Quarterly Journal of Economics, Oxford University Press, vol. 93(1), pages 163-168.
- David M. Cutler & James M. Poterba & Lawrence H. Summers, 1990.
NBER Working Papers
3242, National Bureau of Economic Research, Inc.
- Karl E. Case & Robert J. Shiller, 1988.
"The Efficiency of the Market for Single-Family Homes,"
NBER Working Papers
2506, National Bureau of Economic Research, Inc.
- Case, Karl E & Shiller, Robert J, 1989. "The Efficiency of the Market for Single-Family Homes," American Economic Review, American Economic Association, vol. 79(1), pages 125-37, March.
- Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
When requesting a correction, please mention this item's handle: RePEc:jre:issued:v:15:n:3:1998:p:267-282. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (JRER Graduate Assistant/Webmaster)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.