Picture this. Landlord owns over 100 units. Has done so for more than 50 years.
Easily bringing in over one million 800 thousand dollars a year.
Over 50 years, how much would have been accumulated?
Notice of rent rise each year. This time $100 a week.
Anyone out there tell me how the constant rent rises can be justified?
Remember, currently bringing in $1.8 million a year.
How much is the asset worth? You can’t look at the gross return you have to look at the net return ie gross after expenses.
The landlord has to make a return on the value of the asset greater than, say, what he would get with the same amount invested in the share market other wise why bother with that investment?
The average value of a unit across Australia is $750,000, he owns 100 so the value of his asset is $75 million so for a 5% return you would want a return of about $3.5million. He is getting a poor return if $1.8million was his gross income.
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Welcome to the world of capitalism. The entrepreneur who owns the assets can seek to maximise the return on their risk & investment as they see fit. This hike in rent does come with another risk - that some of those currently renting decide to leave and its difficult to find replacements. But that is the nature of capitalism and risk. Sounds like your landlord is a bit of a risk taker - i.e. a good capitalist. I think, to use the current phrasing, we need to call this landlord a wealth generator and job creator.
Some might suggest that what is needed here is some form of regulation to the unchecked capitalism - some rent control to protect vulnerable tenants. But that is pure woke communism and only an ignorant socialist would suggest that. Its a jungle out there and only the fittest can survive. Your clearly quite old landlord is evidently exceptionally fit and well adapted to his/her jungle - that is the beauty of capitalism.
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Never difficult to find replacement renter. Some on the market properties have upwards of 100 applicants.
The only control imposed by the state government is that rents can only rise once a year. Which in reality no control at all.
The landlord is well into his 80s and rather fit. There is also the worry, what happens when he passes on? Do the units get passed on to the son and what might he do with them?
So the entrepreneur is not really risking his capital at all then? I thought the idea of capitalism was that returns followed risk. Here is seems that return follows zero risk.
Oh, and he is likely to pass on his wealth and investment to his son - so that is not risk and that is not really wealth creation or job creation.
Oh, and there is little or no regulation or control - so pretty much free capitalism.
How well the capitalism system is working for us all.
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