[bko]

Investors aren't stupid. If you're financing a building with high rents but high vacancy, it's pretty obv and their revenue will necessarily be lower than charging market price (which is by definition the profit maximizing price to charge).

If someone can figure out the con on a message board unrelated to real estate I'm pretty sure investors financing this stuff could figure it out as well

[uoaei]

Investors have heard of such a thing as "diversification" and will surely look at their entire portfolio before jumping to short-sighted conclusions. It's very likely real-estate investors have an intimate knowledge of rental markets. There's a nontrivial cost to acquiring tenants and maintaining the buildings.

If they did the math after all the various factors are considered and this happened, then clearly this is the best play from their perspective. It's not even malice it's just "economic sense", except the way the economics works out just happens to screw people with barely enough money to afford rent.

That still doesn't mean they're not culpable under the textbook legal definition of collusion.

[trgn]

Banks are that stupid. For loans, you demonstrate expected rental income, based on rents of comps. We were in that exact situation. Just provided estimates based on a listing search. Question of vacancy rates or whatever did not come up.

[lotsofpulp]

Did you have a stipulation of maintaining a certain debt service coverage ratio, otherwise the lender can consider you to have defaulted?

[trgn]

No. This was multifamily, and we occupied one unit. Wrt default, not sure wrt all the details with property liens, but isn't that only when you don't make your monthly payment, regardless of income?

[afuchs]

An asset can be owned by multiple investors who have competing interests with some wanting to take a large amount of risk by allowing real estate to remain vacant if it can mean a larger reward later.

Louis Rossmann has made numerous videos about vacant properties where asking prices for rent are significantly above what he considers to be market value. Notably, https://www.youtube.com/watch?v=NdfmMB1E_qk and the Reddit post which that video comments on: https://www.reddit.com/r/nyc/comments/innhah/comment/g4ai27m...

The TL;DR is that there's weak evidence that the contractual conditions attached to financing from investors who seek high risk and high reward makes those landlords ignore local market conditions and incentivizes those landlords to leave commercial units vacant instead of renting them out at market value.