[BrenBarn]

I hear people say this a lot but it doesn't make any sense. Why would the value be based on some imaginary rent rather than the actual amount of money taken in? It seems stupid for anyone to say that asking, say, $2500 rent with three free months (giving $27k for the year) is better than just asking $2000 with no free months (giving $24k for the year). If this is really what is going in then the system deserves to crash.

[bombcar]

It’s just how commercial real estate is valued. It’s very formulaic based on the local multiplier of rents. It even applies down to single-family homes but those have competing buyers (families) - but in pure commercial you are the multiple of rents and basically nothing else (save in the strange case of someone wanting that particular property).

The key is home loans for normal families can’t be called - commercial loans can.

[bluGill]

Even in the best of times you will have empty places so they have to ignore unrented places since there is no formula that can tell the state of the economy from just current rent. Real estate is always local so even in the worst economies there is always some place booming

[IAmBroom]

Your suggested alternative generates a need for massive accounting by the banks, tracking each loan's aggregate monthly rental income.

A simpler rule that mostly covers today's problems, and adds very little overhead after the loan is signed, is often considered good enough.

[nothercastle]

It’s probably a bad rule in retrospect but to reprice now would be devastating