How to get rid of vacant homes.

A special three-year rental contract, consisting of the following elements, could help clearing the market.

1. Notional value: a Gross Rental Yield of 7% will be applied to the agreed rent, producing thus a notional value of the property. Example: annual rent of $10,000 will produce a notional value of $142,857 (10,000 divided by 0.07; the suggested yield is above the ‘historical’ average due to the handling costs).
2. Bonus to tenants: once the property is sold, the tenants will get a bonus equal to 7.5% of the notional value ($10,714 in the above example). In other words, the higher the rent, the higher the bonus.
3. The tenants undertake to occupy the property, and pay the rent, for a period of three years. On the other hand, the owners are entitled to sell the property at any time, discharging thereby the tenants of their long term obligation.
4. The tenants will be entitled to their bonus even if the property is not sold during the rental period.

The advantages are numerous and mutual, but first and foremost, the market will be cleared of vacant homes more rapidly than otherwise. Moreover, notional values, based on a conservative rental yield, could be safely regarded as real values, at least for the near future.

Subject to some variations, a similar deal, based on gross rental yield and notional value, could be struck for people who are about to lose their home due to financial difficulties.

Zuriel Shiv
(Could well be that 7.5% bonus is not enough, but the principle is there)