Why the aversion to paying market rent?

[Perry]

Shammy's at it again. Pensioners, this time.
We're giving too much to people who don't need it, Shammy says
No mention of tax and efficiencies, of course.

[flyernzl]

No mention of the fact that:
- the pension is taxable, so those who say the cost is high look only at the gross payout figure, not at the nett (the actual cost to the Government/taxpayer)
- the pension is taxable so those on substantial other incomes as well quite often end up paying more in income tax than they receive in the pension, so they are in effect self-funding their own pension
- unlike losing a limb, the ability to pass an asset or income tax is not set in stone. Someone who is poor today may well win Lotto on Saturday or inherit heaps on Monday, so any test would need to be repeated at frequent intervals - an expensive exercise whose costs may well exceed any money saved.

[McDuck]

I have just powered up the calculator.
Most of my rents are at or near market levels.
I am earning a return of 1.67% on my rental properties.
Is that a great return for my time, risk, efforts, and investment?
One thing is for sure, I am not 'greedy'!

Ha, just powered up the calculator.

A beautiful vison of electric arcs, humming transformers and glowing red numbers.

Now, about this greed thing, I'm not convinced.

1.6% sounds pathetic for sure.

Any business should really aim for between 5 and 10%.

I think I can guess your calculation, but 1.6% of what?

Because, taking it to the extreme to clarify the point, 1.6% of 1 million dollars every year can be a large amount.

And if the 1.6% is just a figure to keep a speculative position in the black, to later cash it in for 400%.

Then I might say "Oink"!

[McDuck]

I've been buying bread from the same countdown every week for over a decade yet for some reason they charge me market price for each loaf. I'm a good customer with a great purchase history and I've never caused them any troubles or failed to pay for my loaf on time.

Why is it that I don't get a discount to market price …...

I'm sorry about that.

When I ran a small business years back, I always gave good repeat customers a better price.
It was just smart.

But then, I had the luxury of doing that, because there was some fat in my product pricing.
I would think that with a product like bread, there's not much room in the price.

Another thing I had the luxury of doing was improving and streamlining the processes, so I could pass on my savings in part to my customer, and improve the quality of the product at the same time.

This is the real thing a business person should get a kick out of.

The money just comes out the end when you manage and plan an innovate well.

[McDuck]

Asking myself the hard question, what would be a good %?

And what two things should I look at to % off against each other?

Well, certainly not my choice of risk leverage.
That's my own stupidity or wisdom, no one should pay for that.

I'm thinking I would see how much my tenant earned, and how much they had left after expenses.
No sympathy for excessive behavior like alcoholism or drug addiction mind.

Then I would try and set up my product, in this case accommodation, to leave them with a decent bit of free choice spending.

I would try and match my customer to my product from the get go.

But perhaps I would look at ways alter the product if my costs were just too high to give good value for money.

And since I achieved a good customer, product, price match, I would sure give a discount to keep it in play.
I figure the discount cost is just coming off the cost of searching for and setting up another match.

Which I consider a smart use of money.

[Keys]

Another thing I had the luxury of doing was improving and streamlining the processes, so I could pass on my savings in part to my customer, and improve the quality of the product at the same time.

You improve by (say) 3% this year.

You improve by (say) 1% the year before that, and before that you improved by (say 0.5%). This year was a good year so you can see yourself improving by just (say 2%) next year.

Compounded, that is over 6% improvement. At what stage can your business no longer make improvements?

[McDuck]

You improve by (say) 3% this year.

You improve by (say) 1% the year before that, and before that you improved by (say 0.5%). This year was a good year so you can see yourself improving by just (say 2%) next year.

Compounded, that is over 6% improvement. At what stage can your business no longer make improvements?

It's pretty difficult to measure improvements in specific % terms.

How could you ever put a % value on customer satisfaction or loyalty?
Or waste reduction, or improved product usefulness?

And since no company is an island, some new piece of tech or research from a totally different field will usually provide you with new opportunities.

Sure there is going to be a diminishing returns curve, as you become expert.
But improvement is a never ending process.

[artemis]

One thing I learned when working in a large corporate - 'there is 30% waste in every process'. Not a bad mantra. It can force us to look until we find it. And when found and fixed, well it is still true. Rinse and repeat.