The Minneapolis journal. [volume] (Minneapolis, Minn.) 1888-1939, 1903-06-20

turns and the real estate market as set
forth by E. A. Merrill, president of the
Minnesota Loan and Trust company, at
the late luncheon of the Minneapolis Real
Estate board, attracted much attention.
Mr.. Merrilps general proposition that
rents sold below cost have strongly de-
pressing effect on values and operate to
discourage outside investors was met with
general approval Comments upon the
views of Mr.. Merrill and the gist of his
paper are. given herewith.
Mr. MerrlPs Position.
Mr.. Merrilrs point is briefly covered in
the following extracts:
vi, I'VE sell rentals just as life insurance
companies sell insurance, and as laborers
and mechanics sell their services. The
insurance companies sell insurance at a
price based upon its cost with fair
net profit added, after paying all expenses
and providing for reserve.
'The owners Of real estate in Mime
apolts, however, not only sold their rent
ais at less than cost during the panic and
the years Of depression, but have con-
2 tinued to do SO. ;E@aaSE =
Considering the returns which the
tenant is realizing either upon his bust
ness or labor in the city of Minneapolis,
he has as great ability to pay rentals
equal to those paid for similar properties
In other cities of the same size, as he had
before the panic. Cost Of living and ex-
penditures for luxuries are not less with
tenants in Minneapolis than they were
before the panic, except in the case of
rentals.
THAT we are deceiving ourselves is
evidenced by the fact that we assert and
advertise that it will now pay to buy lots
and erect buildings for rental. We would
consider that man a poor merchant who
in good times should not be able to pay
frnr oil oil
ton upon his stock, a fair salary to him
self for his services, and earn at least Is
per cent to 20 per cent upon his capital
We would consider the lender Of money
even at present low rates, to be ineff-
cient If he could not realize a net return
of per cent or 6 per cent and at the end
OF a term OF years have new dollar-that
Is, one in good repair, for every one which
he had loaned originally. But these per-
centages are not realized by the owners of
real estate upon rentals after they pay
agents commissions, insurance, taxes,
ordinary repairs, make allowance for
vacancies and loss of rent, and set aside a
fair amount for depreciation.
Now, what is the result of all this?
The nonresident owner of real estate as
serts that his real estate In Minneapolis
proves to be Of little value, because the
rentals are SO low that after he has paid
all expenses he has little income left, and
and depreciating in value, He speaks i'll
of the city, refuses to make further in
vestm ents, either in the purchase Of real
estate or in loans upon real estate, offers
his property for sale probably at loss,
and refuses to keep it in such repair as
to make it credit to the city
'All this would have been different if
the rental had been $40 per month in
stead of $50, as the owner would then
have realized upon his property rental
which would have been similar to that
realized in other cities, and which would
have enabled him to write off the depre-
citation upon his property each year, the
same as the merchant must do if he re-
mains solvent.
1--WE come again to the solid fact that
we must first get our rental returns SO
that the property will be profitable and
sound one for the yielding of an income,
before we can arouse either the interest
or enthusiasm of investors"
To the real estate men at-this time Mr.
MerrilPs paper was extremely interest
ing. No sooner had the real estate mar
ket been put on it's feet than the rental
board agents began to consider an adj
vance in rents. The Office building. men
were the first to take the matter up and
then the agents Of flats. Finally an agree.
ment was reached to advance house rents
this spring and rents Of flats the coming
fall.
What Rental Men Say.
Several interviews show that the rental
men believe thoroly in what Mr.. Merrill
said. The following is what some of them
say:
George Odlum Minneapolis Manager for
Reece M. Newport Of ST. Paul have
always thought that rents were too low
here. The man who rents property gets
lower returns on his money than any
other investor. Because rents have been
low SO long a time, tenants have learned
to think that low rents were right.
III. 3. Ladd-I think fiat building rents
are, in a good many instances, not any
too high. Property must produce GER
tain amount Of rent or 1t does not make
a, good investment OF course, I couldn't
say whether rents are all high enough,
not knowing the whole market, but / find
some are sufficiently high and some, I
think, should be little higher.
An Adverse View.
w, w. Pierce-The paper presented only
one side OF the matter. The trouble with
rents in this city is that agents do not
keep the property remarkable. Houses
should be painted and papered for their
own good, and the yards cleaned. This
will make tenants pay rent Il nothing else