The Washington herald., 1920-08-15
NEW PROPERTY
.LEASEPLANNED
Dealer Believes Misunder.
standing Exists Between
Owner and Tenant.

Much of the dissatisfaction with
rental rates arises from an ignor-
ance on the part of the tenant as to
the real cost of the thing he is buy
ing" says Alfred F. Potts. of In
dianapolis, in the National Real Es-
tate Journal. THE popular belief is
that a landlord realizes fabulous
profits on his investment and that
a tenants duty is to get back just
as much of the ill-gotten gain as
possible in the way of repairs. He
! has no interest in cooperating with
! the landlord in keeping the property
in good condition or saving eX-
pense in any direction. 1t has al
ways seemed to me there must be
method of arriving at a basis for
calculating rental rates at once fair
to the landlord and acceptable to
the tenant.
Seven Per Cent Return.
After some study worked out
new form of lease. based on the
theory of taking the tenant into
my confidence. giving him the facts
as to the cost of the property or
its selling value and the expense
Of it's maintenance and saying to
him in effect: I am going to sell
you this property at an agreed
price. You don't need to use your
own money or borrow. I'll furnish
all the capital. All 1 ask is that
you pay me 6, or as the case may
be, per cent on the capital l fur
nish you. Isn't that fair?' And of
course he has to admit it
We'll, as I've turned the property
over to you, you will have to pay
the taxes and insurance and keep up
the repairs the same as any other
owner.
This he sees and assents to.
The buildings on the property
will gradually depreciate so that at
the end of a certain period. thirty
three years, let us say, they will be
practically so run down or out of
date as to be worthless and will re-
quire replacement So you must set
aside a depreciation fund to take
care of this loss. While you pay
that sum to me to cover deprecia-
cannot spend it. The payments
must be allowed to accumulate to
replace the present buildings when
they are out of date. So you see
all that I get out of this property
is the or per cent on the cost or
value of the investment"
Tenant Pays for Repairs.
This frank and simple explana-
tion of the economics of the situa-
ton has always proved satisfactory
in the many cases where l have
employed this basis of calculation
or form of lease. The unknown
quantity is the amount to be
charged to cover repairs. Formerly
you have found a tenant anxious
to get all no could out of you in
the way of repairs. Now he realizes
that he Is paying for the repairs
himself just as he would If he
owned the property and he begins
at once to see how little he can
get along with, not how much he
can exact.
I'm fact, the situation is almost
amusingly reversed. You find that
you have to insist on keeping the
property in good repair and that
it cannot be done for less than a
certain sum which must be in
cluded in the payment to you so
that you may preserve the property.
To his suggestion that he will make
his own repairs, look after the
plumbing, paper the walls, polish
the floors, repaint or revarnish. you
must turn a polite but deaf ear, as
he might do so little that the house
would get shabby and undesirable.
Convincing the Renter.
"As you agree to expend the re-
pair fund portion of the rental on
repairs largely for the comfort and
pleasure of the tenant, he realizes
that you have no motive in making
the repair fund any larger than
necessary.
Certain work, such as a new
roof, the repainting of the exterior
of the house, etc, obviously to some
extent tends to lengthen the life
of the building. A clause Is inserted
that such expenditures shall be
charged to the depreciation account
and not deducted from the allow
ance for repairs.
''Of course the interest rate,
whether six or seven per cent or
more on the investment as we'll as
the rate of depreciation, will be for
each lessor to fix for himself IN
agreement with his tenant depend