Pricing Rentals: Lease-A-Dump Corp owns 10 apartment buildings in a college town, which it rents exclusively to students. Each apartment building has 100 rental units, which all have comparable floor plans and amenities. Over the last few years, LADC has been experiencing cash flow problems due to high vacancy rates.
In order to get a better handle on the problem, LADC has been experimenting with different rental prices in its various properties. The rental prices in each building, along with the number of units rented last year, are provided in the file
Rentals.j (on Excel). RentalPrice = the rental price per month at that building (in dollars) UnitsRented = number of units rented in that building last year
Based on the data, estimate a demand curve for Lease-A-Dump?s properties. (Note: A demand curve gives the demand (in terms of number of units rented) as a function of the rental price. You can assume that the demand curve is linear, i.e., it has the form Demand = Beta(zero)+Beta(one)*price
What rental price should LADC charge for it to average a 90% occupancy in its properties?
Assume that LADC needs to spend the following on apartment maintenance.
$ 50 per month on each occupied apartment
$ 25 per month on each unoccupied apartment
What is LADC?s profit maximizing rental price? (For this part, consider only rental prices in multiples of $25, and round any demand estimates to the nearest integer
values). Note that you?ll need to set-up a simple Excel model to answer this question. For guidance on how to set up such a model, please see the Lifestylz example we discussed during the first week of classes (Session1A in early March) and the associated Excel file on blackboard.
rental price units rented