Time Horizons Quietly Determine Market Winners

Which landlord does better, the one who pushes the rent as high as the market allows at every renewal, or the one who keeps a good tenant happy and accepts a little less? Over a single year the first landlord wins every time. Over a long stretch the answer often flips.

The first landlord's tenants tend to leave. Each time one does, there is a month or two of empty flat, an outgoing inspection, repairs and repainting before the next tenant moves in, fees on the new lease, and a fresh gamble on a stranger who may or may not pay. The second landlord has a tenant who reports a cracked tile early because he expects it to be fixed, who pays on time because the arrangement feels fair, and who stays. Fewer gaps, fewer repaint jobs, fewer risks.

Neither landlord is foolish. I think they are simply measuring on different clocks, and each clock rewards a different kind of decision. The trouble is that the short clock gives its answer first, so it looks smarter for a while. The long clock only shows its result after enough renewals have passed, and by then the gap between the two landlords is hard to close. In property, the people who seem to win early and the people still standing later are often not the same people.