Buying city property exploit

[megapolis]

Hi David,

I know it has been discussed earlier but the problem still remains. First of all I still think that Apartments/Commercial buildings market price is incorrect and the premium over the market price that I have to pay when buying the buildings is a temporary solution.
And by the way it can be bypassed because I can still buy properties without premium if I will list them as for sale on properties page and then buy on list of firms page which I consider an exploit.

[David]

First of all I still think that Apartments/Commercial buildings market price is incorrect

Could you please elaborate this?

[megapolis]

Sure. Here is the same property bought from different interfaces.
(The fact that I currently have $0 does not matter, it's just my current state of the game)

caplab bug v001.png (1.04 MiB) Viewed 1270 times

caplab bug v002.png (875.43 KiB) Viewed 1270 times

[megapolis]

First of all I still think that Apartments/Commercial buildings market price is incorrect

Could you please elaborate this?

Ah, sorry, did not understand what I have to explain.

Well... I know a bit about apartments. First of all building them is quite a lucrative business with margins in range of 700-1000%. Unfortunately here, in Russia, you cannot enter this business because you need to have access to large amount of long money and some corruption, but it's not the case.
So, for example you need 6m for a piece of land and 6m to build the building itself. That is your initial investment. (you will also have to commit to some infrastructure but let's imagine that it is already included). Total 12m. Once the building is build, developers use to sell these apartments at 700% profit. Of course some marketing and sales are included but after that they still have around 700%. 12x700%=84m. Why do people or small investors buy them? Because they don't have access to large amounts of long money. They either live there or rent them out at around 5% per year. That is a pretty good ROI on business that does not require much commitment from you. 5%x84m=4.2m/year or 350k/month.
Now in the game we eliminated middlemen and rent out our newly built property at 350k/month since it is a normal market price. Since our margin is in our pocket, we don't even care about property occupancy rate. Anything above 15% is quite fine. And we will never care to sell this property at less than 84m.


So on screenshots above we have a property that brings in 210k of revenue (Yes, revenue, not even profit). That is 2520k/year. With 5% return rate that is 50.4m. In reality with lots of consumers that will definitely work this way.

In game we have quite high maintenance costs. (in this example it is around 30% which is really high). I don't question this because it is a part of game balance. So I'd better count from profit of 100% occupied building. Fortunately in this case this building is 100% occupied.
We have 120k of profit. That is 28.8m at 5% annual ROI. In current economy situation with 8.5% loan interest rate and 4.06% inflation for me it is a no-brainer. 0.44% of totally free money. Even with 100% loaned money. Yes, it has some risks but by the time when economy will change, I will already repay large part of my loan.
On the other side I can always build another building at 15m but it will disrupt real estate industry. if I remember correctly, you're from Hong Kong, you definitely should know it much much better

Ok. Let's imagine that this building has 50% occupancy rate. That is 105k revenue with 70k maintenance. Will I buy it for 28.8m? Well... Let's count. 35x12=420k/year. That is around 1.46% annual ROI. Adding 4.06% inflation it will be 5.52% annual ROI adjusted for inflation. Well, I won't buy it on loaned money but I will definitely buy it on 80% own money and 20% loaned. Even at 50% loaned money I will break even. And, by the way, I will still have an opportunity for improvement if economy will become better or I will play a bit with rent price and attract more people.

When will I never buy this building @28.8m? Let's count. We have 4.06% inflation. I have tons of money that I don't know how to spend. I will have profit of 0.56% per year if I will have 3.5% annual loss. What should be occupancy rate here? Easy. Hmm... 3.5% annual loss is 84k per month. I mean that with current rate of inflation I will buy this property @28.8m even when there are no occupants at all!!! Yes, there is a downside because I play against AI and AI will never buy this property back at 28.8m but it does not matter that much.

Oh, I have another example. I mentioned the price of 50.4m. Let's find under what circumstances I will buy this property @50.4m. 120x12=1.44m. 2.85% annual ROI or 6.91% annual ROI adjusted for inflation if bought for own money (I hope that you have no doubts that I will invest every single penny so that it won't rot on my bank account). Even at 50% loaned money I will still have some profit, but I am not sure. Even at 50% occupancy I will buy it under certain circumstances. Anyway I always have 100 other industries and can invest there if in doubt.

I hope it will clarify my point that buying any property for a current "market price" is a no-brainer.
@17m? definitely buy. @28.8m? definitely buy. @50.4m? buy under certain circumstances but, yes, I will buy it.

In conclusion: buying property for a market price should never be a no-brainer. I should have a riddle with several variables involved. I should either buy now or wait until I will pay all my loans back and buy then or go and build a new apartment with Blackjack and hookers or even invest in another industry. I should be in doubt if I will have profit here or not. Now I just buy all the property in all the cities without any brain involved.

P.S. By the way, I finally love my current run because I am caught in a situation where I have 2b of profit, lots of debt, awful loan interest rate and a desire to buy back 100% of my shares in foreseeable future and not let my rivals to buy each other before I will be able to take care of them. And all of this just because of one mistake. So I even built this building on government money instead of my own and will not buy it in next 3-5 years.

[megapolis]

Oh, I see an exploit here.
Provided that I have 10-20 opportunities to build such building (I will definitely have them), I will be able to rapidly expand my empire.
Build first apartment. Next month it's market price will increase by 500%. Loan money, build 2 apartments, next month they also increase in price by 500%. Continue until you run out of opportunities or even further. By that moment average occupancy rate in all the cities will be around 50% and you will own half of all the real estate in the world. (it has some downsides like large debt that you will be struggling to service but be sure that experienced players can handle this)


Possible solution:
Bank should take into account 20% of newly built building market price increasing by 1% for every month you own the building. So in 80 months all 100% if your property will be eligible as a mortgage for loan.
This should not be applied to property bought from government or rival companies. These should count as they do now.

[David]

Next month it's market price will increase by 500%.

How did you manage to get its market price increased by 500% in just a single month?

[megapolis]

Next month it's market price will increase by 500%.

How did you manage to get its market price increased by 500% in just a single month?

David, this example applies only to the model that I explained. If construction price will be quite different from market price. It is not applied to current game.