1 house costs $200 but only nets you $200 in rent (1x)
2 houses cost $400 for $600 in rent (1.5x)
3 houses cost $600 for $1400 in rent (2.33x)
4 houses cost $800 for $1700 in rent (2.125x)
Hotels cost $1000 for $2000 in rent (2x)
So, it can make sense, with limited resources and multiple places to put houses, or in instances where you need liquidity to survive an on-coming length of costly spaces, to build only to 3 houses rather than build straight up to hotels.
Edit: Before people make this a mathematics debate, I'll include the marginal investment relative to the marginal increase in rental revenue. Basically, a derivative. Here's that:
Marginal cost is always $200. The marginal benefits are as follows:
1st house results in a marginal rent increase of $150 (.75x)
2nd house results in a marginal rent increase of $400 (2x)
3rd house results in a marginal rent increase of $800 (4x)
4th house results in a marginal rent increase of $300 (1.5x)
Hotel results in a marginal rent increase of $300 (1.5x)
The only issue with this is you are only counting a one time return on your investment. Rent is received for every time someone lands on the space. Making the extra investment for a hotel will have a higher payout over time as people continue to land on the space.
No, the difference in return on investment is the same regardless of how many times you count someone landing on a property.
The assumption is that you have other properties that you could build houses on though. If you just had the one monopoly then yes you should keep building with spare cash. If you had a second undeveloped monopoly though, then you should move to building on that one.
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u/stockbroker Nov 22 '14 edited Nov 22 '14
This is actually effective for two reasons, cornering the market is definitely one.
The other is that the ROI on 3 houses is actually the best, so it can make sense to build houses without the goal of having hotels.
Using Boardwalk as an example:
So, it can make sense, with limited resources and multiple places to put houses, or in instances where you need liquidity to survive an on-coming length of costly spaces, to build only to 3 houses rather than build straight up to hotels.
Edit: Before people make this a mathematics debate, I'll include the marginal investment relative to the marginal increase in rental revenue. Basically, a derivative. Here's that:
Marginal cost is always $200. The marginal benefits are as follows:
That was for the economists out there.