Final answer:
Landlords should consider capital gains and the nonfinancial benefits of living in the property, alongside the impacts of price ceilings which may affect maintenance and quality of housing.
Step-by-step explanation:
When evaluating an investment in a new residential apartment building, a landlord should consider several factors beyond the internal rate of return (IRR). One significant factor is capital gains, which represent the potential increase in the value of the property over time. Additionally, a nonfinancial return on investment includes the utility of being able to live in the property, which can be valuable even if it doesn't directly contribute to the financial bottom line.
Another crucial factor is the presence of price ceilings, which can influence the profitability of a rental property. Price ceilings can lead to decreased incentives for landlords to maintain properties, potentially resulting in lower quality housing options. This can impact the desirability of the rental units, the potential rental income, and the long-term value of the investment. Understanding the opportunity cost and the trade-offs of providing lower-priced housing versus quality is essential in making an informed decision.