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May 2, 2007
Investing in a co-op with rent-stabilized tenant?
Does anyone have any experience with this type of investment? How long can the tenant stay in this apt? I assume it can't be as simple as just not renewing their lease in order to get a vacancy.
Any info appreciated...thanks!
Comments
They can stay there forever, until both their income is over 200k (I think) & rent is over 2k.
Posted by: Anonymous at May 2, 2007 7:42 AM
I think it's either one or the other, not both - but check. Also, a relative can move in and take over the place down the road . . . I think.
Basically, the tenant is a drain on your co-op operating expenses that has to be made up with higher maintenance for the rest of the building. Not a good situation, but not necessarily terrible, depending on the numbers. If you're serious about the place, talk to a good R.E. lawyer. Don't know who pays for upkeep on the rental unit, who the owner is - sponsor or co-op itself.
Bunch of stuff to consider but in of itself, not a deal breaker, just something to be (very) diligent about.
Posted by: John at May 2, 2007 8:28 AM
Anon at 7:42 - I looked into this recently, it's both.
Posted by: Anonymous at May 2, 2007 9:15 AM
Not easy at all. You explicitly CAN'T make it your primary residence by kicking the tenant out. Tenant can stay forever, and breed new tenants.
AVOID.
Posted by: Anonymous at May 2, 2007 9:16 AM
9:16 is right. You can only get the tenant out to make it your primary residence if you own the entire building in your name -- not just one apartment in a coop building.
And, to clarify, you must prove the tenant makes over 200k AND the legal rent must be over $2000/mo to get the tenant out. Of course the tenant will likely fight and you'll have to go to court as well.
Once the apartment is VACANT and the legal rent rises to $2000/mo or more, the apartment becomes destabilized and you can do what you want with it.
The seller of this apartment would not be selling it with the stabilized tenant if he could have bought him out for a reasonable sum.
You have to have deep pockets and be able to afford holding a money losing investment for years (maybe your entire life-time) for this to pay off. Remember, their are inheritance rights to children, grandchildren, nephews and neices, regarding stabilized apartments that only require them to live in said apartment for two years before legally assuming the lease.
It's a crock of shit -- but these are the facts.
Posted by: Jake the Snake at May 2, 2007 11:09 AM
uh...let's clarify a few things here.
1) succession rights to rent-stabilized apartments do not flow to neices and nephews...or even to children if they haven't lived in the apartment for two years prior to the stabilized tenant's death. (Stabilized tenants cannot simply move out and turn their apartment over to their relatives.)
2) the entire co-op does not pay the difference between what the maintenance for the apartment is and what the tenant's rent is. you do.
3) and you are the owner of the apartment, not the sponsor or the co-op.
Posted by: Anonymous at May 2, 2007 1:08 PM
why would anyone buy an apartment with no intention of moving into it or of renovating and selling it? Especially if the rent is capped.
Posted by: Archie at May 2, 2007 9:56 PM
The 2,000 luxury decontrol level will likely be raised at any time
Posted by: Anonymous at May 3, 2007 8:59 AM
Yesh Spitzer is pushing to make the limit $2800. Son of a bitch.
Posted by: ZK at May 3, 2007 9:04 AM
who buys? someone looking for tax 'write-off'- depreciation.
Someone hoping tenant either moves or dies and looking for the windfall increase in value.
Once tenant leaves the unit, it is no longer under any control. It is just another unit in building that has to follow coop rules- meaning perhaps they wouldn't even allow you to rent it.
Posted by: Anonymous at May 3, 2007 9:19 AM
Three cheers for the rent stabilized tenant and Spitzer!
Posted by: Armstrong at May 3, 2007 10:09 AM
I would double check this - is the tenant rent controlled or rent stabilized?
Also, was this tenant there before the building went co-op?
I was under the impression that when a building goes co-op, all apartments automatically become destabilized. This was the case with a co-op I rented in some time back - the DOB confirmed this at the time.
I would check with the DOB.
Posted by: Anonymous at May 3, 2007 12:25 PM
Spitzer's move is purely political. Who the hell is he helping?
As a landlord, I'll simply spend even more money renovating my apartments (granite counters, stainless steel appliance, etc.) to get the legal rent up to $2800/mo. (1/40th cost = per month increase.)
The apartment doesn't actually have to rent for $2800/mo. Only the registered legal rent has to hit $2800/mo to qualify for deregulation.
I used to respect Spitzer, but this is such a politically motivated move, it's sickening. It doesn't help anybody and only make Spitzer look better to uneducated rent stabilized tenants who don't understand that the rent laws.
I read Spitzer gets something like $750,000 a years from his share of his families real estate holdings in NYC. This guy is filthy rich and he doesn't even have to do any work at all. He knows the increase won't effect him, so what does he care?
Posted by: Anonymous at May 3, 2007 12:31 PM
I think I caused the confusion - I thought the OP was asking about buying a unit in a building where one of the units was a rent stabilized tenant - a holdover from the offering. That's a drain that all of the units have to compensate for.
But if the OP's asking about buying the actual unit that's got the tenant in it, then either the price reflects the deep discount that the stabilized current and future incomes warrant or it's a really bad idea.
More likely the latter.
Posted by: John at May 3, 2007 12:39 PM
stabilized rental units do not become destabilized when a building goes co-op...and i don't even know how the DOB would know about a building's stabilization status, Anonymous 12:25. DOB has nothing to do with rent control or stabilization.
Posted by: Anonymous at May 3, 2007 2:38 PM
This is really interesting this should come up just now. I'm in the market to buy a coop, and love Crown Heights for its proximity to where I now live, as well as Prospect-Lefferts Gardens. Last Friday, I looked at 14 units, at amazing deals. Gorgeous 1,000 sf one-bedrooms are abundant, to my surprise, at prices from 100K to 200K all over the place. The only problem is, MOST of them are in these buildings that converted to co-op 20 or more years ago, but had very few of the tenants buy. In most of their cases, a managaement company swooped in to buy the remaining shares and are divying up and renovating and selling. Now, of course, on first glance these are gorgeous, well-located units. But the next day, I biked back to the ones I really liked, to learn that the majority of residenst still in teh building weren't owners, and the handful of coop owners do indeed bear the burden of constantly increasing maintenance fees to pay for the kind of capital improvements that will allow the maint. company to improve the non-stabilized units and main areas enough to increase the rent and sell new units high. Result seems to be no input whatsoever on your coop board, and being helpless to your high maintenance. BEWARE young, limited income buyers like myself.
Posted by: Jess at May 4, 2007 8:34 AM
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