Home Buying in West Village>Question Details

Kirsten, Home Buyer in 10038

When looking at a condo or co-op as an investment because it has a rent stabilized tenant, is there any way to find out how old they are?

Asked by Kirsten, 10038 Tue Jan 5, 2010

Or if they are planning on living there for decades more are you basically rolling the dice? Is there no way to get a rent stabilized tenant out even if you plan to move in and live there? Can you pay them to leave? How much would it take, typically, or is there no typical? I believe there is a famous story of someone who bought a condo with an elderly woman tenant and she lived another thirty years...just curious how investors make these decisions.

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Do not under any circumstances ever buy a occupied unit of a rent stabilized tenant. I could easily introduce you to a number who did, then they find out that the 89 year old grndmother had her 24 year od grandson move in with her. If he lives there 2 years with her he has 'Succesion Rights" IE it becomes his apartment too...now you have a 24 year old in a possibly way under market rent...while you lose thousands upon thousands of dollars a year.

The only way to consider such, is if you are buying a large package of units, perhaps buying out a sponsor so you have units that will come off inside a few years to offset those you are stuck with that have a negative cash flow. THis is not a palce for a single unit investor to tread.

Remember Rent CONTROL tenants are still in place in NYC but to be rent controlled the tenant has had to be in continous occpancy since July 1971 (39 years ago) at a minimum. There were still 40,000+ rent controlled units in 2009.

You want to buy with an eye for investment? Look for up and coming areas such as Harlem new developments where they are having a hard time selling now and will cut deals, then when there is a rebound you will be in on the 'cheap'

When I began in this business nobody even called Chelsea a neighborhood, you advertised them as W 20s or North Village depending on how high up they were, West of 9th was a Ghost town. I could not even imagine living West of 8th unless it was the historic blocks and then still I would be heistant, now I live West of 10th and love it and know I will beat the market for years as the area builds up. In fact, by being one ofthe early 'Chelsea Agents' I mad my career by getting in early. (boy now I feel old)
1 vote Thank Flag Link Mon Feb 15, 2010
I'm going to be looking for something to live in but in the back of my mind I've also always wanted to be an investor. Once I found the great resource that is Trulia and found people would actually answer my questions (quickly and with great answers) I decided to ask this question I had always wondered about properties with rent stabilized tenants. I definitely wouldn't buy a place with a rent stabilized tenant hoping I could live there anytime soon. It's too much of a risk. The one I saw that prompted me to ask this question was actually cashflow negative, so I definitely don't want that!

I probably won't apply for a mortgage until May when I get a big check that's coming to me because I won't be able to show that I will have a 20% down payment on the size of unit I want. If I apply in February and get approved for X amount and then in May I have a lot more to put down can I reapply to the same bank to see if they will approve more? If first impressions are everything I want to wait till May when I can go in with a lot more.
0 votes Thank Flag Link Thu Jan 14, 2010
Kirsten, if you are thinking of buying something to live in, and would like someone to discuss your buying potential with, feel free to contact me. There are pleanty of apartments for sale in Manhattan right now, both co-ops and condos, so if you want to buy something to live in, you will have no problem. When you were asking your question the way you did, it seemed like you wanted to buy something hoping that the current tenant would pass away soon. You have some very good answers here about that topic . You may see more drop in market prices in Manhattan even though prices are starting to stabilize in the surrounding areas because the initial drop in the city lagged behind.
0 votes Thank Flag Link Thu Jan 14, 2010
Kirsten, There is a lot of info on rent stabilization on http://www.dhcr.state.ny.us/Rent/
There are a lot of factors that can affect the outcome besides age such as the tenant may have a relative move in with them to take care of them (and this person may then have a right to stay) on the other hand the tenant may be illegally subletting and/or lives most of the year in another state or country and that could be a violation of their lease..On the other hand maybe the tenant would like to be bought out so they can move someplace else..As others have mentioned a New York City attorney versed in these matters would be the one to advise you and if you would like some referrals please let me know. Good Luck!
0 votes Thank Flag Link Thu Jan 14, 2010
hi kristin please see below for 2 different way to handle decontrol best luck carol friedman nestseekers 917 287 2308


1) OCCUPIED APARTMENTS ONLY: High-Rent/High-Income ("Luxury") Decontrol

* the apartment has a legal regulated rent of two thousand dollars ($2,000) or more per month AND
* the apartment is occupied by persons whose total annual household income (that is, the federal adjusted gross income as reported on New York State income tax returns) exceeds one hundred seventy-five thousand dollars ($175,000) in each of the two preceding calendar years

OR

2) VACATED APARTMENTS ONLY: High-Rent Vacancy Decontrol

* A rent regulated apartment which becomes vacant and could be offered at a legal regulated rent of $2,000 or more per month is no longer subject to rent regulation.

Additional Details:

The Rent Regulation Reform Act of 1997, New York City Local Law 4 of 1994 and the Rent Regulation Reform Act of 1993 provide for the deregulation of certain apartments based either one of the following conditions:

1) OCCUPIED APARTMENTS ONLY: High-Rent/High-Income ("Luxury") Decontrol:
These laws provide for, among other things, deregulation of high-rent apartments occupied by high-income tenants by order of DHCR in response to the filing of an owner's petition for luxury deregulation. Pursuant to the Rent Regulation Reform Act of 1997, for deregulation petitions filed with DHCR after January 1, 1998, deregulation will occur for apartments with legal rents of $2,000 or more per month and which are occupied by households with incomes in excess of $175,000 in each of the two successive years prior to the filing of the owner's petition.

Under this method of deregulation, a rent stabilized apartment may become deregulated if both of the following conditions apply:

* the apartment has a legal regulated rent of two thousand dollars ($2,000) or more per month AND
* the apartment is occupied by persons whose total annual household income is in excess of one hundred seventy-five thousand dollars ($175,000) per annum in each of the two preceding calendar years

However, apartments are not automatically deregulated under these conditions. For an apartment to be deregulated, an owner must follow specific procedures, which are detailed in the Rent Regulation Reform Act of 1997.

In addition, please note that if a tenant lives in a rent regulated apartment whose rent rises to $2,000 or more while the tenant resides there, the owner may file a petition for deregulation even if the occupants' total household income is below $175,000. If that is the case, it is imperative that the tenant respond to all requests for information relating to the petition, for any failure to respond may result in the deregulation of the apartment, even if the income requirements are not met.

Furthermore, the owner is allowed to file a petition annually, and a response by the tenant is required each time, even if the same information was supplied in previous requests.

Also, please see the exclusions below.

2) VACATED APARTMENTS ONLY: High-Rent Vacancy Decontrol:
A rent regulated apartment which becomes vacant and could be offered at a legal regulated rent of $2,000 or more per month is no longer subject to rent regulation.

For example, if the most recent tenant paid a rent of $1,800, the owner could, under guidelines, legally raise the rent 17-20% for a vacancy lease, which would increase the new rent to $2,106-2,160. Since the legal regulated rent that could be charged is $2,000 or more, the apartment is no longer subject to rent regulation, and the owner would be free to charge whatever the market can bear. More information on how vacancy rents are calculated can be found here.

Under a City Council ordinance, owners are required to disclose prior rent histories to new occupants of deregulated apartments.

Exclusions:
Housing accommodations that become subject to rent regulation because they receive applicable tax benefits are excluded from the above two decontrol provisions. For example, even if the rent that could be charged following a vacancy is at least $2,000, the apartment remains stabilized for at least the duration of the receipt of the applicable tax benefits.

Also excluded from these decontrol provisions are tenants who have faced harassment by their building owner.

These exclusions are detailed in the text of the Rent Regulation Reform Act of 1997.

Further information on both types of decontrol can be found in DHCR Fact Sheet #36.

Updated 2/28/08
0 votes Thank Flag Link Wed Jan 6, 2010
Ask and Yee shall receive- or better yet, let your Buyers Agent ask, as you won't get the run around. Condo's are preferred for this. Good Attorney is a must!
Web Reference: http://PaulMVPteam.com
0 votes Thank Flag Link Tue Jan 5, 2010
Thank you so much to all of you for your interesting answers! And it was so fast... I am still just toying with ideas about this. I am finally in a position to actually buy something in Manhattan (I'll be much stronger in six months) and I am enjoying actually looking at places for real instead of a pipe dream. I've only had this job two years, but I am making more money than I ever have and the prospects look good for the future. Since I've decided to wait a few more months I am allowing myself to play with different ideas. I am 95% sure I will be buying a place to live in, but I still want to think about investment properties for the future.
0 votes Thank Flag Link Tue Jan 5, 2010
If you are planning to do this, unless you are paying all cash, I would recommend a condo. There was only 1 bank doing investor co-ops, and I am not 100% sure they are still doing them, and their rate is very high. Plus, you would get a loan loan-to-value because although their guideline was something like 55%, they always knock down the appraisal in their review process, so it really is less.
0 votes Thank Flag Link Tue Jan 5, 2010
This is really a touchy and sensitive issue, but you can ask. At the very least you can ask the seller's agent how long the tenant has lived there. If it is a very, very long time you can assume the tenant is elderly. The property, given the circumstances, probably is selling for well below market, and that is because of the risk you take. I agree with comments below that you should consult your attorney.
0 votes Thank Flag Link Tue Jan 5, 2010
ASK! There is no typical, and each situation is different. Consult your attorney for legal options. If tenant stops paying rent, for example...
0 votes Thank Flag Link Tue Jan 5, 2010
Your Realtor can get you information--however, for an accurate answer you need an attorney specializing in real estate--have him/her review all documentation and take it from there--protect yourself legally.

Anna
0 votes Thank Flag Link Tue Jan 5, 2010
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