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October 29, 2007
Rent-Regulated Tenants: A Boon for Buyers?
Can rent-regulated tenants make buildings more attractive to prospective buyers? They sure can, according to the cover story in the real estate section of yesterday’s Times. The article examines the pluses and minuses of buying a property that comes with rent-controlled or rent-stabilized tenants in tow. A family that purchased a four-story brick house in Carroll Gardens for $1.5 million, for example, found that one big plus was a price tag that was about $1 million less than it would have been if there weren’t two rent-controlled apartments on the top floors. The major potential minus with such properties, of course, is the hassle owners can encounter when they try to give such tenants the heave-ho. (Check out the debate over the situation at former HOTD 227 Berkeley Place.) Any landlords care to weigh in on the pros and cons of having rent-regulated renters? Have any readers taken advantage of the rent-regulation discount?
When the Price Includes Tenants [NY Times]
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Only works if you have lots of free time to deal with tenaants. My index fund doesn't require me to take out the garbage, and never takes me to court.
The guys in the article are paying something like 110k+/year (incl taxes and maintenance), receiving $15k/year, and thus spending 7.5k/month on a duplex with a job attached.
Not my idea of a deal.
Posted by: guest at October 29, 2007 10:03 AM
I loved that the article said the buyer had a "modest" budget of $2 million.
Pass some of that dust my way.
Posted by: guest at October 29, 2007 10:12 AM
Yea, I agree with 10:12! I wish I had a modest budget of 2 million.
Posted by: guest at October 29, 2007 10:37 AM
Those guys who think they got a deal is well off. most people can't afford to have old tenants there.
Posted by: armchairwarrior at October 29, 2007 10:39 AM
I think the Carroll Gardens family got bad real estate advice. They coouldn't find a decently renovated house without tenants for $2 million? I know lots of places are listed high, but I doubt they go for that amount. Their brownstone better be on a prime place block to go for that much with tenants.
Posted by: guest at October 29, 2007 10:46 AM
I was glsd to see this story esentially supportive of tenants who are less than fortunate, and of the obviously well-off buyers who were sympathetic to them. Nice to see that some people have a little compassion. And don't consider tenants to be monsters.
Anecdotally, I know of two other buyers: myself with one tenant (not controlled) and a friend who has 4 kind-of-roomers, two students and two others (they did not bother to change the status of their brownstone) and in both cases there were no problems. Neither of us are rich.
Posted by: cmu at October 29, 2007 11:20 AM
I don't understand why paying off the rent-stabilized tenants is so hard. The story on 227 Berkeley suggests that the price of the house was cut almost 700K because of one rent-stabilized person. The posting suggests that person wouldn't take 200K or even 500K to just leave!! That is ridiculous. Why would someone ever turn that down?
I can understand if you had a place where you were paying $200 on the UWS for a 2-bedroom. But this is not the case in Brooklyn. Anyone have any concrete stories where a person was offered a lot of money to leave and just wouldn't?
Posted by: cwh812 at October 29, 2007 11:24 AM
Bstoner said: "Can rent-regulated tenants make buildings more attractive to prospective buyers? They sure can..."
That's a bit misleading. Can rent-regulated tenants make a building more "affordable"? … sure (by reducing the value of a property to the seller).
But "attractive"?! Maybe I'm splitting hairs here but there is NOTHING attractive about having rent-regulated tenants.
And I agree with 10:30am: "The guys in the article are paying something like 110k+/year (incl taxes and maintenance), receiving $15k/year, and thus spending 7.5k/month on a duplex with a job attached."
And by the way, that doesn’t include the capital outlay to purchase their "duplex." For $300,000 down (20%) plus $7,500 a month (which would support around $1.25 million in mortgage) you could buy a $1.5 million house WITHOUT rent-regulated tenants … or is my math wrong?
Posted by: Mr Joist at October 29, 2007 12:03 PM
Um, concrete examples of people who won't take a buy-out? Ratnerville, folks. Goldstein's still holed up.
Posted by: linkinplace at October 29, 2007 12:05 PM
If you were a senior citizen, and you lived in your apartment most of your adult life, raised your family there, had strong ties to houses of worship, neighbors and friends, local shops and services, perhaps had the funeral of a spouse in a local funeral home, and had several generations worth of memories tied into every inch of your apartment, you might not want to move for all the money someone could wave in front of you.
Not everyone is motivated by money. Is it so hard to understand that someone, especially someone older, would not be eager to uproot themselves from a place they are comfortable in? If they are alone, it would be doublely hard, plus trying to find a new apartment in this market and time would scare anyone. While 500K might move most of us from an apartment, to someone whose entire life has been in those walls, no amount of money would be enticing.
Posted by: guest at October 29, 2007 12:12 PM
Yeah, 12:05. Fanatics like Goldstein are just one example of why I'd prefer to bypass rent-controlled or -stabilized tenants at all costs. I know Goldstein doesn't exactly fit these categories, but he is similar in that he's decided to pass up a sh**load of cash to prove a point. All you need is one nut job like DG and you're in court for the forseeable future. I'm a SMALL landlord with a job of my own to boot. I couldn't afford to spend my life in court fighting special-interest extremists.
Posted by: guest at October 29, 2007 12:13 PM
Goldstein's an exception - he's financially secure enough to live off investments. Plus, his father works for a hedge fund. Not the typical rent-stabilized tenant by any means! 200K+ would be a major incentive to most of us mere mortals.
Posted by: guest at October 29, 2007 12:15 PM
That's a touching scenario, 12:12, no doubt. Perfectly understandable. However the landlord, who owns the building and bore all of the risk of his/her investment, is well within his/her rights to ask that person to live elsewhere. I'd NEVER rent to a rent-contolled or -stabilized tenant. No one is going to tell me I can't throw them out of MY building if I don't want them there. If they don't like it, they have every right to MOVE somewhere else.
Posted by: guest at October 29, 2007 12:25 PM
12:25 - Snidely Whiplash, is that you?
Posted by: guest at October 29, 2007 12:42 PM
I own buildings in lower Manhattan and about half my tenants are rent stabilized and paying on average about $700/mo for apartments that would rent for over $2000/mo post renovation. A few rent controllers pay about $100/mo.
My experience has been that younger folks will take buyouts, but older folks, even ones with lots of money, who've lived in their crappy apartments for years and years, have developed bizarre mental barriers to moving, and logic does not prevail.
The rent laws are insane and you folks defending "old" "poor" people with nowhere else to go are defending a minority, not the majority of rent regulated tenants.
I'd love it if an income or net worth limitation was put on all rent regulated apartments, but I doubt it will ever happen since politicians are too scared to risk the rent stabilized vote.
Posted by: guest at October 29, 2007 1:09 PM
12:12 PM perfectly describes the situation with a tenant in the townhouse we own. We bought the house in July 2005 (it had been an Open House Pick in early 2005) and certainly got a discount on the purchase price (probably around $425k). Our tenant has lived there for 50 + years, had her first child born in their kitchen and was living there when she was widowed some years ago. She also lives with a younger family member who will inherit the apartment. I think the previous owner had tried to buy them out but we certainly have no intention to do so. Yes, their rent doesn't even cover their share of the winter gas bill but her apartment is her home for longer than I've been born and I wouldn't dream of trying to buy her out and I'd be incredibly surprised if she wanted to go. Perhaps when her family member inherits we might open up discussions but we also have another floor we rent out at market rent and still have a 3,200 sq ft triplex for us to live in. I could never imagine our family of four needing 5,000 sq ft of living space. Incidentally they are the easiest of tenants and we've never encountered a problem.
Posted by: guest at October 29, 2007 1:18 PM
1:18pm,
I'm glad you have the attitude you do, because otherwise you'd be driven crazy by the situation.
Just because that old lady has squatted in that apartment for 50+ years gives her no right to make you support her.
The fact that her relative can "inherit" the apartment is beyond absurd.
I feel like NYC is more communist than the old USSR. Isn't America supposed to be a democracy based on a free capitalist economy?
Posted by: guest at October 29, 2007 1:24 PM
I hardly think someone paying for their apartment every month for 50 years is "squatting", rc/rs, or not. They are abiding by the laws and rules, fair or unfair to the landlord. The system may be deeply flawed, but that's not their fault.
The amount of rent stabilized senior citizens such as the one is 1:18's home, is pretty small, all things considered. I don't think anyone other than a senior spouse should inherit a cheap apartment from another senior, but the thought of throwing any senior citizen out on the street is totally disgusting.
1:18 - you have much good karma coming your way. God bless you. 1:24 - hope you are never dependent on the good will of others for anything, because you will be in deep trouble.
Posted by: guest at October 29, 2007 1:59 PM
Right on, 1:24!
Posted by: guest at October 29, 2007 2:26 PM
1:59,
That old lady didn't have to pay market rent here entire life.
In other words, her landlord supported her his entire life.
Where's the justice in that?
It's not about rich verses poor. It's about right verses wrong and fair verses unfair.
Posted by: guest at October 29, 2007 2:53 PM
1:18 is certainly doing the right thing and should be commended, BUT he/she writes about a $425K discount on the purchase price, so they're not "subsidising" the "old lady" entirely out of their own pockets.
OTOH, people like l:24 and 2:53 would. I suspect, be happy to purchase property at a similarly discounted rate (i.e. accept their functional equivilant of a subsidy) and still complain about the "unfairness" of it all. It's greedy people like them who made rent controls necessary in the first place.
Posted by: Bob Marvin at October 29, 2007 3:41 PM
oooooh, lookie' here:
an argument on the merits of rent control ... soooo novel!
fire it up!
Posted by: guest at October 29, 2007 3:42 PM
First law of Rent Regulated Apartments:
The chances of a Rent Regulated tenant leaving their abode are inversely proportional to the urgency with which the owner needs the tenant to vacate.
Corollary: the tenant's greed grows in direct proportion to the amount offered to make him or her leave the premises.
Addendum: the involvement of tenant's rights lawyers complicates the situation exponentially by a power of 10.
Posted by: guest at October 29, 2007 3:56 PM
1:18 here again. The annual difference between my market rate rental and my R/C one is $24,640. If I had borrowed the additional $425,000 then the interest at 5.50% (my mortgage interest) would have been an additional $23,375 per year so basically it's a wash. Yes their annual rent doesn't cover the operational outgoings but in all honesty it's a pretty small subsidy and yes good karma.
Personally I love living in a mixed community - I grew up very poor and it's important to me that my kids don't get blinded by their affluence.
Posted by: guest at October 29, 2007 4:00 PM
1:24--Anonymous rants that complain about the poor and working poor are sophomoric at best.
Posted by: gwbrubaker at October 29, 2007 4:59 PM
The height of curmudgeon-ness is to put down a person who's doing good, is happy doing so, and has even an economic basis to justify it. You're wonderful, 1:18.
1:24, 2:53 et al, are you really so down on people and life? Sad.
Posted by: cmu at October 29, 2007 5:07 PM
"1:24, 2:53 et al, are you really so down on people and life? Sad."
I'm UP on people and life. Nevertheless, I don't believe in rent control, or in the idea of someone "inheriting" an apartment because some family member rentd the same place for 50 years. Believing in people/life and NOT believing in rent control are not exculsively intertwined.
Posted by: guest at October 29, 2007 5:45 PM
You have no idea what you are talking about if you think they could have found a better deal in Carroll Gardens. The area is on fire as far as sales and prices and will only continue to go up up up over the next 5 years. Safe , beautiful , and convience are the reasons. Wake up
Posted by: guest at October 29, 2007 6:21 PM
no, YOU wake up sucka' broker mofo.
overhyped CG ain't goign nowhere but down, down, down.
Posted by: guest at October 29, 2007 7:15 PM
I wish I had a rent controled apartment.
Imagine waking up one day and never having to worry about paying rent again!
Why can't we all have rent controled apartments?
In a perfect world with folks like 1:18pm running things, nobody would be poor, nobody would be homeless, and everybody could sit outside on the stoop and play dominos all day long!!!
Posted by: guest at October 29, 2007 8:31 PM
Rent controled tenants paid ZERO for their great deals.
They did ABSOLUTELY NOTHING to deserve basically free rent.
The goverment doesn't subsidize them, private tax paying individuals do.
There's no rational defense of the rent control laws. Whatever market price a buyer pays for a property does not justify other individuals, who, by the way never paid anything for the building, living nearly rent free for the rest of their lives.
It's unconstitutional and a depravity of human rights.
Posted by: guest at October 29, 2007 8:40 PM
8:31: Maybe because there are not enough people like 1:18 who believe in doing good, perhaps at an economic loss. Maybe it's because you (and others who rant about rent control) are so caught up with property rights and so caught up with your own needs that the possibility that someone else may be needier than yourself has never occurred to you.
And, 5:45 I don't know which prior post you made (the joys of being anonymous) but my comment was not about being against rent control, but criticizing someone doing good for their fellow (wo)man.
Posted by: cmu at October 29, 2007 8:52 PM
8:52pm,
Private property rights and charity are two completely different things.
There's nothing wrong with voluntarily giving somebody a rent break, but being forced by local laws to charge $200/mo for an apartment that costs a landlord $400/mo in utilities, maintenance, and property taxes is totally unfair to a private landlord.
The NYC government never compensated landlords for rent control when it was put into effect during WWII as an EMERGENCY MEASURE so wives wouldn't be evicted while there's husbands were away fighting in the war.
The only reason the laws are still in effect is because RENT CONTROL TENANTS vote and don't want to lose the great deals.
POVERTY and RENT CONTROL have NOTHING to do with each other.
Posted by: guest at October 29, 2007 9:07 PM
9:07 is exactly completely right. It's all about fear of losing votes. It's the only reason rent control exists.
The only person I know who has a rent control apartment makes six figures a year. Hardly in poverty!
A tenant's desire to hang onto the good deal, so they can spend the extra money on designer clothes, is what I personally call "greed". It's not greedy for a homeowner to simply want to cover the cost of the apartment maintenance and its heating bills. To want your own investment, the risk YOU took on, to pay off to its full potential benefit, that's not greed. That's called normal. The most commie thing about it all is the fact a family member can inherit the apartment. So utterly absurd.
Posted by: guest at October 30, 2007 12:09 AM
So how'd we go from little old penniless widows to lazy ass six figured bums buying designer clothes? Anecdotal tales of the latter do not justify the gleeful attempt from many on this thread to toss the former out to the curb.
I've never seen so many people eager to wax righteously indignant about a topic, and then believe as gospel, the worst of the worst, as if everyone is living scott free.
I think the rent control laws need to be amended big time to get rid of the people who abuse it. But I don't want to see more stories about 88 year old grandmothers and grandfathers being tossed out into the street because some yuppie decides to move on up. Where is your humanity?
Seems to me the louded cries of "that isn't fair" come not from landlords who aren't breaking even, which is understandable, but more from people who are just envious that they don't have a chance to get the same deal.
Posted by: guest at October 30, 2007 12:31 AM
12:31,
I don't think anyone condones putting elderly grandmothers on the street. What I do think we can all agree on though, is how ABSURD it is that a "younger family member" will inherit the apartment.
The owners should be able to realize market rate rents from this apartment at some time in the future as opposed to SUBSIDIZING the younger family member for life.
Sandy
Posted by: guest at October 30, 2007 2:27 AM
Landlord here,
I've said it before, but my problem is with the people who cheat the system. I'd guess at least 50% of my rent regulated tenants use their apartments on a part time basis. It's nearly impossible for me to evict them since they get their mail and are registered to vote at their regulated apartments. I've hired private investigators in the past who generally charge about $3000 for a basic investigative report. By the time legal fees are including, we're talking big bucks to try and evict somebody who's paying $600/mo rent to maintain his regulated apartment but is really living somewhere else.
All the tenant has to do is move back into the apartment and the case is closed. Thousands of dollars are out the window for the landlord and a month later, the guys is MIA again.
The system is joke. The problem is not the 20% of old ladies scooting around with their grocery bags who have no where else to go. The big problem for landlords are all the cheats who are nearly impossible to evict.
Posted by: guest at October 30, 2007 8:47 AM
I got a better one for you. This person I know, had not lived in this rent controlled aparment for over 20 years. During that time moved to another state, lived with friends, lived on their own, various other places and arrangements, etc. Parent had lived there for 40 years and sadly got a terminal illness ultimately residing in hospice never to be back home again. Person quickly moves back in, tells landlord, mail was delivered there, clothes were in the closet, where and whom they slept with is nobody's business. Awaiting appropriate offer from lanlord to leave.
I would be morally wrong to throw out a elderly person on a fixed income who has lived an entire life in one place never mind illegal. Problem is, the laws do not distinguish between the two and there are many people abusing the system simply because they can.
Posted by: guest at October 30, 2007 10:14 AM
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