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March 9, 2008
Condos to Rentals: What Does It Mean?
I recently purchased a condo (new construction) near the Prospect Park area and I am likely to close within the month. However, I recently learned from my sales agent that 40% of the units in this development will be available as rentals. I suspect that this is probably due the the weak economic climate and such, and thus the developer probably could not unload the rest of the units. So is this a bad thing to have a condo development go 40% rental?
Comments
It might have to do with the sponsor controlling the building
.Double check
I hope I am wrong on this one.
Keep your eyes and ears open.
Posted by: Ysabelle at March 9, 2008 11:08 PM
If ya don't like renters, ya buy in a co-op. Not only will the sponsor be renting all those apts (and controlling the board meanwhile) in any condo a percentage are bought by investors and others who choose to rent their units for whatever reason. Yup, you should be around 50% for a while.
Posted by: denton at March 10, 2008 6:48 AM
yeah of course it is bad. Tenants don't look after their units as well, are less inclined to follow all the rules that make living in close proximity to many people bearable. And finally, come sale time, a buyer has to consider if they're willing to buy into such a building vs one that is fully owner occupied.
Even with co-ops the owner-occupier ratio is stated proudly because of the stigma associated with rentals.
Sorry, but there it is. If you can get out of your contract I would. You will find the same unit cheaper if not now then very shortly, but in a building that has pride of ownership.
Posted by: guest at March 10, 2008 6:51 AM
Lets hope the rents they are able to get will cover the developer's/sponsor's debt. Foreclosure? You might have to wait for another cycle before they get sold, 15 years?
Posted by: guest at March 10, 2008 8:47 AM
You are going to be in for problems no doubt. I wouldnt think 15 years, but it sounds like the developer is having problems and, like most stubborn and greedy developers,they cant bear the thought of having to drastically reduce prices. So they will rent the units out, with you being the one who ultimately suffers.
I would try to gry out of the contract if possible. Otherwise, you will definately be stuck in a somewhat crappy situation. You probably will not be able to sell for a long time either because you will be competing with the sponsor and not many people will put a premium on living in a rental building.
Sorry.
Posted by: guest at March 10, 2008 9:49 AM
Here are advantages to condo buying.
You can buy the unit and sell it to anyone you wish for absolutely any reason with no interference from the board
With foreign currency worth more than USD it is easy to sell or rent with no restriction.
You put down 10% to go to contract and finance any which way you like.
Posted by: Ysabelle at March 10, 2008 12:21 PM
It means you are screwed buddy. You might as well rent out your unit too, and find someplace else to live.
Posted by: guest at March 10, 2008 12:58 PM
I agree with the down sides outlined by others. However, possible silver linings:
Read the by-laws in the offering plan. Hopefully, you'll find the common stipulation that only RESIDENT OWNERS can have a seat on the board. This way, those of you who own can at least manage the property in a way that is most beneficial to your group.
Also, if it becomes a popular rental building, it could be easier for you to rent, too, and buy somewhere else, as 12:58 suggests.
Good luck~
Posted by: curiositykilledthecat at March 10, 2008 2:30 PM
In this case I don't think the owners will have a seat on the Board. The Sponsor usually has control of the Board until the entire condo is over 90-95% sold or over a given period of time (5-7 years).
If you want to get out I would suggest you talk to your lawyer in confidence to see if there are some legal way out of your purchase contract.
The last thing you can try is your punch list items and walk-thru. Here you might bring in an engineer with you.
Go thru the apartment like if your life depended on it. List every little thing you find wrong. i.e. A draft coming from the window. One of the light switch is lower than the other. Bring an egg and place it on the floor to see if it is leveled.
Measure the square footage of tha apartment to make sure that it's close to what was advertised.
Outside, in the common areas make sure the developer/sponsor followed everything what was mentioned in the offering plan. i.e. The Boiler is a 150 Gallon tank. The HVAC in the Lobby is working, etc.
If anything you find contrary from the Offering Plan and/or the place is not finished to par use that as your out.
Posted by: guest at March 10, 2008 3:47 PM
Having lived in NYC over 30 years, and rented in various neighborhoods most of that time, I've never expected to have control over who lives near me, and for the most part I've had good, or at least unobtrusive neighbors. Of course there are folks I wouldn't want next door, but this is after all New York City, and not a restricted suburban subdivision. It's not all that hard, for anyone with reasonable common sense and knowledge of the city, to spot the difference between a building or block where residents care about their neighbors and surroundings and one where they don't. And it's not all about income either--I've seen really ugly stuff go on between neighbors on prime blocks in Cobble Hill and exclusive upper-west-side co-ops, and experienced strong community and decency between neighbors in parts of the city New York Magazine and the NY Times real estate section don't much care to talk about. Living in the city means learning how to live with people whenever possible and take care of yourself when necessary. If you can't do that, no co-op board's going to do it for you.
Posted by: guest at March 10, 2008 3:58 PM
If you and your fellow owners have more than 50% of the voting rights, you control the building. Condos have boards of directors, too. If you buy, join the board and work with the others to make the rules you feel are necessary. You'll have many tools at your disposal. Just watch out that the sponsor or developer doesn't control the building.
Also, my experience is that new construction has its issues due to settling of the building, poor workmanship, etc. Be very detailed on your punch list. Be strict on getting work completed promptly. And, don't hesitate to bring in a lawyer to resolve disputes with the developer.
Good luck.
Posted by: guest at March 10, 2008 4:16 PM
Read the offering plan with the condo by-laws and go through it to understand what it means if the developer or sponsor owns those units - who controls the board, who makes the laws, how many votes the sponsor would have.
I'd also try the http://cooperator.com/ for resources on better people to talk to than a Brownstoner respondents. While some people care it doesn't sound like most, if any, have gone through this situation so the advice you get is questionable.
I am in a condo but it is owner occupied. And if there were rentals the owner would be doing the renting, not the sponsor so I don't have specific advice on your situation.
Good luck.
Posted by: guest at March 10, 2008 4:33 PM
All of the above is true, from one perspective. But it's worth asking: how much do you like your apartment? Are you thrilled with the location, price point, lay-out, etc.? Because although it is true that the sponsor will probably (again, read the by-laws) control the board, that renters will not show as much care for the building, that any re-sale may be complicated by a high number of non-owner-occupied units--these factors can range from an inconvience to a tremendous headache. The automatic answers that you should try to break your contract are a bit glib. And bear in mind that the sponsor (or a syndicator that may take blocks of rentals off the hands of the sponsor) will want to cash out those units. So, over time, the building will probably trend towards higher and higher owner occupancy. Not to mention the fact that getting out of your contract is going to be a headache of a different sort. If you like your apartment, you might want to do a little soul searching. Good luck.
Posted by: guest at March 10, 2008 5:11 PM
if it's the building i'm thinking of (http://newyork.craigslist.org/brk/abo/601395247.html), i wouldn't worry. what riff-raff is going to spend $5500 per month and trash the joint?
Posted by: guest at March 10, 2008 5:14 PM
'With foreign currency worth more than USD it is easy to sell or rent with no restriction.'
what the fuck does that mean? ill just start charging euro's shall I? i mean they are worth 50% more but they dont know that?! explain this bubble talk please?
Posted by: guest at March 10, 2008 7:39 PM
Don't youu feel stupid!!!!! You should have waited.
Posted by: guest at March 10, 2008 9:42 PM
Your deposit is significantly less than your depreciation will be. You're in contract to buy at the height of the biggest RE boom you will ever see in your lifetime. Some lessons cost $. Walk. You will thank me later.
Posted by: guest at March 11, 2008 10:05 AM
Leave it to the bloggers to over react. It's not the end of the world. You can still live there and sell when you want to. It is doubtful it will turn into an SRO.
Posted by: guest at March 11, 2008 12:50 PM
I agree with 12:50 that everyone is overreacting. If you love the place, then you will still love it even if your next door neighbor is a renter.
Most likely the renters will be paying an insane amount of money equal to or greater than your monthly mortgage payments. Therefore they are not likely to trash the place.
If you're planning on living there long-term it's not a bad thing.
Save the Polar Bears!
Posted by: guest at March 11, 2008 1:31 PM
Geez, 1:31. How come 12:50 gets all the credit for talking sense? -- 5:11
P.S.: My opinion is based on first hand experience by a family member.
Posted by: guest at March 11, 2008 1:37 PM
Geesh, this forum is tough on renters. I own now, but I rented for a long time, I'm sure the OP rented at some point in his/her life too. Were you all really such terrible people when you were renting that you wouldn't want to live next door to yourselves? Or is everyone assuming that somehow you were all somehow exceptional renters and generally better people than the masses in your same income bracket who are looking for housing similar to yours?
Posted by: guest at March 12, 2008 1:32 PM
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