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January 9, 2009
Raising Rent, Followup
One the of consequences of having below market rate tenants is that they seem to go out of their way to avoid much conversation with me. They stoop-talk for hours on end with my wife(i guess she's not the landlord in their eyes), but keep it short and trite with me.
Anyway, I just found out from my neighbor, that one of my tenants is pregnant(his wife and my tenant take the Dekalb bus together in the am). So here i am contemplating raising the rent on a couple that's having a baby this summer.
As a parent of 2, i understand how drastically one's budget priorities change once you become a parent. There will never be a good time to increase the rent on a young family. They'll always need to buy more diapers, more formula, more food etc. I love my kids to death, but they're a money pit.
At the end of the day, thats probably the biggest reason why i want to raise the rent. I'm leaving $1800 on the table every month. That's $21.6K a year that could toward the enrichment of my children.
Back to the question at hand. Popular opinion seemed to be that a increase greater than $150 was unreasonable, with 4% being generally accepted by most. Does the fact that my tenant will be having a child this summer change any of this?
Comments
I am thinking about leasing all of my own apartments out at market rate and just living with you as a renter. It's too good a deal to pass up. Could you let me know if there is a vacancy?
Seriously. The pregnancy doesn't change the situation. Give written notice in Feb or so that you will be raising the rent a slight percentage in April. If they balk and move out then you can rent it out (to me) in May, when the rental market is better.
Posted by: corolla at January 8, 2009 12:52 PM
If $36-45 per month is going to hurt these people then they have far bigger problems.
Posted by: daveinbedstuy at January 8, 2009 12:52 PM
You have to remember that you're running a kind of a small business. Times are hard for everybody. Perhaps your year end bonus wasn't as high as it has been in the last couple of years--does that mean you should raise the rent to cover it? No. Nor does it mean you should NOT raise the rent simply because your tenants are expecting a baby. (Would the guy running the shoe store down the block charge them less for a pair of shoes because their expenses are increasing this summer? No.) I admit you're in a bit of a pickle, but in general you should follow the market. As a landlord, I raise the rent a little bit every year (3%) but elected not to raise it this year because the market doesn't seem to warrant it. In your case, I would raise rents minimally because you haven't done so in the past. If your tenants want to pay less, they can (and should) go see what else is available in their price range.
Posted by: newsloper06 at January 8, 2009 12:53 PM
As had been previously noted, you're running a business. Treat it as such.
Posted by: buttermilk channel at January 8, 2009 12:59 PM
It doesn't change anything per se... BUT it does underscore the fact that you shouldn't be looking at "market rate" as a reference. If you were well above market rate, then maybe... but you're below. You should be looking at your finances, the finances of your property etc.
If you are looking to raise the rent just to make lots of money, then that's "understandable" but you may want to reflect a bit. If there are real expenses that need to be taken care of, then that's clearly a reason.
Also, are these good tenants? Do you want to lose them? If I was paying $1200, and you raised my rent to "market rate," I would leave. I would have NO choice. And I bought an HD TV last year... I saved for it. It's a one-time purchase. I wouldn't have bought it if I was paying $1800 a month. Actually, I wouldn't have been eating very much either.
I'm not suggesting a charity... but perhaps, just perhaps, if there were more landlords that charged rents that were in-line with reality (i.e., not the "market"), then maybe adults could stop having roommates before 35, or actually one of the parents could stay home with their newborn baby for more than 3 weeks. A family making $50k would be fairly comfortable most places, in Brooklyn it's a total joke. If they pay "market rate" for their apartment (let's say $2500 for a 2-bed apt), they only have $5,000 a year ($416/month) left to feed their family, pay utilities, medical bills, transportation, etc etc etc.
I'm suggesting something here... it's called a social compact. And the property owners, sellers and buyers have simply given up on it in this city. It's all about self-interest and maximizing profits. That's not a social compact, that's a sickness.
Posted by: tybur6 at January 8, 2009 1:00 PM
No, I don't think the baby should make a difference. Sounds like your tenants have pretty decent jobs. In my neighborhood, I worry about the incoming college graduates (who themselves don't make much) pushing out the immigrant grocery checkers as rents rise from $1200 to $1600 for a five or six-room apt.
Posted by: mopar at January 8, 2009 1:00 PM
Don't think of it as increasing the rent on a pregnant couple - instead think of it as lowering the subsidy you have been providing. Do you have your kid's college funds fully paid up? If not, are you really willing to put their educational future at risk? Would any of these tenants step up and give you money if you fell on hard times, had another kid, etc? If the answer is anything other than "certainly", it seems you are making unwise financial decisions in this regard.
Posted by: arches at January 8, 2009 1:05 PM
I can`t believe this. Get hold of yourself, Man! You`ve got kids. Give four, five months tops notice that the rent is going to one hundred bucks below market rate (one has to stay competitive) take it or leave it. That money you`ve been leaving on the table should be going to your kids education fund. Have some balls and pick up the phone.
Posted by: sally at January 8, 2009 1:13 PM
You should charge the market rent for the unit, regardless of your tenants are having a baby or not. Business is business. I would suggest giving them a 90 day notice that the rent increase would take affect.
Posted by: Gowanus_Bklyn at January 8, 2009 1:18 PM
Sally - great comment!
Posted by: mg1 at January 8, 2009 1:20 PM
No, Sally, silly comment.) Obviously, OP is 1) not seriously hurting and 2) has a social conscience, more than I can say for most landlords. As such, the advice given is good, and it's still up to him to decide.
OP, you cannot look at it as money lost, or every little thing will seem that way...like thinking you lost money buying a TV when the price drops in a month. Keeping good tenants is worth a lot too.
Funny those who say "it's a business" don't say that when it comes to harsh rules and draconian policies you want to impose on tenants because "it's your house, not theirs".
Posted by: cmu at January 8, 2009 1:38 PM
Though market rate is now playing a role in your thinking, it is not REQUIRED to be a factor in your current calculations. For example, you didn't buy your house at today's market rates—how much is that factoring into the equation? The wildly inflated real estate market and its profiteers have contributed greatly to this country's current crisis. Your calculations and decisions can be based entirely on issues that have nothing to do with market rate. You HAVE a contract with your tenants—that's the month-to-month lease. You also have an IMPLIED contract, which you set yourself by not raising rents for the period of time you chose yourself. You can't blame that one on your tenants, or resent their position created by your own choices.
Do you have tenants you like and trust? Are you covering your costs? For many people, that is more than enough, and there's no chump-factor—perceived or actual—in it being that way. If profit is an important factor for you, how much profit is enough profit? One way or another, you've covered your costs (and I'll assume made a profit) with your rents exactly as they are. But you're not happy WITH YOURSELF for your own decisions. Don't let that overflow into judgments about your tenants' choices and lifestyles. Separate your personal influences from your business decisions. The links to the current RSA guidelines I posted yesterday, in cases where the most recent vacancy lease was executed six years or more prior to the date of the renewal lease, provide for a one-year renewal lease increase of 4.5% or $45, whichever is greater; and a two-year renewal lease increase of 8.5% or $85, whichever is greater. Do the right thing by yourself AND your tenant and give them leases. Take some time to figure out what's driving YOU right now, and what you really want from the situation, both long-term and short-term. From what you've written, a current across-the-board increase of $85 would strike me as reasonable, fair and friendly. That's what I recommend, with the future open to your own amendments.
Posted by: vinca at January 8, 2009 1:44 PM
I like this vinca person.... mostly because she/he agrees with me! :-)
Posted by: tybur6 at January 8, 2009 2:10 PM
You need to get over your fear of acting like the landlord you are. If you have good tenants and want to keep them, tell them their rents are under market (they know this already) that you are raising their rent 4-5% in March, and that you plan to increase their rent each year by approximately that amount. This is what most people expect from their landlord-- even people in rent controlled apartments see their rents increase from year to year.
Posted by: fawn at January 8, 2009 2:13 PM
You are letting a simple business transaction get really complicated.
Pretend that instead of being a landlord, you are selling a generic service to a generic client. You agreed to a fee of $X when you would prefer to make $Y, but your options are limited because you are the one who agreed to $X in the first place. In this pretend scenario, you have to wait for an opportunity to raise the fee, and you have to balance your need to approach $Y with your need to be professional about it. I would define "professional behavior" as behavior that accepts responsibility for your role, deploys a certain amount of empathy for your how your client will perceive the rate hike, and works toward a mutually acceptable solution.
Now, in your real scenario, you have a legitimate opportunity to raise the rent because the lease is up. Raise the rent already! Just do it in a professional way--in a way tha takes responsibility for the fact that you could have asked years ago, and accepts the fact that a hike of more than $100 is a lot for any budget to accommodate!
Whatever you do, don't trick yourself into thinking that worrying about their family situation and not increasing the rent in the past gives you license to be unprofessional now. It's still just a business relationship, in which the actual resolution matters way more than your current fretting or past "too niceness."
Just be fair and act with integrity and you'll have nothing to worry about!
Posted by: vanburenproud at January 8, 2009 3:05 PM
Hey....do you have any apartments available. Everytime you will ask for higher rent ill give you a sob story and my rent will remain the same!
Im not sure this person is legit. Definitly does not sound like any landlord I know.
"its not personal, its business"
repeat that over and over again!!!!
Posted by: troll at January 8, 2009 3:48 PM
Tybur6 and Vinca, the market rate is not a fabrication designed to screw people. It is the point where if these tenants won't take it, other people would.
All other "market rate" costs have gone way up in this time period, from paint to handymen to heating. A small adjustment, which btw still leaves the apartment way below market, is definitely fair for everyone.
Posted by: corolla at January 8, 2009 3:55 PM
Here's my advice as both a renter and landlord: Given how far below market rate you are, you can legitimately raise the rent between $100 - $200 and still be $300 - $400 below market. (Do I have that correct?) If you give a few months notice, you should feel no guilt whatsoever raising it.
We lived for years in a very below market floor through apartment. The landlord never raised the rent, and in return, we took care of all the snow shoveling, garbage, minor repairs and never bothered the landlord. After many years, the landlord suddenly told us the rent would be raised $400, which was probably a 30 - 40% increase. Although we were bummed out, the new rent was still a few hundred dollars below market. So how could we complain? More than a year later, the higher rent encouraged us to finally buy a place of our own (new rent on our old apartment was $300 more than we paid!). I have friends who were in similar situations where the landlord finally made a huge rent increase and who were resentful and I thought that was unreasonable. Yes, it's too bad the landlord will no longer subsidize you, but that doesn't mean you shouldn't be grateful for all the years your rent was subsidized by a nice landlord.
Best advice we got when we became landlords is to make a small rent increase every year, even if you love your tenants, for exactly this reason. You can still give good tenants a break on the rent, but you don't need to give them a $500-$800/month break.
Posted by: CGfan at January 8, 2009 3:55 PM
I'm a pretty empathetic person, but this is ridiculous.
Given your sensitivity, you will do this right - raise the rent 3-4% points and move on. This does not warrant 10,000 words of commentary.
I would also suggest maybe some therapy or assertiveness training - Agonizing over other people's interests without addressing your own is not healthy.
Posted by: squaredrive at January 8, 2009 5:01 PM
i think it's a little silly to claim you're subsidizing a tenant if the rent is below market value, but you haven't asked for more rent(speaking generically, not saying OP says this). They're paying the rent as charged and while the landlord is shortchanging himself, its not the tenant's fault. Most tenants don't make big bucks and assume (often wrongly) that the landlord is rolling in dough because they own the house. saying the landlord is subsidizing the tenant implies the tenant is somehow at fault.
That said, the tenants made the decision to have a child. why is that your responsibility? If they can't afford to have a child, they wouldn't. You're not being callous to raise the rent, you have your own family to think about first and no reasonable human being can expect you to put their family ahead of your own. And if they do- sorry to say, but tough on them.
If there is leeway between what you need to get and what you actually want to get (market value), maybe that would give you and your tenant the means to get a rent increase without attendant angst. they would still be getting a deal, and you would be getting a rent fairer to you. It might be less than market value for now, but as a tenant I can say from experience a big rent increase can be devastating and painful fo both parties.
Posted by: bxgrl at January 8, 2009 8:07 PM
I remember when I was a bartender, and certain people left me outrageously big tips. I never thought "Gee, what a great, generous, person!" I thought "What an insecure, needing-to-be-liked idiot..." (Unless they were wealthy and it didn't matter and they were spreading the wealth.) Chances are, your tenants, whom you admit don't talk much to you, just think you're an idiot.
Posted by: annieny at January 8, 2009 10:05 PM
Following up former comments, you should have a lease, have a yearly sit down, consider your costs, consider the market rate, whether they are good tenants, how you would manage your own cash flow if you lost a month. And stop worrying so much about it. There are other rent options for everyone; Brooklyn is more expensive than a lot of places and many parents decide to opt to get more bang for their real estate buck elsewhere when they start increasing their family. You don't want to be an SOB about it but you are running a business. They are going to expect you to provide heat, to make sure the heating, plumbing work, fix things which break, take care of the building, pay for utilities in the building, water etc. It's a business contract. People need to pay a fair rent for the service you provide. Examine your thinking over this. No reason to feel either guilty, angry or victimized. Good luck.
Posted by: donatella at January 8, 2009 10:38 PM
Following up former comments, you should have a lease, have a yearly sit down, consider your costs, consider the market rate, whether they are good tenants, how you would manage your own cash flow if you lost a month. And stop worrying so much about it. There are other rent options for everyone; Brooklyn is more expensive than a lot of places and many parents decide to opt to get more bang for their real estate buck elsewhere when they start increasing their family. You don't want to be an SOB about it but you are running a business. They are going to expect you to provide heat, to make sure the heating, plumbing work, fix things which break, take care of the building, pay for utilities in the building, water etc. It's a business contract. People need to pay a fair rent for the service you provide. Examine your thinking over this. No reason to feel either guilty, angry or victimized. Good luck.
Posted by: donatella at January 8, 2009 10:39 PM
why do i picture this landlord as Stuart Smiley sitting in front of a mirror in a yellow cardigan questioning his decision to raise the rent!?!?
*rob*
Posted by: PitbullNYC at January 9, 2009 9:24 AM
To pick up on someone's comment above...
Why is charging below the artificial benchmark of Market Rate considered "subsidizing" the tenant? Why isn't is considered charging what you need/want?
I see the market rate as the top -- not a target. This conversation has been frustrating and painful to me. Maybe, if I was married and had a combined income of $150k I'd look at this conversation a different way... but since I'm single on a middle manager's salary, I find this city ridiculous is SOOOO many ways.
To think you can be a 35 or 40 year old professional and still *need* roommates.... luckily that's not me because I've found a decent landlord that isn't obsessed with the "market rate." I'm grateful. I don't think he's an idiot. And I have a lot of respect for him for making this decision.
Posted by: tybur6 at January 9, 2009 9:29 AM
I agree with tyburg6. I've been really lucky with my landlords over the years and grateful, not contemptuous of them for the breaks they gave me. If you're that cynical to think the landlord (or big tipping customer) is an idiot for cutting you a break, trust me, he's not the idiot.
Posted by: bxgrl at January 9, 2009 9:50 AM
La di da di;
I have been a renter,an owner of a building similiar to yours, and now own a condo (just so you know that I've been on both sides of the table).
With all due respect, I have to say that you are letting questions of friendship and social relationships get in the way of a business decision. This type of thing occurs with small 2-4 family homes in which the landlord lives. I know it happened to me.
You are a business person providing a product. You should be charging the market rate. I agree with those who say, however, that it is not wise to hit them with a sudden increase. I agree that 4% sounds about right in this environment, and then henceforth peg their rents to some index such as energy costs, CPI, etc..
The fact that that one of the tenants is now pregnant is completely irrelevant. If you owned a store, would you ask each customer who came in about their personal situation before deciding upon the price? If you were hit with a sudden serious issue like a major illness or a layoff, would your tenants dig into their pockets and agree to a higher rent? Would they agree to an above-market rent to compensate for your mis-fortunes? Why should you agree to a below-market rent to compnesate for their circumstances?
Tybur6: (also with all due respect): it seems to me that you really need to do some hard thinking about your situation. This is a big country, and if you feel that NYC is really crimping your life that much, you might be better off elsewhere. Folks are simply not going to buy into some type of watered-down socialism wrt their property.
Posted by: benson at January 9, 2009 9:54 AM
The only thing that changes this transaction from any other landlord-tenant relationship is that its an owner occupied brownstone and the landlord has to consider who they will be living with. Unhappy destructive tenants are not fun.
The discussion about treating the market rate as something theoretical is insane. The market is what people will pay for the apartment - if you dont get that as an owner, you are leaving money on the table. Anything below market is a de facto subsidy to the tenant.
If you dont want to go to market by terminating the month to month, then do what others have suggested - raise the rent now and build in escalations over the terms of a multi-year lease.
Posted by: very bored at work at January 9, 2009 9:56 AM
tybur6-
Market rate is not an "artificial benchmark." Like every other good or service in a market economy, it's the price set by what renters are willing to pay to live in a given neighborhood. You know, good old supply/demand. Unfortunately, people are willing to pay a lot for very little just to live in NYC.
If you're relying on owners to set rent based on what they "need/want" then I think rents would actually be a lot higher, as "need" is very relative and a lot of people "want" to be wealthy.
'Market rate' probabaly serves as a check against landlord greed more often than not.
Posted by: squaredrive at January 9, 2009 9:57 AM
"I see the market rate as the top -- not a target" Thats why you are not seeing this correctly...
Market Rate is the general average of what the market(Tenants) is willing to pay for a product(apartment).
Market rate is not the max amount any one person will pay.
This is simple supply and demand, not an altruistic expression of humanity's good will toward others. Why does any company charge any amount for a product above what it costs them? Why cant they just give their products away or just cover costs to keep us in a good relationship with them? That wouldnt make much sense would it?
I am a former long time renter before buying and I have to say, I appreciated my landlord for the fair rent he charged, but weighed any increase with what I could find in a comparable place. I would never expect him to let me live in his building below market for very long if he knew he could be getting alot more - That argument holds whether he is covering costs or not.
It sucks to be a professional adult and not be able to pay high rents without a roomate, but there is always a choice, you have the right to move to a more affordable place or someplace that is smaller. You do not have a right to live wherever you want and only pay what you think is affordable. If that was possible I would be living in a beachfront mansion in Malibu.
Posted by: newsouthsloper at January 9, 2009 10:03 AM
First of all, as someone who has been on the other side of this situation, as a tenant, I think that you're compassion in this situation is refreshing and understandable.
That said, the sooner you send them the notice, the sooner they can react to it and make the best decision for them. Don't wait until the time when moving for them will mean that she's trying to unpack and apartment while she's 9-months pregnant.
Posted by: BrooklynButler at January 9, 2009 10:03 AM
quote:
You do not have a right to live wherever you want and only pay what you think is affordable. If that was possible I would be living in a beachfront mansion in Malibu.
shut UP with that tired argument. NYC was built by immigrants and mainly affordable. Malibu was never built like that. malibu started as a rich persons getaway enclave. i am so SICk of the argument of well if you cant afford it, move and the whole well i wanna live in beverly hills but i cant afford it. well beverly hills was originally made for that! der.
*rob*
Posted by: PitbullNYC at January 9, 2009 10:10 AM
Goldman Sachs is one of the few big investment banks doing A-OK. They managed to avoid the worst of the subprime implosion. So I would listen to them.
Posted by: sam at January 9, 2009 10:13 AM
Rob;
How old are you? Have you ever picked up a history book of NYC? Did you know that about 120 years go, the areas of Coney Island, Manhattan Beach, Gravesend and Bath Beach -now heavily immigrant areas - were the premier resort areas in the entire country? Did you know that 100 years ago, the area of Washington Heights, now heavily populated with immigrants, was an exclusive residential area? In other words, the residential makeup of NYC is constantly changing.
What the heck are you talking about? In other words, we should freeze the current socioeconomic map of NYC for all time? Hey, if that is the type of city you're looking for, I would suggest places like Buffalo, Utica, New London, Connecticut and all those other dying cities that are set in amber.
Posted by: benson at January 9, 2009 10:24 AM
The Beverly Hills argument absolutely does apply, Rob. How a neighborhood started out decades ago has nothing to do with anything. It's going to be priced today according to its identity and values today. Plus you're wrong, not all of Beverly Hills or Malibu was always always expensive. Beverly Hills has sections with cute but very modest and small bungalows that were originally for the middle class not the rich. Beverly Hills also has plenty apartment buildings that were originally for the middle class. Parts of Malibu used to be affordable. I had a friend who lived in Malibu in the early 90's as a poor college student at Pepperdine. She lived in a trailer park. Yes, a trailer park. Right in the heart of Malibu.
Posted by: traditionalmod at January 9, 2009 10:45 AM
newsouthsloper- I agree with you in principle but the reality is a bit tougher. Bottom line is telling working people to find someplace more affordable in NYC is like telling them to move to Podunk. Working people- at all earning levels- are the lifeblood of the city. When those who don't make the big bucks are forced further and further out, they not only suffer, their jobs suffer.
Even if you're talking about an office cleaner- a necessary, but hardly "sexy" job- when your cleaners have to spend 4 hours traveling both ways, for a pittance, they eventually look for work closer to home. You lose a reliable workforce. too often we refuse to consider the symbiotic relationship of workers to businesses and think its just the CEOs or the managers or the financial managers who are important.
Its frightening to see formerly affordable neighborhoods become market rate monsters. In the long run everyone suffers- even the landlords who are getting the most money out of their properties because its shortsighted. Bloomberg has this vision of a city of moneyed elitists serviced by the working/middle class. By which he means "second-class." The what's infamous MREB is partly that.
When you're looking only at the financials it's easy to overlook the social/psychological impact. But now that everyone is throwing around terms like consumer "confidence" maybe we ought to be giving more credence to how those factors have as much play in the economy as the dollars do.After all, marketing is the psychological game of getting you to part with your money.
All of which simply means that I think charging market rate and charging what you actually need to make (plus profit) are one and the same, and that difference contributes to social problems all the way down the line.
You are right- people should live where they can afford- but the constantly decreasing pool of affordable places in decent neighborhoods is hurting, in the long run, everyone including landlords.
Posted by: bxgrl at January 9, 2009 10:58 AM
The notion that people with menial jobs are forced out of the city because brownstone brooklyn and manhattan are at market rents is silly. I work in the restaurant industry and have known literally hundreds of immigrant workers making a low wage who are very happy living in what we all consider "fringe" areas of Brooklyn...and *gasp* Queens. I know several of them who own homes in Astoria and the like that are worth more than a million dollars and they are landlords themselves. There will never be a shortage of workers like these because there will always be work to be found for them here.
Posted by: boofer at January 9, 2009 11:37 AM
I'm happy I'm not your tenant. If I was to have a baby and my landlor came up to me with the increase I'll move in a heart beat.
DOn't you think a child is expensive as is??? This is some baby boomer talk
Posted by: karo25 at January 9, 2009 11:41 AM
karo25:
You having a baby is not your landlords responsibility. Where do you get this mentality from? If you can't afford an extra $100 a month on top of your baby's expenses then you cannot afford a baby. If you can't afford a baby than don't have one.
Posted by: boofer at January 9, 2009 11:50 AM
You got into this mess by worrying about other people for far too long. It's time to stop. The baby doesn't change anything. Give them fair notice, of course, but raise the rent closer to what it should be. Case closed.
Posted by: alsawo at January 9, 2009 11:53 AM
karo25:
What boofer said. Why would it be a landlord's responsiblity to subsidize his tenant's choice to have a baby? I mean, in addition to all the subsidizing we already do in the form of tax credits...
Posted by: curiositykilledthecat at January 9, 2009 11:58 AM
Have you ever been in some of the places these folk have to live? I'm not saying everyone's situation is the same, but you can't ignore demographic change. FYI- I live in what some people consider to be a "fringe" neighborhood. I love it here but as it becomes more "desirable" to people with more money, I see how poorer and working poor get forced further out. And I'm not talking only about immigrant workers, but long time residents.
It's so easy to say if you can't afford your neighborhood just move. well, when you've lived there for years and the neighborhood has changed around you, it isn't easy. And it isn't good for the city overall. I also want to point out that immigrant workers have a different set of issues, expectations and goals. Many of them (I know quite a few also) come from very poor countries where conditions are so much worse. I've seen them put up with conditions no American born here would put up with- conditions no one should put up with. They work really hard, buy a house, bring over extended families. Owning a house and having your family here doesn't mean you are living in optimum or even good conditions. Usually you work 3x's harder for 3x's less.
If you don't know about the gentrification issue you haven't been paying attention.
Posted by: bxgrl at January 9, 2009 12:00 PM
Should we then section off neighborhoods and make it only legal for low-income families to live there? What are the answers to these gentrification issues? You must think your speaking to a wealthy individual to say "it's so easy to say if you can't afford your neighborhood just move" I started off in this city in the West Village..priced out, I moved to the Financial District, priced out again I moved to Brooklyn Heights, priced out of there moved to Fort Greene. So yeah I do know what it's like to live in a neighborhood I love and have to leave. It sucks, but as more people do move further out, the "fringe" places they move to do get better.
Posted by: boofer at January 9, 2009 12:26 PM
sorry if this has already been covered in one or both threads, but how big is this apt? a lot of times when people prepare to have babies they move into bigger places to have a nursery, etc. maybe they're looking to upgrade anyway and just need a little push to get going. you sure can't blame em for staying all this time, it's not like tenants are gonna ask you to raise the rent. they may be surprised but will probably react with 'i can't believe we got away with it for so long!'
Posted by: Jimmy Legs at January 9, 2009 12:42 PM
I won't be around today, but wanted to note: The argument that the market accurately reflects the amount people will pay is true *in a certain context, defined by certain criteria*; it would be equally appropriate to argue that the market reflects people's preference to choose a roof over their heads rather than homelessness. The argument that money is "being left on the table" not only ignores the fact that the owner's equity derives from more sources than rental income, but also transmutes a perfectly comfortable and acceptable income stream into entirely unacceptable losses. The argument that "if you can't afford it, move," is not only primarily aimed at people who constitute the deepest fabric of the neighborhood, and who contributed mightily to its maintenance and attractiveness, but also the very people who HAVE afforded their apartment for YEARS and YEARS, until the culture and the market became skewed by forces that are now biting all sectors of the economy and population.
Just FYI, and for some added context and perspective on market value close to the timeframe of OP's purchase, below is what the NY Times reported in the Residential Resales column of July 17, 1994. Just give it some thought when drawing conclusions about how much profit is enough profit: BROOKLYN HEIGHTS—$600,000, State Street, 2-family, 4-story, attached, brick house; 4 bedrooms, 2 1/2 baths, dining room in primary triplex; 1 bedroom, 1 bath in simplex; needs work; 25- by 106-ft. lot; taxes $5,100, listed at $695,000, 15 months on market. KENSINGTON—$255,000, East 4th Street 3-family, 60-year-old detached frame house; 3 bedrooms, dining room, eat-in kitchen in two units; 1 bedroom, 1 bath in other; 2-car garage, 35- by 100-ft. lot; taxes $1,900, listed at $295,000, 26 weeks on market. PARK SLOPE—$350,000, 10th Street, 4-bedroom, 2 1/2-bath, 3-story brownstone; 11-ft. ceilings, parquet floors, original mantels, recently renovated; taxes $1,200, listed at $385,000, 6 weeks on market.
Posted by: vinca at January 9, 2009 12:53 PM
Brownstoners: this is not an ethical treatise. It's business. Even if this one overly-compassionate landlord never buckles to increased costs and prices the market will bear, the market rate will not go down. There are thousands of other apartments and renters out there.
The only thing that brings the rate down is decreased demand.
Wish all you want about the bucolic paradise that NYC was in the 70s or whenever when owners had such low demand for real estate that they were burning their properties to get rid of them. It doesn't change reality now, and market rates are part of reality.
Posted by: corolla at January 9, 2009 12:56 PM
"Should we then section off neighborhoods and make it only legal for low-income families to live there?" A little ridiculous, don't you think?
I don't see why it always has to come down it's all about the money. As the famous Mr. what has incessantly reminded us, the M in MREB stand for Mutant. Our whole economy is a huge ponzi scheme- based on greed. There has to be a better, smarter, fairer way than "I was forced to move- it sucks but what can you do?"
And really- when poor or middle class people get forced into fringe neighborhoods, they don't necessarily get better. It isn't like they come bringing cash. It isn't like the banks will open their purses so that they can improve the neighborhood. That happens in neighborhoods where people with money are coming. Most working class neighborhoods get along or make do. Not to say they are bad neighborhoods or anything else. But the further out you go the less convenient the public transportation (or more expensive to get to work), the less amenities, the less care.
So what's your point? We just let the city become an inner elitist core that gets all the best services and amenities, while the working poor and middle class get shoved further and further out until it takes them a full day to get to and from work? It's ok to shove people who rent around according to how much money they make? Sorry- I don't agree. How many revolutions and uprisings have come out of that whole have/have not scenario. You'd think we learned our lessons by now- obviously we haven't. finance doesn't make a society successful- that takes people and understanding.
Posted by: bxgrl at January 9, 2009 1:02 PM
I think it its been said in various forms before, but I would like to reiterate that the market rate is an absolute necessity. Without it, who determines waht a fair price and *profit* is on any given transaction? Vinca, Bxgrl? What is the definatition of a "Fair profit"? Surely you agree that nobody would agree on this point. That is why we have free markets, because only the market collectively can decide what the value of something is based on demand, necessity, availability, quality, etc.
Without market prices, every dollar you earn, product you buy, or service you receive is virtually worthless because there is no clear definition of its value. As idealistic as it sounds to live in a society where everyone is equal and everyone just takes care of each other, this is just not realistic.
To all those that argue the OP shouldnt realize a gain from their investment based on the market: How would you feel if your employer said "We noticed you drink Starbucks coffee and have nice cloths while other employees dont - therefore we are reducing your salary so you dont have as much money to enjoy the things you like"?
Of course this wouldnt happen because you know what the *Market* value of your services is, and you could find employment that compensates you accordingly. If eveyone adhered to this logic, society would immediately devolve to the point where nobody worked, produced, innovated or progressed and we would all be killing each other over grubs we manage to scratch out of a tree.
Posted by: newsouthsloper at January 9, 2009 1:27 PM
I consider myself working middle class and I live in Fort Greene, the same neighborhood where the OP (remember them)has floor through apartments renting at 1050 dollars a month. I doubt he/she is the only one out there and I wouldn't say Fort Greene is the shabbiest place to live. Are there apartments in Fort Greene renting for $4000 a month as well? Yes. Are there apartments in Bushwick for $3000/month? Yes. Are there apartments in Bushwick that are $700/month? Yes. And yes the comment about sectioning off neighborhoods was ridiculous as I meant it to be sarcastic. How long do you really think it would take this elitist core to envelope the tri-state area to the extent that poor workers are travelling a whole day to get to work?
Posted by: boofer at January 9, 2009 1:41 PM
bucolic paradise?? ever hear "the Bronx is burning?" FYI- landlords burned their property, to get rid of old tenants, get insurance money and get out of paying taxes on for buildings they no longer wanted.
Many people died in the "bucolic seventies" as you call it. It wasn't because of low demand. And how you think that brought rates down escapes me.
Posted by: bxgrl at January 9, 2009 1:43 PM
Certainly the city is the most vibrant when people of all backgrounds and economic levels can mix in the same neighborhood. That's the place I want to live, anyway.
However, I don't understand any argument that relies on landlord restraint and 'morality' to set rent rates and maintain such diversity. It will never happen on a macro level. This basically means that affordable housing has to follow another model (outside of market) in expensive neighborhoods, whether gov't subsidy (certainly not problem-free) or something more creative.
Posted by: squaredrive at January 9, 2009 2:11 PM
I agree, squaredrive. I'm not objecting to expensive neighborhoods where the moneyed few can afford to live- they've got rights too. I'm just questioning how we expect to keep NYC a viable, vibrant and creative place with decent living conditions (and I don't mean luxury living- just decent) for everyone when the complete emphasis on money has created some of the most callous, inhuman conditions we've ever seen. On one hand people love to say that's the reality. Money talks. The other reality is we aren't all rich, we don't all have the same circumstances and the middle class and working poor are as integral to an overall successful society as the rich. Sam Walton wouldn't be rich without all those less than wealthy people spending money in his stores.
Small landlords like OP aren't the same as big developers and landlords with multiple buildings.All I'm saying is that, seeing as landlords and tenants are necessary to one another, that gets recognized in the business relationship. running a business doesn't mean you have to gouge your customer, and being a customer means being realistic about what you ought to expect.
OP should raise the rent- I've said that several times. He seems like a really nice guy but some posters seem to think he should punish the tenants for his oversight with a huge sudden increase in rent. That's not fair either.
Posted by: bxgrl at January 9, 2009 2:47 PM
The income and family composition of tenants is a consideration when deciding whether to rent to them in the first place, not in determining the level of rent. It could also be a factor in deciding whether to renew the lease (i.e. if you think that a one bedroom apartment is inappropriate for two adults and six children). The factors that are relevant to your decision of how much rent to charge are the size, condition, location and amenities of the apartment and the rents of similar apartments in your neighborhood. If I were a lessor I would have my lessees on a formal lease. Each renewal I would offer two choices, renewal for one year at market price, and renewal at two years less a small discount for taking a two year lease (which offers me more security). Lessees who want a month to month rental should pay a premium over market rate for that flexibility. Similarly, a lessor who wants a month to month rental should offer a discount for the insecurity for the lessee.
If you were a public housing authority, income and family composition would be factors in setting the rent. You are not a public housing agency and your building is not a project.
Posted by: bohuma at January 9, 2009 3:30 PM
Most rational people decide to have a baby when they feel financially secure. If they don't feel secure, they wait.
I too am very annoyed that I am stuck in the damn South Slope, when I should have a penthouse on Central Park West.
Posted by: denton at January 9, 2009 3:41 PM
Bxgirl, I could hug you.
Thank you for making my point that your side of the argument is seeing this unnecessarily emotionally by totally missing the sarcasm in my response. The rest where you jumble your facts about people dying, landlord arson and high/low demand are pretty choice as well.
Posted by: corolla at January 9, 2009 4:11 PM
You made a point? Did you write it in your post or were you still running it around in your mind when you hit the post button?
Actually, what makes you think I missed it instead of just ignored it? But since my family was living in the Bronx through the 70's (I grew up there), it would be a fantasy on your part to think I know nothing about it.
Posted by: bxgrl at January 9, 2009 4:57 PM
"this is not an ethical treatise. It's business."
Such an attitude has worked wonders for the US economy.
Posted by: musicmope at January 9, 2009 5:23 PM
Is it just me or does anyone else feel like they are being trolled? I dispute the validity of this story.
Hi b-stoners, it's the first time I've had all week to post.
Posted by: Adam Dahill at January 9, 2009 6:13 PM
Having been a landlord in the past, I can only say that once you run someone off in an economy where people can't come up with the ridiculous first and last months rent, deposit, finder's fee, etc., I would much rather have a good tenant that have an empty apartment for 3 months. How much do you actually lose with 3 months of no payments versus 3 months of an extra $100 payments? At 1000/month losing 1 month rent because they moved out will take you 10 months to make up if you can't find a tenant who can cough up all those startup costs, but losing 3 months rent costs you $3000 plus the $300 you didn't get either. In case you haven't noticed people are losing their jobs and not spending money unless they have to, and apartment vacancies are going up fast. As fast as things are falling, by the time 3 months of vacancy rolls around the market rate might be back right where you are now and you will have lost it all plus take a chance on getting some deadbeats all for nothing.
I have rentals out of state and they are almost half underpriced for the area, but my tax writeoffs are what I am using them for, not profits. My rents cover the mortgage plus expenses and that's about it. Rental property for me is just used to offset other profits while preserving equity. If I make a profit with my rental I then have to pay even more taxes. Now if my rentals were my only income it would be a different story I guess, but I am not in the business of being a professional landlord, however I am a professional who needs them as a tax shelter.
Posted by: williamsburgguy at January 9, 2009 7:10 PM
Adam, not after the first post. But maybe after the second. Sheesh.
Posted by: Bolder at January 9, 2009 8:40 PM
chasing the market rate is a fools game...you end up with yearly turnovers and college students as tenants...that said, just go 10-15% under market and you will get great long term renters...my tenants put in an entirely new kitchen on their own dime because of this (marmoleum floors, milk painted cabinets) ..being a greedy pig is fast proving to be a bad business model in america
Posted by: eman1234 at January 9, 2009 9:31 PM
Dear OP: Be sure to let us know if there is an uprising when you raise the rent $80/month. And if the sky starts falling too.
Posted by: corolla at January 10, 2009 10:11 PM
I am a secret subsidizer.
I enjoyed this entire thread, and am summoning the courage? to significantly raise rents ($300.00) for (3) long time tenants. There was a fuss two years ago when I went from $1200.00 to $1500.00. But market should be 1800-2200 in CH West. All leases expire this summer, and I planned to renovate units to market rate. These three units are mainly, partly , and not really improved.
Posted by: brucef at January 12, 2009 10:42 PM
Actually you just brought up a very important consideration: the quality of your units vs. others in that price range. Good apartments will rent.
Survey rents on CraigsList before you send the notice to your tenants to do a reality check on prices and do what you need to do. I guarantee ConEd will not be getting cheaper just because it's a recession....
Posted by: corolla at January 13, 2009 12:57 PM
if it is not a rent control or rent stabilized then you can do what ever you want. especially if there is no lease. be a slum lord or subside their rent but dont whine.
Posted by: meme at April 21, 2009 2:07 PM
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