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June 24, 2009
rent stablized lease renewal
so now that the increases have been announced, what determines if i sign a 1 or 2 year lease? 1 year is 3% and 2 is 6%
i pay below market and plan on staying indefinitely so i guess 2 is the best option?
Comments
It's not that easy. What if next year the one year increase is 2%? Then having taken a 1 year at 3% (this year) and a 1 year at 2% (next year) would be less than 6% for a two year lease.
It's a gamble like the rest of life.
Posted by: SenatorStreet at June 24, 2009 10:26 AM
One thing to keep in mind is that just because the rent board approved increases doesn't automatically mean you'll be raised. My family has given leases with no increase of nominal increses below that of the Rent Boards guidlines.
But regardless, there are tenants in my parents building that have been there 10, 15+ years. They all take 1 year leases. No matter the increase.
Posted by: christopher at June 24, 2009 10:53 AM
thanks, my landlord will definately be raising mine as much as he can... i think i'll do one year and take the risk... even if it goes up 4% the following year, it'd still save me $1000
my lease isn't due to be signed until april 2010, so i can feel it out till then...
Posted by: sender9999 at June 24, 2009 11:29 AM
I never understood the 1 year vs. 2 year in rent stablized places... the two year option ALWAYS seemed like a losing endeavor.
3% for one year, then 3% the next year...
(Rent X 103% X 12) + ((Rent X 103% X 12) X 103%)
That's less than (Rent X 106% X 12)
Why would you sign a 2 year lease? If you're rent is $1200 now, you would pay $429 more for option B. It's break-even if the second year is around 3.25%
Posted by: tybur6 at June 24, 2009 12:53 PM
I never understood the 1 year vs. 2 year in rent stablized places... the two year option ALWAYS seemed like a losing endeavor.
Posted by: tybur6 at June 24, 2009 12:53 PM
The theory, originally, was increases are 3% for 1 6% for 2 this year, but what if the Guidlines Board bumps that next year to 4.5% for 1 and 8% for 2? In theory a 2 year lease now at 6% would come out cheaper than 2 1 year leases at a combined 7.5% (if I'm doing my math right).
But like I said in my previous post, I've rarely known people to get a 2 year lease...
Posted by: christopher at June 24, 2009 1:23 PM
All my rent stabilized tenants normally chose the two year option, until last year, since the rent increase last year was higher than usual. They gambled, correctly it turns out, that this year's increases would be lower.
But next year's will lilely me much higher since landlord incomes are plummeting with rapidly rising vacancy and diving rents throughout the city.
Posted by: IronBalls at June 24, 2009 3:11 PM
It's definitely not simple.
The two year will always look more expensive on its face, but if the rent stabilized tenant is going to stay in the apartment for a long time consider this:
1) you never know what the one year increase will be in the second year of any potential two year period. if it is less than the current one year percentage increase, then clearly two consecutive one year renewals would save the tenant money. if it is more in the next year than the one year increase is now, then the two consecutive one year increases would add up to more than the two year increase
2) unless the one year increase percentage does drop in the next year, the combination of two one year increases raises the base rent by more than the two year increase. if the next year increase goes up at all, it's compounded. as the base rent goes up, since ALL future increases are calculated on the base rent there is a cost in future dollars over the course of many renewals of taking the shorter term.
3) the math of calculating the extra cost in the first year of taking a two year against the extra cost in the future of taking a one year is possible to understand but impossible to do, since we don't know the future.
in other words, it's a gamble. you pays your money, you takes your chances ;)
Posted by: raphael9 at June 24, 2009 6:35 PM
I may have to sell my building. The rental market is terrible. And my expenses, especially the property tax, are skyrocketing.
This tiny increase on rents that are already 30, 40, or 50% below market is a joke. It's a small fraction of the increase in expenses, even according to the RGB. The whole system is political. Some of these low-rent tenants have an income higher than mine.
Sorry, just had to get that off my chest
Posted by: starfish1948 at June 24, 2009 9:33 PM
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