Renters in a co-op?

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Co-Op Related November 1, 2012 at 11:17 pm

Renters in a co-op?

Looking at a few different co-ops in PH/CH, some of them have sponsor units rented out to long-time tenants and some do not. Does a high # of rental tenants in a co-op bldg raise a red flag? How does it affect maintanence/assessments/etc for rest of bldg? Shld i look 2 buy elsewhere or is it same situation evrewhere? Tks

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Depends a lot on the variables of the particular situations.  Does long-time tenants in this case mean rent control?  If yes, then rents may well be less than the maintenance owed by the sponsor on those units – find out.  Find out if the sponsor is paying their share of maintenace and is up to date in payments, some aren’t.  In the market drop at the end of the 80′s, sponsors often stopped paying their maintenance on these units.  Coops took over the units from the sponsors, and then coops were in the situation of having units that did not pay in rent their share of maintenance.  Was good for coop if tenant moved out, coops could sell the units and collect the correct maintenance.  Some paid the tenant  to move, and sold the unit, usually cheaply, to a buyer who would then renovate – win-win-win for all three parties involved.  Depends on how many are rented, what percentage are rented out.  Also depends on whether you have any difficult tenants.  And if the sponsor still owns enough units to have a controlling voice in the management of the building, never a good thing. 

some (most?) banks will not give mortgage for apartment in a building that is less than 80% owner-occupied. That is probably a good threshhold to look for.

True, but even if the renatals under the rental % threshhold that Fannie and Freddie set for buying mortgage loans, you still can have significant problems in a coop, depending on the rents, tenants, and sponsor, as noted above.

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