Rent Stabilized Apartment Building in NYC

[Johnery Laurimore]

I'm potentially looking to purchase a small rental building which falls under the NYC rent stabilized program. Looking to pick the brain of an experienced investor in this space in NYC as have some questions and running into a brick wall with DHCR.

[Josane Cumandala]

Can you be a little more specific about the property and the type of rent stabilization program? For example I know a lot of older apartment buildings are rent stabilized by default. And then there are new programs. My apartment building is stabilized under the J-51 program which is an incentive for landlords to update older buildings as long as the keep the rents stabilized for a certain number of years. More information on your specific circumstance will help those knowledgable give you the best advice. I'm not an expert in the legal nuances of rent stabilization however as an NYC appraiser I have to tell you that rent stabilized tenants are a huge hindrance on the value of the property. You have to buy the tenants out of their lease and some will not move for any price. Even if delivered vacant it can take a considerable amount of time to legally de-regulate a stabilized building and it mostly requires you to have the units vacant for a period time (no cashflow). I could definitely see this being an obstacle for lenders and investors. Good luck!

[Johnery Laurimore]

Sure it is a 6 Family that was built in 1935 which automatically pulls it into the rent stabilization program.  The issue that I'm running into is that the seller hasn't kept up with their rent roll registrations (last submitted was 2008).  I'm concerned about if there are fines for not keeping this up to date.  In addition, there are some units (2) that are vacant which I'm trying to determine how much those can be rented for (assuming no upgrades made to units/overall property).  I get conflicting information particularly on the rental amount for vacant units (whether can charge full market rent or is it the 20% over the last rent charged).

[Vik Kuang]

Hi Johnery, did you actually get that property since the post is 3 years ago?  I've been looking around in NYC and those rent-stabilized properties seem pretty attractive, but my realtor friend is telling me that they're not worthy of investment due to the headache with tenants and the renewal process.  Would love to hear from someone with experience, or if any direction on where to look for more info.  

Thank you!

[Saq Hussain]

All available loopholes, which allowed deregulation of units were, unfortunately, closed by our elected officials, except the substantial rehab strategy, which requires 80% vacancy throughout the building and 75% replacement of all building-wide systems, you are essentially forced to renovate the complete building and still at the mercy of DHCR.. which has the final saying