How to be a successful landlord in New York even with rent control law

New York is famous among real estate investors for its strict rent laws. While these regulations are great for renters, they raise challenges for landlords trying to maintain profitability.

However, New York still offers lots of opportunities for landlords. After all, the Big Apple is still one of the most popular places to live: and nearly 70% of its residents live in rental units.

With the U.S. Supreme Court refusing to hear appeals against New York’s rent control system, these strict regulations (the toughest in the country) are likely going nowhere fast. So, how do you balance the opportunity of this prime market with the frustration of preferential rents?

With the right strategies, it’s possible to navigate these restrictions and run a successful rental business in New York.

Here are some key approaches to consider. And, if you’re not sure about the difference between rent stabilization and rent control, read our our deep dive into New York’s rent control laws first.

1. Focus on free-market units

Not all residential units in New York are subject to rent control or rent stabilization. Free-market units, which allow landlords to charge market rates, provide greater flexibility and profitability.

When looking at properties to invest in, look for buildings with a mix of regulated and free-market units. This will help to balance the stability of regulated income with the potential for higher returns from market-rate rentals.

2. Invest in upgrades for vacancy decontrol

In some cases, landlords of rent-stabilized properties can increase rents by making improvements. Major Capital Improvements (MCIs), such as replacing a building’s roof or upgrading its heating system, or Individual Apartment Improvements (IAIs), like renovating kitchens and bathrooms, may allow for rent increases under New York law.

In some cases, these improvements can lead to deregulation of units when rents reach a certain threshold. If you’re going to pursue this strategy, make sure you stay compliant with state regulations and calculate the return on investment carefully.

3. Target properties with low-rent tenants

Rent-stabilized units with long-term tenants, who pay significantly below market rent, can actually be an opportunity for future profitability. While this approach requires patience, turnover in these units may allow landlords to legally increase rents or even convert them into market-rate apartments. This strategy works best for investors with a long-term outlook.

4. Optimize your operating costs

Reducing expenses is one of the most effective ways to increase profitability, especially in rent-regulated buildings where income is capped.

Some ethical ways you can do this:

• Make energy-efficient upgrades, such as LED lighting or improved insulation, to lower utility bills
• Renegotiate service contracts for maintenance, waste management, or security
• Be proactive with maintenance to avoid expensive emergency repairs.

5. Leverage tax incentives

New York City offers a number of tax incentive programs designed to support property owners. For example, the 421-a Tax Exemption provides relief for new developments, while the J-51 Tax Abatement encourages landlords to undertake renovations. Taking advantage of these programs can reduce property tax burdens, freeing up resources for other expenses and increasing profitability.

6. Invest in Emerging Neighborhoods

Emerging neighborhoods often present opportunities for real estate investors, especially those who are planning to renovate and rent out a property. These areas typically offer lower acquisition costs, and are on the cusp of increased demand due to new development, infrastructure improvements, or cultural appeal.

By investing early, landlords can benefit from long-term appreciation and better profit margins compared to more established neighborhoods.

7. Diversify your portfolio

Consider expanding beyond traditional apartment buildings to include mixed-use properties. Retail or office spaces typically aren’t subject to the same rent regulations as residential units, offering an additional revenue stream. Mixed-use properties also diversify your portfolio, reducing reliance on residential income alone.

If this is something you’re considering, we’ve previously written about the pros and cons of investing in commercial property.

8. Build strong tenant relationships

Having positive relationships with your tenants can lead to longer tenancies, less stressful disputes, and lower turnover costs. Fixing issues quickly, communicating clearly about policies, and treating your tenants fairly will keep your tenants happy: giving you a stable income stream. It may not be market rate, but stability is more reassuring than having gaps between one-year leases and the cost associated with finding new tenants.

9. Partner with legal and financial experts

Navigating New York’s complex rent regulations needs a lot of expertise. Working with experienced attorneys and accountants will help you to stay compliant with laws while optimizing lease agreements, implementing rent increases where allowed, and leveraging tax benefits effectively.

10. Get the right financing in place

By working with a trusted lender, landlords can overcome financial hurdles and capitalize on profitable opportunities even in regulated markets. Express Capital Financing gives you access to tailored financing options to support your investments in New York’s challenging property market.

For example, a Debt Service Coverage Ratio (DSCR) loan can be a valuable tool for landlords looking to secure funding based on the property’s cash flow potential rather than personal income.

With flexible terms and quick approval processes, Express Capital Financing’s hard money loans can help you to acquire, renovate, or expand your rental portfolio efficiently.

Make your mark in New York’s highly regulated market

Becoming a successful landlord in New York, despite its stringent rent control laws, requires a well-thought-out strategy, patience, and smart financial planning. Navigating the fine balance between regulatory compliance and profitability may seem daunting, but as we’ve explored, opportunities abound for those willing to invest in free-market units, make strategic improvements, target emerging neighborhoods, and build solid tenant relationships.

Securing the right financing is critical to leveraging these opportunities to their fullest. Whether you’re looking to acquire new properties, renovate existing ones, or expand your rental portfolio, Express Capital Financing offers the flexible, fast, and friendly financial support you need to turn your rental business ambitions into reality. Experience the customized financing solutions our clients have leveraged to overcome hurdles in this highly regulated market by applying for a loan today.