All Forum Posts by: Matt Payne

I did a little more hunting about this. Check out this link:

http://www.nyshcr.org/Rent/FactSheets/orafac7.htm

You cannot charge more than what your rent is, unless the unit is furnished and then you can charge 10% more. But if you don't actually maintain the unit as a primary residence then the subtenant can assume your lease.

I say just be grateful you are fortunate enough to have gotten a stabilized unit in a new building and live there yourself. It's incredibly lucky to get the opportunity.

I'm not a lawyer and this is not legal advice, but I can tell you it is not allowed. If you are going to be doing it by the book, the landlord will have to know how much you are charging, and I'm almost positive that you are not allowed to make a profit from subletting a rent stabilized unit. 

That said, plenty of people illegally sublet in NYC and if you are fine with knowlingly breaking the law then you may get away with it (assuming you have a quiet doorman and neighbors). If the landlord finds out you are illegally subletting you will almost definitely be evicted (and you subtenant) and may get sued as well.

If you were letting a room (as in taking on a roommate, but still actually living there) then that is typically looked upon differently. The landlord can't really dictate what the agreement between two roommates is. But even having a roommate that isn't on the lease is something that can get complicated, especially if you have a relative or spouse living with you. NY has a "roommate law" that, in part, dictates what you are and are not entitled to do.

Bottom line, subletting a regulated apartment in the city is not legal, and more importantly not ethical. It is also not real estate investing.

@Jonathan Makovsky I'm not an accountant, so this isn't tax advice. But I believe that the transfer tax is not progressive. So what you mention above is correct (although technically $500K would still only pay the 1%, above that pays 1.425%).

I think if you were in a situation where you (or someone you represent) was selling and the price came in right at this level, you would just have an open discussion with the buyer about the taxes (of course they'd be happy to pay less anyhow). I would imagine if this situation came up then the lawyers would already be on top of it (assuming you have a good one!), but I have a feeling that very few properties are closing at $501k. :)

- Matt

Engelo,

Why do you think upstate is the toughest market? Is it the quality of tenant? I hear a lot of people are making great returns in Rochester and Syracuse areas.

-Matt

Felix,

As Darren mentioned, NYC and in particular Manhattan are much tighter markets than the rest of the country. This means that you will have a much harder time finding deals with high cap rates and ROIs. The trade off is the low vacancy rates and price stability in the long term.

The best way I've seen investors make money in NYC is by adding significant value to rental properties. This can be done through renovations, aggressive management (especially with stabilized and controlled leases) and by finding properties that have been under-managed (rents haven't risen with the tide on free market units).

Depending on what scale you're working on, the deals are out there, but in a saturated market you've got to be smart about finding them.

-Matt

@Angad G. In my experience, landlords will rent to anyone that is financially qualified (In fact, it's illegal in NY to discriminate based on age or status as a student). You shouldn't have a problem finding places for people to rent, assuming that they meet the following:

For tenants:

-40x monthly rent in annual income (combined)

-Credit above 700

If a tenant doesn't meet both of these requirements then they will probably need a guarantor. Those requirements:

For guarantors:

-80x monthly rent in annual income (some landlords accept multiple guarantors, some do not)

-Again, credit above 700

Of course there is some wiggle and negotiating room. If there is significant cash available or extra security is paid up front then a deal can get more creative. For students with little or no income though, guarantors are the most popular route I've encountered.

I would also not simply rely on your network at school to get listings. The NYC market is excruciatingly competitive for agents and you have to be the first and best to really make it. It's about customer service, hustle, and consistency with your marketing. Otherwise, eventually, all of your friends will have apartments, and then you'll be out of leads!

-Matt

Right on @Darren Sager 

The rental market is complex. Here are the basics:

There are 3 types of listings:

Open listings - typically from larger management companies. These listings are open to every agent in the city and can be very competitive. Your broker can get you access via a set of keys or you may have to set up an appointment with a leasing agent. These listings are considered CYOF (collect your own fee) typically. Examples: AIMCO, Rose Rentals, The Brodsky Organization

Exclusive listings - These are where the landlord signs a listing agreement with one brokerage and/or agent. The agent has the exclusive right to list and show the apartments for a specified period of time. They also set the fee for the tenants typically. If the listing agent is a REBNY member they are required to share the listing as a cobroke (more on that later) with other agents.

Pocket listings - These are sort of hybrid listings. Think of these as open listings that only a few people know about. They typically aren't well advertised (to brokers and agents) and normally only a few agents will have access to them. These types of listings can be ethically troubling though if you're a REBNY member. If you are refusing to sign an exclusive simply because you don't want to cobroke (and split your commission) then that could be an infraction of the rules set by REBNY.

REBNY (Real Estate Board of NY) is basically an ethics board that helps to level the playing field for brokers and agents in NYC. Without a governing body of some type, the competition can get too fierce and the RE sales and rentals game becomes cut throat. REBNY makes sure that people are playing nice with each other and the everyone has a fair shake.

REBNY offers the RLS (syndicated through OLR, RealtyMX, Nestio, and others) that acts as a MLS for member brokerages. Most rental listings on the RLS are exclusive listings that would be cobrokes (commission is set by the listing broker and split between listing broker and tenant's broker). Some open listings are also posted on the RLS, with varying accuracy.

Commissions: Legally speaking, there is no standard commission in any aspect of real estate. I have had deals happen for less than one month's rent all the way up to 15% and anywhere in between, depending on terms and negotiating. I know people that charge higher than 15% and are able to convince people to pay it. It is all about what the market will bear.

OPs: Sometimes the landlord will pay all or part of the commission. These apartments are said to have OPs (owner paid). Numbers here vary as well, but I've seen a half month to a full month, plus other incentives offered on top sometimes. These typically come in slower times of year, or in an instance where the owner wants to get a higher number on the rent roll, because renters love apartments with OPs. These are the apartments that are advertised as "No Fee" typically. 

When an OP apartment is cobroked, typically the listing becomes a CYOF. So the listing agent takes the OP and the tenant's agent can set there own price for their commission.

Most of your time will be spent looking for clients. Your brokerage will typically have a pretty good database of open listing and also likely the RLS. You may also have access to exclusives out the gate, or you may have to hustle and find your own if you want them. 

The thing to remember with rentals in NYC is that it is a customer service business. People are spending a crazy amount of money and stress and energy on finding and renting a place here. If you can make that job easier and less stressful, then you'll be in business.

Let me know if you have any other questions!

-Matt

Thanks for the post @Dion DePaoli 

This is an incredibly complicated issue here in NYC. One of the companies mentioned in the article (I won't name names) was accused of some other fair housing violations associated with turning over stabilized units. The company was asking for immigration paperwork, proof of income, and other things that are clear violations of the NYC and NYS fair housing laws and also against the Rent Stabilization guidelines.

The issue here, in my mind, is two fold. On one hand, the landlord's should have the right to make money on their investments. These buildings cost an incredible amount of money and take a lot of time and effort to run. And NYC's market is so tight that it can be difficult to make money sometimes, even with what looks like a great deal. It's just very competitive out there.

On the other hand, people need a place to live that they can afford. Rents in Manhattan have skyrocketed, while incomes for the middle and lower middle class have remained stagnant. If there isn't a correction eventually then there won't be anyone left to rent these types of apartments. Most of these units are in B or C areas that won't attract many long term tenants that are wealthy enough to qualify and afford them.

It will be interesting how this whole dilemma plays out. de Blasio's plan is ambitious, but from what I've seen and heard about it it doesn't have any real structure yet. If he can work with the property owners and the investors to make it advantageous in the long term to provide cheaper housing then maybe it will have a shot.

Anyone seeing this sort of thing happen in other markets? Curious to hear what others have to say about this.

-Matt

I've got a great recommendation for a lawyer. He helped me with a long, complicated, and drawn out apartment purchase and I think is the best in the business. He also handles multi-family and commercial transactions. PM me if you'd like his info!

- Matt

Welcome! There's a lot of great stuff to learn on here!