If you own a couple of Manhattan apartments, or an SRO or multi-family , no doubt dealing with tenants can be a challenge for even the most experienced Manhattan property owner. Here is a checklist of common sense but often overlooked things to keep in mind when renting and dealing with tenants.
1- Rent at below market or close to market rent. This will allow your apartment to rent quickly and you will have more interested potential tenants. Many times, I sit down with Manhattan property owners who want to ask for a rent that will likely lead to an apartment sitting on the market. On a $3000 lease, f you ask, $200-$300 more but lose 3 months rent, that means you lose $9,000 that you will never recoup.
2- Raise or lower rents as appropriate to keep tenants but maintain profit. Years ago, I owned an apartment on Manhattan’s upper west side on Central Park west that I rented out to a tenant. She always paid on time and never bothered me at all. She informed that she was considering to move at the end of the lease because she could save money by moving further uptown. I asked her how much she would save and she said about $200 or so. Instead of suffering a vacancy I reduced her rent by about $150 and she stayed. She stayed with me in total 7 years from the first time I rented it up until I sold the apartment. On vacancy, I would lose at least one month rent if not more, and also have to paint and fix the apartment. The cost would have been more to have the vacancy.
3- Raise the rent as appropriate. I met many landlords who are reasonable and firm and others who are too nice and feel guilty about raising the rent. When the lease is about to come up, consult with your Manhattan real estate broker to see what you can get on the open market. If the rents have gone up or are in a continued up cycle, then you should raise the rent to keep pace. Many long time owners are 10-20% below the market in the rents that they charge. There is nothing wrong with keeping pace with the market. You can still charge an excellent tenant a discounted rent but if you raise their rent and they are still 10% below market, they are not going to move.
4- Be firm and make sure that you always get your rent on time. Lease riders can have late charges for rent submitted late. Also, do not be too lax about evicting a tenant who is not paying. If they do not pay, then you need to get an attorney and move to eviction. Problems do not go away by ignoring them and this one will get worse.
The Author- Brian Silvestry , a licensed real estate broker, has been selling residential and commercial real estate since 1999. He has sold in every Manhattan market from Battery Park City to Washington Heights.
by Brian Silvestry
If you are about to renovate your Manhattan home, take a look at this article about some of the trends in Smart home tech that is fast becoming the norm in our industry.
by Brian Silvestry
The new tax law can be a big boost to investment real estate and gives an advantage over art collection. The reason is the IRS code 1031. The 1031 exchange allows owners of investment real estate to sell one property and buy another and defer the taxes. Generally, the property being sold is sold first, possible purchase properties are identified within 45 days of closing and must be closed and purchased within 180 days of the first closing. The 1031 exchange has facilitated the buying and selling of Manhattan property and in other states for years. It is a staple of the real estate investor. It used to apply to art as well as stocks. But now the new tax law has eliminated 1031 exchanges for anything but real estate.
This will seem to be a boon to the real estate industry and could play into an elevated market for investment real estate as well.
NYT How the Tax code Rewrite Favors Real Estate over Art
If you are a small time landlord, you will want to read the NYT article about calculating your tenant’s rent. The takeaway is while a landlord may even live in the same house as a tenant and may know their tenant personally, they should still try to keep the rent as close as possible to the market. One owner who happened to purchase his properties years ago when prices were low, passed that savings on to his tenants if they didn’t bother him. Holding on to a good tenant is always wise.
Several years ago, I had a rental apartment on the Upper west side and charged slightly lower than the market rate to rent the apartment quickly which I did. I raised the rent when I could about 2-3% per year to stay close to market rent. Then when the rents decreased, the tenant who always paid on time and never bothered me, wanted to leave to reduce her monthly costs. I asked her how much and she said $150 and I reduced the rent. That saved me thousands of dollars to paint and also money that I would have lost due to vacancy. That tenant stayed 7 years from first lease to when I sold the same apartment.
If you are thinking of buying a Manhattan condo for investment with the objective to hold for rental income, here is one simple tip that is often overlooked.
In general, after paying common charges and taxes, you will gain an approximate 2% return annual. So an apartment that you acquire for $2 million will yield approximately $40,000 in net income. In some cases, you might have an even lower return.
One type of property that you might consider is an apartment with enough space to add an additional bedroom. With the right design, you can rent an additional bedroom/den for a higher income just due to the increase in bedroom count. I had one listing where they converted the dining room to a 2nd bedroom and as a result we were able to rent the apartment for $4,200 whereas similar size apartments without the conversion were renting for around $3500. This made the return on the apartment based on the current market value closer to 3%.
You will need to see if the layout will allow it. Usually a space will need to have a minimum of 750-800 sqft to accomplish this but it will also depend on the current layout. A dining room or a dining area will be an ideal area to make the additional bedroom as long as there is a window and enough space.
With more people than ever sharing apartments and families remaining in Manhattan, this a nice way to gain an additional rental income and increase your yield on the property.
The former home of the dive bar- Subway Inn is reportedly in contract according to Bloomberg, for $300 million. Kuafu Properties LLC will close on the purchase from the World Wide Group in October. They plan to add about 60k sqft of retail space in a ground-up project. The same New York based Chinese firm has also purchased One MIMA Tower, a luxury rental on West 42nd street which it will convert to condos. They are also the purchasers behind the property at East 86th street and Lexington avenue which currently houses a NYSC.
I was reading a recent article and someone commented that NYC property is like a Swiss bank account for investors because it’s considered so low risk and certainly will go up in the future. But where do you buy and for how much? Should you get a loan or pay CASH? Here’s some advice that may help you to decide.
So let’s say you have $1 million just as an example and you want to invest. What are your options assuming you will not live there? Click through for guidelines.
Continue reading Thinking of buying a Manhattan apartment for an investment?