Rent Control Units in NYC -Some thoughts - Posted by Frank Chin
Posted by Frank Chin on March 07, 2002 at 06:50:59:
The rent of $200.00/month you mentioned sounds like a rent controlled apartment. I still see them from time to time, and a few months ago, I saw one where the tenant is still paying about $132/month. This is due to the fact that the rents were frozen at the WWII levels, with minor increases allowed from time to time which never caught up with inflation.
There’s a few angles to this.
Under the rent controlled laws, anyone who lived there since 1945, is entitled to continue living there. BUT in addition, children or anyone else that lived with the lessee is entilted to continued living there as well. This was a law passed in WWII to control prices that still exists today.
A friend of mine, grew up in the Village as a small boy where his dad had a rent controlled apartment since WWII. But years ago, they bought a 3 family house in Queens, but still call the Village home. While his dad passed away some 10 to 15 years ago, my friend’s younger brother still has the rent controlled apartment. He’s entitled to it because the original lease was for his parents, and the children. While he has a house in the outer boroughs, as a NYC police officer working the 1st precient (Chinatown), he could uses the place to sleep over without commuting all the way back to Queens for the night.
Technically, if he actually lived there, and had children, rent control can continue for another generation.
BUT technically, he could be evicted if the landlord cares to check. Because, under the Rent control, and even rent stabilization laws, it must be a primary residence 100% of the time. So if a tenant had a place in Florida to stay 6 months of the year, he or she could be evicted. Landlords have been known to hire private detectives to check out where their tenants actually work, vacation, and sleep, as the answer may be worth ONE MILLION DOLLARS.
This may be an interesting project for an investor with a bit of spare cash and patience. Back in the 1970’s, investors whould buy up large lots of units like these and wait for the tenant to move to a nursing home or die. Fortunes were made.
In this case, you may want to find out if this person is VERY OLD, or the decendent of someone under rent control.
I have heard of investors buying NEW HOMES for these people to move to. For instance, this tenant may be stuck here, but rather move to Florida to be with her children. Three BR new homes in FL goes 140K. If you can talk her into moving to a brand new home in Florida that you just bought (for NO MONEY DOWN?), you may have a deal here.
So, you’ll have to really sit down here and figure out MOTIVATION, in the same way as you deal with motivated sellers. If I live in a 1.5 miilion apartment, and under the law, only had to pay $200/month, it’ll take more than 100K, or even 200K, to make me think about moving.
Then again, who OWNS this unit. He or she may have only paid 10K for this many years ago and now wants 500K instead of 1.5 million. Can a deal be made with the guy and what is his motivation? Remember, carrying charges alone may run $1,000/month or more for a doorman building, certainly with 1.5 million asking prices, and you have negative cash flow here even owning it free and clear!!
Then, without more details about the tenant, such as age, health, motivation, children and their location if any, its hard to come up with a detailed game plan.