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I found a condo, everything is ok with it except that in the building of 50 units ca. 18 units are occupied by RS renters. They all seem to be owned by the sponsor, who is starting to unload them. Common areas seem acceptable. What are the risks of this situation? Is there a higher risk of default for the condo? Will it be difficult to get a mortgage?
The condo itself doesn't own anything, has no mortgage, so can't default. What you want to find out is, how much the sponsor is collecting in rent versus her CC/taxes outflow. That'll be detailed in the annual offering-plan amendment the sponsor has to file with the Attorney General. If the sponsor can't wait out the natural attrition of non-purchasing tenants, then she'll sell them as occupied. That doesn't happen often, though, so you need to know whether "starting to unload them" means selling as tenants vacate or selling them with the tenant in occupation.
I'd worry if the sponsor has a pattern of holding on to apartments even after the non-purchasing tenants vacate. Whether a sponsor does that depends on the selling versus rental market and their own situation.
If it's a normal sell-when-vacated story, then the current percentage unsold doesn't matter much. Almost every co-op/condo conversion started out with a large percentage unsold, and that goes down over the years in the natural course of things.
Re: mortgages, look up recent sales and see whether the buyers got mortgages.
Thank you, NWT. They already sold a couple of units with RS tenants in place. The rent is 30% of market rent.
I am assuming the building (i.e. you) has lower property taxes than it otherwise would or something similar making up for the lost income.
A condo building's taxes are based on comparable (as defined by the city) rental buildings' income, so yes, the comparables having RC/RS tenants would lower the all the condo owners' taxes.
For a given condo unit, though, the RC/RS status doesn't change its taxes.
E.g., the eight KS-line units at the Apthorp. 3KS and 4KS have sold, 6KS is for sale, and the other five are occupied by non-purchasing tenants. Each unit's owner pays the same $15,428 per year.
pyxis, the tenants being rent-stabilized, or how much rent they pay, doesn't matter to you. The whole point of a condo is that all the owners can rent if they want, and they may or may not collect enough to cover CCs/taxes/debt. A lender might not care whether a low owner-occupancy rate is due to sponsor-held or sold-but-rented apartments.