In NYC, landlords and management companies aren’t the only ones renting out units. Owners are jumping in on the market too. But hiring a broker to list the unit can be costly. So, they might consider going it alone and listing the apartment as “For Rent By Owner,” which is often referred to as FRBO. While seasoned landlords will often go this route, individuals can also work directly with renters. While the cost savings and control might be alluring, it’s important to know everything about the process before jumping into it without a pro to help.
The process of listing your unit for rent by owner is pretty straightforward. But it doesn’t mean it’s simple to execute. Here’s how it works.
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If you’re planning to rent out your home, you want to be sure whoever lives there will treat it with respect. Paying rent on time is also of paramount importance. This is why vetting prospective tenants is a vital part of an owner’s FRBO process.
So, how do you do that? You’ll want to follow the same steps as other landlords and property managers in the city. That means you should request all the paperwork needed to rent an apartment in NYC, like employment verification, pay stubs, bank statements, ID, etc. Plus, you’ll want to run a credit check and ask for a recommendation letter from a prior landlord.
“It’s imperative to meet the prospective tenant and complete measures such as a credit check-up, follow up on previous job references, and meet in person to have a general understanding of their personality and needs before committing,” said Nada Rizk
licensed associate real estate broker of Brown Harris Stevens.
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Yes, if you’re going to list your apartment as for rent by owner, you’ll be in charge of drafting the lease too. When it comes to what to expect when signing a lease, you’ll want to be sure it has things like the term of the lease (i.e., the rental period), rent due date, what’s covered under the rent, etc. Other elements to address include any fees, insurance, and terms of lease renewals. Keep in mind that the Housing Stability, and Tenant Protection Act of 2019 ushered in some new laws for leases in New York. Long story short: Drafting a lease is probably not something you want to do on your own. Hiring a lawyer to draft one protects both you and the tenant.
“It’s best to get a ‘pro’ to write up a lease, to make sure that both parties are covered in the beginning and that expectations are set to avoid problems after the transaction is complete,” said Rizk.
There are really two key benefits of listing your unit as for sale by owner. First, you have the opportunity to interact personally with prospective renters and minimize costs without a broker being involved. While those might be enough to sell you on the FRBO idea, just remember you’re also taking on much of the legwork of finding a tenant as well.
Although there is potential to save some money with a for rent by owner listing, there are also some downsides to consider.
As discussed above, you take on all of the work of a broker with a FRBO. Advertising the apartment, meeting with prospective tenants, finding a lawyer, and reviewing a lease is not only effort, it’s a lot of time. And while your process may go very smoothly, with no issues or hiccups, it’s probably wise to plan on some form of unexpected delay or problem.
Additionally, as Brown Harris Stevens broker Joanne Greene points out, if you’re renting out an apartment on your own, you will also likely be managing it, which can bring a separate set of challenges.
“You don’t have the professionalism, accessibility, and advocacy of a broker that can help deal with day-to-day responsibilities and home improvement efforts that might be intimidating to go directly to a landlord about,” she says.