I own shares in a small co-op and have been renting out the apartment (legally -- the co-op allows subletting, and the board has interviewed the tenant and approved). The tenant has been there for about 6 years, and I have raised the rent only once, two years ago, after a previous maintenance increase. The rent increase amounted to about 5%. The upcoming increase is much bigger. If I raise the... [more]
I own shares in a small co-op and have been renting out the apartment (legally -- the co-op allows subletting, and the board has interviewed the tenant and approved). The tenant has been there for about 6 years, and I have raised the rent only once, two years ago, after a previous maintenance increase. The rent increase amounted to about 5%. The upcoming increase is much bigger. If I raise the rent by the exact amount of the maintenance increase, it would be a 9% increase in the current rent. I'm trying to decide what to do, and what's fair. Is it reasonable to ask for that much of an increase all at once?
The board also requested a one-time assessment, split into two parts. Not sure about whether it's reasonable to pass any of that along to the tenant, either.
As you can probably tell, I'm not a very cut-throat landlord. I probably shouldn't even be in NYC real estate at all! But since I am, I want to understand the usual procedures in these cases.
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Response by Pawn_Harvester
almost 14 years ago
Posts: 321
Member since: Jan 2009
you should determine market rent and ask for something close to that. Your costs are not relevant to the tenant. Rent has gone up over the last 6 years, so your you probably have some leeway.
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Response by uescoopowner
almost 14 years ago
Posts: 5
Member since: Jan 2006
Not sure what market rent is these days. It's a studio in a very basic building (no amenities, but clean and quiet) in a great location, southern exposure, hardwood floors, separate kitchen, pre-WWI building. About 350 sf. I see similar apartments renting for less but they are not as well located, and/or are dark, or near the subway construction. And you know, I'm a nice landlord.:)
The board has been talking about adding a laundry room and maybe some storage space, but I think that's probably not going to happen any time soon.
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Response by Sunday
almost 14 years ago
Posts: 1607
Member since: Sep 2009
I would suggest increasing the rent by 6%, and then plan on increasing it again by a similar amount two years from now.
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Response by huntersburg
almost 14 years ago
Posts: 11329
Member since: Nov 2010
>If I raise the rent by the exact amount of the maintenance increase, it would be a 9% increase in the current rent.
Presumably the rent is sufficiently in excess of the maintenance, so that increase seems huge... and independent of the market value of the place as Pawn says.
>And you know, I'm a nice landlord.:)
Maybe this is the first question to ask ... why are you a landlord? Why don't you sell the place?
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Response by nyapts
almost 14 years ago
Posts: 7
Member since: Sep 2009
If you like the tenant and do not want to go through the hassle of finding another tenant offer a modest end increase. If you really like the tenant explain your situation and agree to meet them halfway at 4.5% The next year you can raise the rent again so it is less of a blow all at once depending on market conditions. Fair? yes/no?
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Response by fsbo88
almost 14 years ago
Posts: 76
Member since: Jan 2012
uescoopowner - since you're a good person, you are concerned about your long term relationship with your tenant. Unfortunately for you, only the market price really matters, and your incremental costs should not automatically be a factor for a rent increase. You really need to figure out what market price is, and adjust accordingly. I don't think splitting the difference is your solution, if it prices the unit above market. And if you were underpriced before, a substantial increase is going to be painful to your tenant. BUT -- market prices have come down in past 3 years, even though costs have gone up... so be careful. Factor in your tenant's moving costs- if the rent increase is just less, you may be able to get away with it. But i'm a market guy... I am always (and only) willing to pay the market price. No reason to ever pay more than the market. And I have no expectation of receiving more than market for items I sell. So I respect your concern -- and urge you to figure out today's market price for your rental.
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Response by RealEstateNY
almost 14 years ago
Posts: 772
Member since: Aug 2009
"Not sure what market rent is these days."
That's an important number. Without that we don't know how "nice" a landlord you really are.
A "nice" tenant is worth alot. There are plenty of not so nice tenants that will pay late, not pay at all, complain about the most minor issues, etc. than it becomes your problem.
I used to rent out a couple of apartments and always charged below market if I had a good tenant, didn't want to lose them. As long as you are covering all of your expenses and making a monthly profit and you have the additional benefit of depreciating the apartment.
Find out what the true market rate for the apartment is; that your starting point.
If you give us some additional info, like location, condition of apartment, building, rent, etc. I'm sure someone will let you know if your are currently charging above, below, or at market rate.
Good Luck!
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Response by ManhattanBradNY
almost 14 years ago
Posts: 37
Member since: Aug 2008
I agree with RealEstateNY, if you provide the thread with general info: cross streets, floor number (how many flights up?), condition of apt, (you've already given building type and apt size), light/view factor - someone should be able to give you a general market rate figure.
Or feel free to email me, and I'll help you as well. bmalow@crrnyc.com
Brad at Rutenberg Realty
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Response by uescoopowner
almost 14 years ago
Posts: 5
Member since: Jan 2006
88th & Lex
3rd floor walkup
Pleasant street view (you can see the sky) and sunny with high ceilings
Good condition -- when we bought it we had everything in it painted professionally, installed a new refrigerator, new window A/C, had the floors refinished. We look in about once a year, and things seem in good shape. The kitchen has the original tall wood cabinets, the bath has been renovated. There's an off-site super who lives nearby. The building is not fancy, but it is solid and well maintained.
Rent $1465
This tenant has been exemplary.
We contemplate some day reverting the place to personal use but haven't decided what day that will be.
It's a nice and livable place, it's just small.
This apartment is similar, rent is quite a bit higher:
imo, u should get in %habit and get ur tenant habituated to an annual rent increase, even if its just 3% or just $50. i would do this even if the tenant were my mother.
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Response by huntersburg
almost 14 years ago
Posts: 11329
Member since: Nov 2010
Not a bad MO.
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Response by RealEstateNY
almost 14 years ago
Posts: 772
Member since: Aug 2009
If you do a search of the Upper Eastside for studios under $1500 you'll see there is virtually nothing available. Therefore you can assume you are charging below market rate. Of course a good tenant is worth their weight in gold.
Having said that, I don't believe you need to keep the rent fixed $500 below market as you showed in your example. I'd speak to the tenant and explain the situation and indicate you intend to keep the apartment below market because they are such good tenants but you intend to increase the rent between $75 - $100 per year for the next 3 years. Of course you always risk that the tenant will move but that's the risk a landlord needs to take unless they intend to subsidize the tenant more and more each year of their tenancy. I faced a similar situation years ago and the tenant knew they had a great deal and agreed to the rent increases and only moved when I sold the apartment. Good Luck!
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Response by bramstar
almost 14 years ago
Posts: 1909
Member since: May 2008
I agree with tommy that you really should be raising the rent incrementally each year, at the very least to allow for inflation. As to what to do right now, I would do some comp research to get a better idea of what the market is in your area and then begin to raise the rent to bring it more in line with the market.
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Response by West34
almost 14 years ago
Posts: 1040
Member since: Mar 2009
Bump it to $1600 or even $1650. Finding a decent Manhattan studio in any neighborhood below Harlem at that price is near impossible right now. And you'd still be a nice landlord, and your tenant would still be getting a break.
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Response by hol4
almost 14 years ago
Posts: 710
Member since: Nov 2008
OP,
Small time landlord here as well.... This is not as queasy as a convo you'll have with your tenant as you make it out to be..
Chances are your tenant KNOWS he's getting a great deal, but playing coy/dumb, and will act "shocked" at any rent raise...
My tenant was the same, only to find upon negotiations he knew every rental building to play comps with me..
Simple solution, with your offer.. pull comps from tregny to show justification for your rent raise...
I bumped mine up 10 % cause I knew he was getting a great deal, plus my unit was furnished.. He had no problem with it, considering unfurnished unit were going for more a small broker fee (I don't charge broker fees as an owner.)
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Response by hol4
almost 14 years ago
Posts: 710
Member since: Nov 2008
just saw your posting.. no tenant is worth $400-$500 undermarket every month in this rental market (or any for that matter)..
unless he's including bartering of his body and is a young 20's model, but even then, there's grindr for that nowadays for free.. or he's doing major reno to your apt at his expense which I doubt, beyond painting.
You are a landlord - raise it to market rate and tell your tenant Fuck You pay me.
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Response by inonada
almost 14 years ago
Posts: 7952
Member since: Oct 2008
I think:
1) Rents are not up that much from 6 years ago. Look up Miller Samuel's data for rentals, you'll see for yourself that things are within the range of that 5% that you did. What most people are forgetting is the large drop in rents in 2009. I personally negotiated a 20% drop in rent in late 2009, near when you did a 5% increase. Just as you've been a nice LL for not playing jack-the-rent in other years, your tenant was nice for not playing smack-the-rent in 2009.
2) Your $1465 sounds low. Without knowing the details, we can compare what you have to the market. SE has 70 studio listings on the UES. The highest-priced 50% are typically overpriced crap, so let's throw them out. The better-priced 50% are $1500 to $1900. Maybe there's some room for negotiations off those prices, say $100. So unless your place is the bottom of the barrel, you've got some room for an increase from $1465.
3) An increase of 9% would be at the limit of what'd be "nice", up to $1595 (better-sounding than $1600). It'd leave a bit of a bitter taste, but not terrible. Jack it up higher -- say 16% to $1700 -- and you're giving the tenant a reason to move (LL jacked the rent by lots) and plenty of other options that will be a wash financially (e.g., they can find an equivalent $1600 place, negotiate it down, and still come out even to your $1700 after fees & moving). Jack it up by 6% to $1550, and I think your tenant will be fine w/ no bitter taste.
4) I think raising the rent by $50 hereafter is a good idea.
5) Personally, I'd jack the rent to $1550 for this year with an understanding that it'll be $50 for future years. It's an above-inflation number (3.4% rather than 2%) that is easy to swallow, and your story of a 9% maintenance increase will make the tenant feel that it is a reasonable outcome.
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Response by ss400k
almost 14 years ago
Posts: 405
Member since: Nov 2008
inonda according to you your sultry 2BR rented $4,700 in 07 but now goes for $2500, less than the studio next door.. right.
you can easily get $1700 for that place.. people prefer smaller studios vs having to split a larger place with a roomie .. privacy is king.
lemme guess dolly lenz wrote this piece too since she's in the part of the RE Illuminati.. everyone know there are secret studios under the Manhattan bridge renting for $1/sq foot..
it's all a conspiracy!
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Response by huntersburg
almost 14 years ago
Posts: 11329
Member since: Nov 2010
Does Dolly shave her legs with a raxor?
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Response by ss400k
almost 14 years ago
Posts: 405
Member since: Nov 2008
yes a samsung, unflipped for the extra skin girth... moooooooo
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Response by uescoopowner
almost 14 years ago
Posts: 5
Member since: Jan 2006
I ended up doing the 4.5% increase. No problem with the tenant. Thanks for the advice.
you should determine market rent and ask for something close to that. Your costs are not relevant to the tenant. Rent has gone up over the last 6 years, so your you probably have some leeway.
Not sure what market rent is these days. It's a studio in a very basic building (no amenities, but clean and quiet) in a great location, southern exposure, hardwood floors, separate kitchen, pre-WWI building. About 350 sf. I see similar apartments renting for less but they are not as well located, and/or are dark, or near the subway construction. And you know, I'm a nice landlord.:)
The board has been talking about adding a laundry room and maybe some storage space, but I think that's probably not going to happen any time soon.
I would suggest increasing the rent by 6%, and then plan on increasing it again by a similar amount two years from now.
>If I raise the rent by the exact amount of the maintenance increase, it would be a 9% increase in the current rent.
Presumably the rent is sufficiently in excess of the maintenance, so that increase seems huge... and independent of the market value of the place as Pawn says.
>And you know, I'm a nice landlord.:)
Maybe this is the first question to ask ... why are you a landlord? Why don't you sell the place?
If you like the tenant and do not want to go through the hassle of finding another tenant offer a modest end increase. If you really like the tenant explain your situation and agree to meet them halfway at 4.5% The next year you can raise the rent again so it is less of a blow all at once depending on market conditions. Fair? yes/no?
uescoopowner - since you're a good person, you are concerned about your long term relationship with your tenant. Unfortunately for you, only the market price really matters, and your incremental costs should not automatically be a factor for a rent increase. You really need to figure out what market price is, and adjust accordingly. I don't think splitting the difference is your solution, if it prices the unit above market. And if you were underpriced before, a substantial increase is going to be painful to your tenant. BUT -- market prices have come down in past 3 years, even though costs have gone up... so be careful. Factor in your tenant's moving costs- if the rent increase is just less, you may be able to get away with it. But i'm a market guy... I am always (and only) willing to pay the market price. No reason to ever pay more than the market. And I have no expectation of receiving more than market for items I sell. So I respect your concern -- and urge you to figure out today's market price for your rental.
"Not sure what market rent is these days."
That's an important number. Without that we don't know how "nice" a landlord you really are.
A "nice" tenant is worth alot. There are plenty of not so nice tenants that will pay late, not pay at all, complain about the most minor issues, etc. than it becomes your problem.
I used to rent out a couple of apartments and always charged below market if I had a good tenant, didn't want to lose them. As long as you are covering all of your expenses and making a monthly profit and you have the additional benefit of depreciating the apartment.
Find out what the true market rate for the apartment is; that your starting point.
If you give us some additional info, like location, condition of apartment, building, rent, etc. I'm sure someone will let you know if your are currently charging above, below, or at market rate.
Good Luck!
I agree with RealEstateNY, if you provide the thread with general info: cross streets, floor number (how many flights up?), condition of apt, (you've already given building type and apt size), light/view factor - someone should be able to give you a general market rate figure.
Or feel free to email me, and I'll help you as well. bmalow@crrnyc.com
Brad at Rutenberg Realty
88th & Lex
3rd floor walkup
Pleasant street view (you can see the sky) and sunny with high ceilings
Good condition -- when we bought it we had everything in it painted professionally, installed a new refrigerator, new window A/C, had the floors refinished. We look in about once a year, and things seem in good shape. The kitchen has the original tall wood cabinets, the bath has been renovated. There's an off-site super who lives nearby. The building is not fancy, but it is solid and well maintained.
Rent $1465
This tenant has been exemplary.
We contemplate some day reverting the place to personal use but haven't decided what day that will be.
It's a nice and livable place, it's just small.
This apartment is similar, rent is quite a bit higher:
http://streeteasy.com/nyc/rental/851241-rental-167-east-90th-st-carnegie-hill-new-york
imo, u should get in %habit and get ur tenant habituated to an annual rent increase, even if its just 3% or just $50. i would do this even if the tenant were my mother.
Not a bad MO.
If you do a search of the Upper Eastside for studios under $1500 you'll see there is virtually nothing available. Therefore you can assume you are charging below market rate. Of course a good tenant is worth their weight in gold.
Having said that, I don't believe you need to keep the rent fixed $500 below market as you showed in your example. I'd speak to the tenant and explain the situation and indicate you intend to keep the apartment below market because they are such good tenants but you intend to increase the rent between $75 - $100 per year for the next 3 years. Of course you always risk that the tenant will move but that's the risk a landlord needs to take unless they intend to subsidize the tenant more and more each year of their tenancy. I faced a similar situation years ago and the tenant knew they had a great deal and agreed to the rent increases and only moved when I sold the apartment. Good Luck!
I agree with tommy that you really should be raising the rent incrementally each year, at the very least to allow for inflation. As to what to do right now, I would do some comp research to get a better idea of what the market is in your area and then begin to raise the rent to bring it more in line with the market.
Bump it to $1600 or even $1650. Finding a decent Manhattan studio in any neighborhood below Harlem at that price is near impossible right now. And you'd still be a nice landlord, and your tenant would still be getting a break.
OP,
Small time landlord here as well.... This is not as queasy as a convo you'll have with your tenant as you make it out to be..
Chances are your tenant KNOWS he's getting a great deal, but playing coy/dumb, and will act "shocked" at any rent raise...
My tenant was the same, only to find upon negotiations he knew every rental building to play comps with me..
Simple solution, with your offer.. pull comps from tregny to show justification for your rent raise...
I bumped mine up 10 % cause I knew he was getting a great deal, plus my unit was furnished.. He had no problem with it, considering unfurnished unit were going for more a small broker fee (I don't charge broker fees as an owner.)
just saw your posting.. no tenant is worth $400-$500 undermarket every month in this rental market (or any for that matter)..
unless he's including bartering of his body and is a young 20's model, but even then, there's grindr for that nowadays for free.. or he's doing major reno to your apt at his expense which I doubt, beyond painting.
http://www.nytimes.com/2012/02/29/opinion/rental-business-picks-up.html?_r=1
You are a landlord - raise it to market rate and tell your tenant Fuck You pay me.
I think:
1) Rents are not up that much from 6 years ago. Look up Miller Samuel's data for rentals, you'll see for yourself that things are within the range of that 5% that you did. What most people are forgetting is the large drop in rents in 2009. I personally negotiated a 20% drop in rent in late 2009, near when you did a 5% increase. Just as you've been a nice LL for not playing jack-the-rent in other years, your tenant was nice for not playing smack-the-rent in 2009.
2) Your $1465 sounds low. Without knowing the details, we can compare what you have to the market. SE has 70 studio listings on the UES. The highest-priced 50% are typically overpriced crap, so let's throw them out. The better-priced 50% are $1500 to $1900. Maybe there's some room for negotiations off those prices, say $100. So unless your place is the bottom of the barrel, you've got some room for an increase from $1465.
3) An increase of 9% would be at the limit of what'd be "nice", up to $1595 (better-sounding than $1600). It'd leave a bit of a bitter taste, but not terrible. Jack it up higher -- say 16% to $1700 -- and you're giving the tenant a reason to move (LL jacked the rent by lots) and plenty of other options that will be a wash financially (e.g., they can find an equivalent $1600 place, negotiate it down, and still come out even to your $1700 after fees & moving). Jack it up by 6% to $1550, and I think your tenant will be fine w/ no bitter taste.
4) I think raising the rent by $50 hereafter is a good idea.
5) Personally, I'd jack the rent to $1550 for this year with an understanding that it'll be $50 for future years. It's an above-inflation number (3.4% rather than 2%) that is easy to swallow, and your story of a 9% maintenance increase will make the tenant feel that it is a reasonable outcome.
inonda according to you your sultry 2BR rented $4,700 in 07 but now goes for $2500, less than the studio next door.. right.
you can easily get $1700 for that place.. people prefer smaller studios vs having to split a larger place with a roomie .. privacy is king.
"Raxor Thin Vacancy Rates in NY"
http://www.slate.com/articles/business/moneybox/2012/03/high_rents_america_s_ridiculous_shortage_of_apartment_buildings_is_pushing_rents_way_up_.html
lemme guess dolly lenz wrote this piece too since she's in the part of the RE Illuminati.. everyone know there are secret studios under the Manhattan bridge renting for $1/sq foot..
it's all a conspiracy!
Does Dolly shave her legs with a raxor?
yes a samsung, unflipped for the extra skin girth... moooooooo
I ended up doing the 4.5% increase. No problem with the tenant. Thanks for the advice.
Thanks for circling back, sounds very reasonable.
4.5% sounds fair for both sides I believe.
hoodia
1 day ago
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4.5% sounds fair for both sides I believe.
shut the fuck up
Jim, stuff it.