Buying in coop with flexible sublet policy

Anyone has any experience with this? Thx!

A policy could definitely change in the future if different people are on the Board, if too many people sublet and it threatens banks' willingness to loan, if the Board gets sick of processing tenancy applications.

Personally, I don't think the restriction on renting is a big reason for co-op discounts; I think it's the buyer universe limited to those who would qualify (which in many buildings excludes foreigners/non-residents).

So if you value the right to sublet more than the average co-op owner, good, but don't pay for it.

I represent investors in real estate transactions involving "investor friendly" co-op buildings in Manhattan. These buildings are known for their "unlimited sublet policies from day one", i.e., investor can purchase an apartment and start subletting it from day one.

There are approximately 30 buildings of this kind in Manhattan. At any given month, no more than 2-3 apartments are offered for sale in these buildings. Many change ownership via off-market transactions. Average time to get such units in contract is less than 4 weeks. Average time to get a traditional co-op unit in contract is 40 weeks. "Investor friendly" co-op apartments are highly liquid and attract a solid demand.

On average, a cash investors earn more than 15% annually on his/her investment by purchasing and subleasing a cooperative apartment in these "investor friendly" co-op buildings.
The math is quite simple.

Let's consider Upper East Side co-ops in pre-war low-rise buildings.

Average co-op studio price is $300,000; $600 - $650 per square foot (Average 1BR price is $350,000). An average monthly rent for a studio is $1900. Average monthly maintenance for a studio apartment is $750. Annual Net Operating Income (NOI) = $13,800. CAP = 4.6%. Compared to investing in condos - by purchasing and renting a condo in Manhattan, an investor will not earn more than 2.00% - 2.50% annually.

Moreover, over the last year, on the average, co-op prices increased by more than 15% in Manhattan (see most recent Market Reports published by the most leading real estate brokerage companies in Manhattan.)

Undisputedly, there is always a chance that a board might amend the co-op bylaws and forbid investors to purchase units in the building or create restrictions on subleasing. However, the chances of this happening are very slim. Usually, the board needs 66% voting approval from all of the shareholders in the co-op in order to to amend bylaws. Most of the shareholders in such buildings are investors who sublease the units once they close on a purchase. Such shareholders/investors will never vote against their own interests. Thus, it is nearly impossible for the board to gather the necessary 66%. That's precisely the reason why these buildings are called "investor friendly".

Today, this type of co-op deals is an incredible investment opportunity that certainly deserves a careful consideration.

If you are interested in investing in co-op “investor friendly” buildings in Manhattan or would like to get more information about this type of deals, please contact me at md@findsider.com.

dilen, stop spamming, sheesh!