What should I ask for in an apartment buyout?

Oops, I meant $600,000. Sorry for the typo.

Your first step is to get knowledgeable. Find out how much market rent is for an apartment you would want to move to.

If you love your apartment and can swing it financially, try making an offer to buy with a steep discount (say $450K), it may just be worth it to the landlord not to have to deal with an occupied rental apartment when he is trying to sell condos. (Some buyers may object to holdover rent stabilized tenants especially in a small building).

If you can't possibly buy or WANT to move here is what I would do. Decide where you want to live (within reason, not the clocktower apartment in Williamsburg) and estimate what the difference is between the rent you would have to pay and what you are currently paying. Ask the landlord for five years worth of the difference plus an extra couple of thousand for moving expenses.

Others may have more professional or proven means for estimating buy out requests. This is just mine that I used at one point (but it didn't get to negotiations).

You need to figure what it would cost you to rent an apartment in an area that you would be happy with. The difference in that figure and what you are paying now is a starting point. You should also find out exactly the rent the apartment you are living in is without the discount for being rent-stabilized. You are also protected now somewhat because the rent-stabilized law only allows for a small increase each year.

How much you would need to move into your new place has nothing to do with what your landlord would be willing to pay you. The experts here can provide "cap rates" which are multipliers to apply to the rent you pay to determine the sales price for an apartment that rents for what you pay. If $600,000 is the likely price he could get to sell your apartment, then the difference between those figures is the value of freeing up your apartment. You're not going to get all of that because you have to leave somethi ng on the table, but it gives you an idea of where to start.

Eric has it right. Don't just figure out what it's worth to you. Also figure out what it's worth to him.

You need to figure out BOTH, and be sure you understand that a buyout is taxable to you as ordinary income.

So your number to present to the landlord needs to be grossed up to cover the taxes. That is your true "need" number.

I will make it simple for you: your number is $50K... You will likely get $35K to $40K. Good luck.

If your building is going condo, isn't there an insider price? Is there an offering plan?

The advice of the attorney for our Tenants' Association was pretty simple: Don't ask for anything; just wait. When you get the Sponsor's first offer, ignore it. When you get their second offer, ignore it. These offers will probably include some official-sounding deadlines. You can probably ignore those too. The longer you can feign complete indifference, the more likely you are to find out what it's really worth to the landlord to get you out.

The way our attorney saw it, the problem with asking for a buyout - even an outrageous one - is that it may give the Sponsor the impression that you are going to leave anyway, or that you might be vulnerable to decontrol. The impression you ideally want to convey is that you love your apartment and will never leave at any price.

That's a pretty sensible view, but it's a bit heavy on zero-sum strategizing. Sometimes, approaching the other side with a win-win proposition can actually work. For example, if the sponsor is a big firm, the person responsible for your building may be under pressure to generate a certain number of sales in each reporting period, even if it means accepting lower prices, or paying up a bit to get tenants out.

And if that is your real name, I would change your username with any follow up questions or comments.

w81 tells it--but get a good lawyer for this--call dru white--no kidding--interview him--ive used him for several buys/sells since 87--honest effective and completely loyal to client, as a lawyer should be.

I have never been in the situation, but here are my thoughts. The value of your rent stabilization is pretty straightforward to calculate if you plan on staying indefinitely.

Suppose the true value of the apt is $600K, market rent is $2500, taxes are $500, and common charges are $500. So someone out there is willing to pay $600K today to save $1500 a month today, with all numbers growing with inflation over time.

Now suppose your rent is $1500 and you plan to stay indefinitely. You only have to pay $500 a month beyond taxes & common charges. Now if someone is planning to pay $600K to save $1500 a month, and you only pay $500, then your rights are worth 2/3rds of that $600K, or $400K -- if you stay indefinitely.

What if you only stay 10 years, what is the value then? Well the market is paying $600K to save $1500 a month, or $18K a year. That means the $600K will pay itself off in 33.33 years. If you are only planning on taking advantage of your RS for 10 years, then the value is approximately 10/33.33 * $400K = $120K. That number is a bit high because of something more complicated than I feel like explaining having to do with 33.33 years vs indefinitely, but let's call it more like $100K.

Only you know how long you're planning on staying, and FWIW I'd guess people tend to stay put longer than they expect. Perhaps the above explanation of the value of "indefinitely" will skew you to stay longer. In any case, it is to your advantage to communicate / imply as large a horizon as possible. The longer you've been there so far, the easier it will be. And you know your true period, off of which you can figure out the real value to yourself.

The West81st strategy of ignore may be fine, I don't know. Certainly "I don't want to leave ever" is your best position, especially if it's real. But you can also have your reasons with numbers to back them up when pressed. "Look, if I leave, its gonna cost me $400K to replace what I've got, and that's not a number that's gonna make sense for you, so let's drop it."

I agree with west 81st's advice

I was in this situation. Eric and West81 are spot on. Our situation was a conversion on prime fifth. The owner paid a nickel under 8 figures to buy out less than ten RS/RC tenants. Their initial offers were stupidly low, so hold out bc there is a lot of value on the table. Get an attorney once the pot sweetens as you wait it out.

Also, think about taxes. You should try to get the owner to cover them. If not, be mindful you can characterize the surrender of a long term lease as LTCG, not OI.

JG:

1. you need to compare your current rent with the market rent you will have
to pay if you move out

2. whatever buyout you receive will be taxed at capital gains rates: sale of long-term lease
3. in all likelhood your new rent will be $12-20,000/year higher than your current rent
4. I would ask for at leasr 20x annual difference in rent
5. plus moving expenses
6. if you are happy where you are there is no reason to move
7. in any event I wouldnbt consider anything less than $200,000 unless you have terminal cancer
or something similar

i'd get an atty with good knowledge of this type of situation right now--pay a few bux now for a couple of hours of work/advice, to insure you make no mis-steps--too much value on the table to risk jeopardizing

and if you've got terminal cancer, keep that btwn you and your atty--and put me in your will!

IMHO and from what I have witnessed; a good buyout is fine if and only if you are leaving the city. Also, if you like where you are living and the neighborhood, full well knowing that you can be happy there for several more years at least, just stay. As a friend of mine in similar situation told me; "The only thing I didn't like about my place was the kitchen counter, and it was a pittance to replace". Higher rents, capital gains and everything else listed above appear to be a no win if staying in the city. Make it easy for yourself.

I really appreciate all your comments, as they've been really helpful.

A few more points:
1. I was told by a mortgage broker that I couldn't expect more than $50,000, though I'll also ask around further (one tenants' association didn't even know!).

2. As for an insider's price, right now they're offering too little off, only 15%, up from 10% initially. I was told that the norm was more like 50% off, so I'm going to see what kind of mortgage I could get (my income isn't high but it's increasing, and I have some investments. I was advised to see if I could get the management's price down to $300,000, and see what happens.

3. West 81st's comment about not acting too quickly was encouraging. I have been delaying, as it happens, but only because I've been too busy recently to conduct the research and talk to the people I need to talk to. So it's good to know that my delays may indeed have worked in my favor. Now they know that I'm in no hurry to leave. They didn't make any offers, btw, they just saying they wanted to talk with me about it. It's interesting: I got the same advice about buying, i.e., after making that $300,000 offer, just sit and do nothing, and let them stew a bit.

4. The problem with the buyout is that, even with $50,000, it may not be worth it for me to leave. Local rents are high. Also, I'm in a rent-stabilized situation, and though the rent does go up (sometimes by as much as 6%), it's still OK, and I have all sorts of rights that non-stabilized renters don't have.

It's interesting. The landlord is pressuring me a little, with an email from the manager saying that the "window of opportunity" on a buyout won't be there forever, etc.

"window of opportunity" is pure and total BS. Don't feel any pressure, just sit tight and they will have to sweeten their offer to you. If you want to stay, just stay as a renter. If you want to buy it, then wait them out and buy it later at your price not theirs. You have all the leverage and they have none.

The sponsor is not allowed to negotiate buyouts with individual tenants until the plan is devlared efective. He can negotiate buyouts with the tenants committee as a group only. In the course of negotiations with the tenant committee he may offer a buyout to all, which you can decide to take or not. After the plan has closed then the sponsor can negotiate with individual tenants. So sit tight, if you can aford to buy and it seems resonable do so. Otherwise wait and negotiate later, your tenancy is protected so no hurry, you may be in a better position next year.

oops excuse my spelling

"Window of opportunity", that's rich. Just makes me laugh. Other than that, you hold the cards and best of luck to you OP.

As a real estate broker and mortgage broker, I used to buy with some investors what was called tenant's rights,meaning I would pay a tenant living in a converting building a certain amount of money for his rights to purchase at the insider price, or sometimes I would buy the apartment, sell it and split the profits with the tenant.

That said the days where a tenant gets 50% off the outsider price hasn't existed for sometime. Whether a tenant gets a good insider price depends on a few factors. For one just how anxious the landlord/sponsor is to unload his apartments. Also the tenants should get together and hire a lawyer to do some neogitaing. This can be a big help in getting a good deal and most tenants living in converting buildings do this.

Just where your plan is in the process of getting approved for filing with the state attorney generals office is impoortant.

So until the above info is known, it doesn't make sense to negotiate anything with the landlord.

Again organize, and feel free to email me.

Ellen Silverman
Licensed Real Estate Broker
Licensed Mortgage Broker
www.esfundingco@aol.com
www.esfunding.instantlender.com

Hire a lawyer to do some negotiating. (sorrry for the misspelled word)

Just to stir up the pot a bit: it is funny that we give advice to a rent stabilized tenant -who basically is subsidized by our tax money- how to extract more money from the owner of the building so she can evacuate. The owner cannot claim his own property because the law gives negotiating rights - to the point of blackmailing - to the tenant.

Amazing isn't it?

How is this rent stabilized tenant subsidized by the government?

their "window of opportunity" is running out. they just misphrased it.. ;)

Greensdale,

Rent control reduces the market value of controlled rental property, both in absolute terms and relative to the increase in property values in unregulated markets. The tax implications of this reduction can be significant, as taxable assessed rental property values decline relative to unregulated property.

Search the web for a study of rent control in New York City, which calculated the loss in taxable assessed property values attributable to rent control at approximately $4 billion in the late 1980s. These distorted assessments cost the city an estimated $370 million annually in property tax revenues. Who pays for that? Guess...

Interesting.

unfortunately for NYC's pocket, the tax abatement is a much larger drain to the property taxes collected, then the leftover RS/RC units. in the 1980's there was a much bigger "cost" to the city then now.

I think rb345's advice of 20 year's worth of rent difference is about right. There's only about 30 year's worth of rent difference between the rent you're paying and the value he can get by selling the apt. You have full right (if you stay) for the entire 30 years of value. Asking for the entire 30 years is not viable -- it leaves essentially nothing for the LL. Keeping 2/3rds of the value that is rightfully yours while giving up 1/3rd of the value, in exchange for liquidity & freedom, seems about right. Now if you know you're definitely going to move in 3 years, different story.

A $50K offer, or 15% off an inflated $600K ask which is about the same, is a joke. Assuming your plans are indefinite and using rb345's 20-year rule, that amounts to a $200 rent differential. I'd guess you are closer to a $1000 rent differential.

As far as living in a rent-stabilized apartment is concerned, it's the only way a lot of people can afford housing. So I don't think of myself as living off the fat of the land. Much of the so-called actual market value has been inflated over the years because of market failure: when the natural workings of a market fail to satisfy demand. There are lots of luxury buildings going up, but none going up offering affordable apartments.

Ellen, I don't know about organizing. It's a small building, and two of the people I know are definitely renters would never be in the market to buy. In any case, I will keep you in mind.

Inonada, I hope you're right. But I'm not so sure. I was told by a local mortgage broker that $50 was reasonable, but not higher.

Anyway, John75's comments on the evils of rent control aside, I want to thank you all for your helpful and interesting comments.

Maybe $50K is expected, but you don't have to accept it. If it doesn't make sense for you given your discount and the number of years you expect to stay, it doesn't make sense. Don't sweat it.

>> it is funny that we give advice to a rent stabilized tenant

What's funny is that the advice you gave is utter crap, and then you pontificate about the magnanimity of the advice. $35-40K for a $600K apt whose rent is 25-50% discounted? Sounds like you might be throwing away your plentiful income on poor financial decisions, and then you lash out against people who make things work on less.

The OP got into a contract years ago based on some arguably stupid policy. The LL bought and leased based on that same policy. Some other person bought their own place. Neighborhood went up based on luck / wisdom. Housing bubble helped based on some other arguably stupid policies. Housing bubble kept supported based on yet other arguably stupid policies. Now all three have benefited, but you lay blame at the feet of only one of them?

Argue against the policy, fine. But dismissing RS rights is just as bad as dismissing property rights. People made irreversible life choices (like deciding not to buy) based on those rights.

joannegerber: "...so-called actual market value has been inflated over the years because of market failure..."

Exactly: when a whole bunch of housing stock is taken OFF the market forever - that's what rent stab/control is, after all - the market IS broken and the rest of the housing stock is artificially inflated. If someone pays artificially lowered price, someone else pays artificially inflated price. Abolish all kinds of rent regulations, and voila, plenty of reasonable apartments around! A miracle!

>> These distorted assessments cost the city an estimated $370 million annually in property tax revenues.

Wow, that's like a whole $45 per person in a city with a population of 8.2M. Out of a city budget of $67 billion, or $8200 a person. About 0.5%.

Meanwhile, mortgage interest deduction costs $100 billion in tax revenue. Over 300M people, that's $333 per person. Out of a federal budget of $12,000 a person, that's 2.8%. More than 5x larger.

However, let's not discuss that distortion and the stupidity of tax policies that disproportionately favor the wealthy. Because it happens to favor John75.

John75, here's the real beauty of your baloney.

421a tax abatements create RS units. That's the arrangement. The abatements also cost the city $400M a year. Two sides of the same coin.

So now why don't you spill some virtual ink about the distortions of bad policy from the other side too?

>> If someone pays artificially lowered price, someone else pays artificially inflated price.

Hmm, yes you are absolutely right. Let's go back and abolish all past freely-signed sales contracts and replace them with prices that should have been there without an artificial bubble. Sounds like a great idea, comrade.

Eric_14 and inonada touched on a point that I think bears emphasis: the Sponsor's level of motivation is closely tied to the amount of rent you pay, or more specifically, how that rent compares to a) the cost of carrying your apartment and b) the potential value-if-vacant.

Regulated rents vary quite a bit. Some are amazingly low; others are within a stone's throw of market rent. A tenant in the first category has significant negotiating power (although the Sponsor might pretend it doesn't matter much because "We buy in bulk" or "We're in this for the long haul"). That's why I'm leery of sweeping generalizations like Streetsmart's "the days where a tenant gets 50% off the outsider price hasn't existed for sometime." Certainly, no offering plan in the 21st century provides a 50% insider discount. Once the Plan is effective, though, anything is possible if the negative carry or opportunity cost on your apartment is sufficiently onerous for the Sponsor.

Number of RS units in Manhattan in 1999: 365K
In 2011: 260K

Other rentals in 1999: 107K
In 2011: 225K

"my income isn't high but it's increasing"

That begs the question if you will even be able to qualify to rent in another place that you like should you end up moving. So working out a deal to buy your unit may be the easiest for you, all things considered.

Great thread
Inonada...eloquent explanation of actual practical value

Thanks for your advice and encouragement inonada, and you, too, hsg9000.

The rise in property values has had a lot more to do with speculation in the real estate market that finally went bust. I've been in my place about 20 years, and so that is why I can even afford this place. If the market were totally unfettered, especially in NYC, the rents wouldn't go down naturally, they'd keep climbing sky-high, because there is no shortage of rich people (often from abroad) buying pieds-à-terre in the city. That's what market failure is in this case: it fails to fulfill all the demand that's out there because it's not profitable for the developers to do so.

As for giving advice to a rent-stabilized tenant, John75, what's wrong with that? If you don't want to give me advice, then don't. But stirring up the pot a bit is a waste of everyone's time. I'm not looking for a political discussion about the rightness or wrongness of rent stabilization. I'm just looking for practical advice from anyone with something to contribute.

Fuck me, 20 years? You ain't going nowhere, and make sure the LL knows it. And if $100K sounds like a tempting amount of money to you, make sure you realize that the entire worth of that $600K apt is nothing more than the monthly spread between rent and common charges + taxes. Your rent payments over the past 20 years have bought you those rights.

BTW, if rent stabilization had not been part of the equation, would you have bought sometime in the past 20 years?

FTR Joanne, I am not a proponent of RS going forward (i.e., new ones). Nor 421a, nor mortgage interest deduction, nor Freddie/Fannie.

Just think it's silly to demonize individuals exercising their rights under policies I disagree with. If we collectively vote for policy I feel is bad, I would still encourage everyone to take full advantage of said policy.

>>> These distorted assessments cost the city an estimated $370 million annually in property tax revenues.

It's an interesting perspective. Certainly not one I've considered in the past. I thought John was going to give us the point of view that rent stabilization is outright paid for by the taxpayers, which it is not.

>Wow, that's like a whole $45 per person in a city with a population of 8.2M. Out of a city budget of $67 billion, or $8200 a person. About 0.5%.

I don't believe the $370MM is government waste, but if it were, I'm not sure why we should look at government waste and say it's only a small amount on a per citizen basis.

>Meanwhile, mortgage interest deduction costs $100 billion in tax revenue. Over 300M people, that's $333 per person. Out of a federal budget of $12,000 a person, that's 2.8%. More than 5x larger.

Again, I don't believe that the $370MM is government waste, but again, if it were, why is it ok just because something else might be bigger waste?

>However, let's not discuss that distortion and the stupidity of tax policies that disproportionately favor the wealthy. Because it happens to favor John75.

Sounds like you have a beef with John. That doesn't make government waste ok.

Personally I think that what aboutready is doing is the worst. She's going to take significant money from a legal settlement that is intended to right the State of New York's tax benefits given to developers in exchange for affordable housing for the working and middle class, or should be given back to housing for the middle and working class of New York. And this was all after she entered into a market rate lease on an arms-length basis, and was in no way personally harmed by anyone.

Of course, someone could say that the NYS-funded windfall to aboutready is just $50,000/ 20 million citizens of the State of New York, and therefore it is ok that this money is going to her. But that's not how I look at it.

Anyway, I think joannegerber should get what she deserves out of this negotiation. It's merely a two way negotiation between two parties, one of whom wants the personal rights (rent stabilization) that currently belong to another.

Joanne - I gave you my honest opinion about how much you can get from your LL - $50K. At the same time, I have certain views about rent control in general - I am not blaming you for taking advantage of a broken system. But the system IS broken.

Ino - your comments are usually excellent but lately you sound bitter.

Greensdale - I could not agree more.

If we really want to get into market failures, let's discuss those beautiful pre-war buildings in the village occupied by all those little NYU hellions. Sure, they are gritty dorms on the inside, but they have so much potential...

why this unit comes with roof rights but others dont?

John, just stirring the pot back at you. No harm intended.

I think we agree that RS is broken. I think the govt agrees too, as evidenced by the reduction of RS units. I'd go further than "not blaming" people for taking advantage of a broken system, I full-on encourage them to do so. How else are we to learn not to create broken systems? By creating broken systems and hope people hash out proper vs improper uses one-by-one through online forums?

Any case, how do you feel about 421a and mortgage interest deduction? Broken system like RS or good?

You are right West 81st (as usual), post offering plan, renters are often able sizeable discounts for purchasing their apartments (especially if they are relatively young or have a possible "successor" waiting in the wings). If you choose to wait joanne, you may be able to buy the apartment for less than you think and have a mutually beneficial ending for both you and the sponosr.

Greensdale, apart from your personal antipathy (which I don't get but whatever) for AR, I don't understand why you are so angry about her settlement. She is not the only market rate renter who is getting money from the settlement and I doubt many, if any, are saying "no thanks" or donating the proceeds in total to charity. Aboutready may have been a little more affluent than a "traditional" PVC resident but she and her family were at least an asset to the "neighborhood" as opposed to the 3 people to a studio, students and twentysomethings whose behavior (noise, drinking, vomiting) has been very disconcerting and upsetting to long-term residents, especially the elderly. Those residents are hardly the "working and middle class families" residents ST/PVC was built for. But where is your anger against them.

HB, regarding "government waste". I did not call it government waste. Just that if we're going to talk about govt policy distorting the housing market and taxes missed by such distortions, let's talk about the bigger ones as well.

I am curious whether John75's against all govt policy distortions to housing, or just the ones that he does not benefit from personally.

Actually, every member of the class signed a market-rate lease. Every.single.one.

It's redress for the landlord taking money from taxpayers and illegally deregulating apartments in the process. You have no problem with the landlords defrauding the taxpayers?

The landlord lost all of its equity, this isn't even a case against the landlord at the time.

The money was from the taxpayers of the State of New York, intended to provide affordable housing for the working class. Not the wife of an equity partner at a top NYC law firm. You still have the opportunity to do the right thing when the money is paid to you and make site you donate it appropriately. I hope you do

HB, obviously aboutready is not swayed by your argument. Why don't you take your message to the class action lawyers? Much more money there, to right this grave injustice. If none of the market-rate tenants deserve this, then surely the lawyers representing thousands of them (and no one else) surely doesn't deserve it.

Thank you for your thoughtful suggestions.

Hfscomm1

Hi C0C0.

Hfscomm1

Joanne:

1. I have bought dozens of apts like yours over the years for investment
2. and also bought out a number of my rent-stabilized tenants
3. a great deal of what you are being told is inaccurate

4. first, there is no "window" in the buy-out business
5. owners like me are perpetually in the business of making beneficial deals

6. second there is no price ceiling on what to pay a tenant
7. owners like me are businesspeople: if a deal makes sense we will do it
8. the resale value of your apartment sets an upper level on the benefit of a buy-out
9. but its resale value with you in it also sets a floor
10. depending on .. the resale value of your apt as an RSL coop mighr be as low as 10% of market

11. a smart owner will pay a substantial fraction of the difference between floor and ceiling
12. and more if they need cash badly
13. do not let yourself be bullied or buffaloed
14. and remember to consider where you will live if you take a buy-out
15. if you intend to stay where you are you really should seek 20 years rent difference NET OF
the amount of your buy-out that you immediately lose to taxes

16. you also need to consider the possibiiity that Bernanke's policy of printing money to pay
for the federal deficit will stoke hyper-inflation of much higher inflation rates

17. if it does your 20-year assumption will be way off and your buy-out of much less value
18. in part because of that you probably should just stay and keep your RSL status

Hb, I think you don't have a clue about this.

AR you don't deserve this windfall. This money, it's source being the taxpayers of NYC was not intended for you.
I hope you ultimately don't do the wrong thing and take and keep this ill gotten money.

Hfscomm1

Do they have rent regulations in Columbia County?

Hfscomm1

Ino,

As far as the mortgage interest deduction: it makes no difference to me but you are being silly: you compare apples to oranges. The mortgage interest deduction is given to anyone who gets a mortgage. Everone benefits from it. How can you compare it with rent control?

As far as the 421a, I think it is wrong. If you ask me if it affects my decision when house hunting, not at all. I could not care less if the apartment I like comes with tax abatement.

>I could not care less if the apartment I like comes with tax abatement.

Why not?

> The mortgage interest deduction is given to anyone who gets a mortgage.

and who pays taxes.

Hfscomm squared

Interesting, John75. What line are you in?

John75, people get tax breaks for any number of reasons. Mortgage tax breaks help people who get mortgages, and taxpayers who don't get mortgages are supporting that with their tax monies. All this is about helping people afford housing, whether rental or owned. Also, I'm a taxpayer, too. I might be supporting your mortgage! So, it's an even trade, right? Now let's move on and stay on topic.

rb345, thanks. It seems that you may be right about staying put as the best solution.

Greendale: I do not say I won't take the tax abatement - but it won't affect my decision.

Alan: My trade is very specialized - let's just say I "move" things :-)

John75, on 421a. Suppose apt A is not abated. Apt B is has total abatements over the next 10 years to the tune of $200K. Everything else is the same. You'd pay the same for both?

On mortgage interest deduction, not everyone benefits. Renters do not benefit, obviously, regardless of income. Middle class homeowners do not benefit because they cannot itemize, more so in states with no income tax. Affluent homeowners benefit the most, because they itemize and carry sizeable mortgages near the $1M limit. Wealthy homeowners benefit less their deductions are limited by PEASE and the $1M cap.

Point is its a distortion with both voluntary & involuntary exclusion, just like mortgage interest deduction. A middle class mortgage holder in Texas is excluded from the benefit just like you are from RS apts over $2500. And just like a renter could buy and gain the benefit (but does not because of life), you could go rent an RS apt in the Bronx for $2000 but choose not to because of life.

BTW, the rent control and rent stabilization programs are different. The former has been going through a phase-out process that started 40+ years ago. Only about 3% of rentals, probably 2% of all apts, are under rent control.

Shipbroker?

>Shipbroker?

Pirate?

rb345: Good post. Couple of minor points:

- #6 and #8 seem to contradict each other. I think #8 is correct. The ceiling exists. #6 is true only in the sense that the tenant cannot know what the ceiling is.

- #7 is true, but you would hold out for a better deal before settling for one that "makes sense". If a tenant approaches you and proposes a buyout that is a genuine win-win, your initial reaction will be, "Are you insane, you greedy, spoiled, ignorant leech? I can't possibly pay that much." If the tenant holds firm, you will eventually, grudgingly, take the deal, because it makes business sense. That's a bit different from "if a deal makes sense we will do it".

RB: have you every had a situation where you (say) offer someone $50K, they turn it down, and then they stay for a period shorter than it'd take to recoup the $50K?

Inonada:

I have never spent more than $15,000 on a lease buyout, and at times in the 1980's only
1/3 of that or less. I have even had tenants lease breach amd simply move out, thinking
they there were really sticking it to me.

But in today's economy with all its risks of meltdown and accelerated inflation, it would
be very hard to structure a buy-out for Joanne which doesnt leave her at substantial risk
of finding herself in substantial economic and housing distress in later years.

On difference is thaty then the exonomy was expanding

West 81st unless the asking price if a steal, I would try to negotiate it down. There is no
real conflict between numbered points 6 and 8 in my earlier post: point 8 qualfies point 6:
the resale value of the apt sets an upper ceiling on what I would pay

hb, the judges disagree with you.

The judge doesn't disagree with me.

"But in today's economy with all its risks of meltdown and accelerated inflation, it would
be very hard to structure a buy-out for Joanne which doesn't leave her at substantial risk
of finding herself in substantial economic and housing distress in later years."

And I have two neighbors here who are worse off than I. So, I suppose the answer, as has already been suggested, would be to stay put.

Another interesting twist, a mortgage broker who researched this property said that the owner will have to sell 90% of the units (i.e., out of 15 or 16, as two units may be counted as one) before they can get the financing to go ahead. That means that this place may not go condo for a long time. Strange that the owner hadn't thought of this before.

How many apartments total? How many are with rent regulated tenants?

hfscomm1

joannegerber, how much is the current rent?

Joanne:

1. your owner has known about that 90% sale problem all along
2. what it is really doing is a classic 1980's leveraged buy-out
3. trying to use the proceeds of selling the building's units as individual condos
4. to pay for its acquisition of the building

5. that fact gives all of you residents tremendous negotiating leverage
6. although that increased leverage doesnt alone reduce my concerns about your getting hurt

7. it is however a real-time example of the importance of doing due diligence
8. you deserve praise for your persistance in learning as much as you can about your seller

9. because that 90% fact totally reverses the balance of power between seller and tenants
10. and puts you collectively in total control of your seller

Joanne, what do you mean that the owner will have to sell 90% of the units to "get the financing to go ahead?" The owner has already completed sales of several units in this building over the past few months. One of the buyers had 80% financing, and a couple of the others had some financing.

The reason the rest of us are paying stupid real estate home prices and rent is because of people with rent control, stabilization, and zoning laws. These rules short circuit the market by artificially reducing supply.

Anyone with half a brain can reason this out. People who can't afford to live here are subsidized. (sometimes for an entire lifetime, and they pass it on to their children, who they claim live there too). Zoning laws prevent developers from increasing the supply to meet the demand. Therefore, prices increase as people fight over the remaining available apartments. In a pure economic market, rental prices in NYC would probably be about 1/3 of what they are now. Of course, we'd have massive highrises everywhere blocking out the sun.

As an owner, I don't know if I want these subsidy rules repealed. I bought my place at the inflated price as a result of the subsidies. If all rental rules were removed at this point, my home's price would plummet. These rules result in politicians currying favor from both homeowners and subsidized squatters squeezing the normal renters the most.

You want no zoning laws?

For selfish reasons as an owner, I don't want a free-for-all now because that would cause my home's price to plummet.

But yes, less regulation. It will allow more people to be able to afford to live here. Some things like parks and public areas need to be protected, but stupid rules like residential vs commercial.

Thank you for your concern, rb345. I really appreciate that.

Regarding the 90%, buster2056, that was what was told me by a mortgage broker I met with last Friday, who had done some homework. Tomorrow I'm consulting with a lawyer to see in more detail what my rights are.

rb345 I may have an opportunity for you. Would like to discuss.

ctgirl:

Thank you fpr thinking of me. My e-mail address is oxford22nd@yahoo.com.

How did this end?!

Hi there,

The building I have been living in for 13 years in Alphabet City, 5th st.& Ave C was bought out by new Owners/Mgnt a year ago for $4M.
20 units, 5 rent stabilized, 3 rent control and the rest is now market rental of $2300 . My legal rent is $1120.08/mo., 2nd floor. 4 lines, each unit no more than 600 sq.ft. Neighborhood is prime now.

4 previous rent stab. tenants have already taken buy out leases fr $15K-$45K. The LL's lawyer originally proposed a buy out lease offer for my unit last March '13 for only $15K I replied with no because as we know that is not an "reasonable offer' then ignored. Last week I had spoke to lawyer that I was ready to leave. She asked me what was I asking for I said $90K rent free march/april vacate by May. She came back to me with $30K 6 months rent free. Lawyer also claimed reason I'm not getting about $45K is because my unit is not as valuable as ground level unit below where they will be constructing a small outdoor patio access.

We are still negotiating but lawyer seems unworkable and LL won't budge any higher. So at this point I need advise...how soon do I want to leave, get a lawyer(is it worth it?), or just settle for $30K? I know it's best to get a professional to deal with negotiation but I'm worried about legal fees. Not exactly sure how buy out lease Lawyers in terms of payment. Is there a flat fee for negotiation or are service charges incurred for amount of time negotiating?

Any thoughts or advice would be appreciated thanks.

I agree with Bob420 - you should change your user name to protect yourself. Anonymity is a good thing.