Real Estate Professional · New York City, NY · Member since 2016 · 2 posts · 0 votes
I am evaluating a property with 6 rent stabilized units in the Bronx. The upside is in potentially raising rents and I'm wondering if anyone has done this. Based on my research (http://www.nyshcr.org/Rent/factsheets/orafac26.pdf) rents can be increased through Individual Apartment Improvements (IAI). There are certain criteria such as new floors, appliances, etc., but I am looking for some clarification. I understand that rents can be increased by 1/40th of the renovation cost. Does that increase apply to the monthly or annual rent? Also, has anyone tried this and How was the experience? Did you still require approval from the city? If there is a tenant in place, increasing the rent can only be done with tenants consent, have you found tenants to be reasonable and cooperative?
I'm sure there is a discussion on this topic but can't find it. I would appreciate any insight or link to an existing discussion on this topic.
Rental Property Investor · Greenwich, CT · Member since 2015 · 4k+ posts · 2k+ votes
9y
Hi Ed, my wife and I live in a rent stabilized apt in Manhattan. Much of what you cite above does not align with my understanding.
#1: no tenant is going to be okay with you raising the rents, no matter how much nicer you want to make the property.
#2 you need a darn good attorney who understands the NYC laws. DO NOT try to go this alone. You'll get eaten alive.
I know it looks tempting to compare regulated rents with market rate and start fantasizing about the potential property, but it is incredibly difficult to make that a reality. That's exactly why these rent laws exist.
Investor · New York City, NY · Member since 2014 · 289 posts · 374 votes
9y
Yeah, this is exactly the sort of thing that the rent laws are trying to protect against. You better have a damn good understanding of what you are doing before trying to play that game. Look at Sty town as a good example. A few years ago, investors looked at the regulated rents vs market rents and said there was money to be made. In the end they paid waaaaay too much money and ended up losing their shirts. I would do my best to stay away from regulated units if you need market rents to make the numbers work.
Lender · Queens, NY · Member since 2017 · 10 posts · 7 votes
9y
Will any of the units be delivered vacant? I agree with @Jaysen Medhurst on both points. I am also interested to hear from the community regarding investing in Rent Stabilized multi-family especially since the majority of MF in NYC is rent stabilized.
Rental Property Investor · Jersey City, NJ · Member since 2011 · 1k+ posts · 876 votes
9y
I believe that in general, this is a game for the deep pocketed, with good lawyers and the ability to lose a few rounds. The play you didn't mention is consolidating units to get below 5 and off regulation. How workable that is depends on the layout of the place and what tenant buyouts would cost you.
We were close to a contract in 96 on an UWS 8U for $500k, and decided we didn't have the stones for it. We did well here in NJ, but not the >$5m we would have made there if we pulled it off.
Investor · New York City, NY · Member since 2014 · 370 posts · 85 votes
9y
I think the big thing with IAI is the consent. I would look up the RSA about seminars and get a good person well versed in this subject matter. This sort of thing would seem to be a long range play.
Real Estate Professional · New York City, NY · Member since 2016 · 2 posts · 0 votes
9y
Thank you all for the replies. Unfortunately, none of the units will be delivered vacant, but the numbers aren't bad. The NOI is just under $40k with an asking price of $800k in the Bronx. I'm not hoping for significant increases, but wouldn't someone be willing to pay an additional $50-100 per month for $2-4000 of improvements or updates? I would!
Either way, Id be open to waiting for any tenants to vacate to do $8000 improvements where I can then raise rents by $200 per month, which would still be below market. There is a similar property that is priced 20% higher and the Bronx seems to be appreciating a little quicker than other boroughs given that others have too much activity.
Reconfiguring the building into 5 units is an interesting idea, but that may be an even more challenging process. I'm okay with a buy and hold strategy doing occasional improvements when vacancies arise.