Section 8/Rent Stabilization Impact on Potential Deal
Hi all,
First off, I want to apologize to @Account Closed for missing last night's meet-up. I really wanted to partake, but unfortunately got held up.
I am working on a deal right now in Mt. Vernon for a 6-unit property. Most of the units are occupied by Section 8 tenants. The issue is that the rent for all of them is well below Section 8's Fair Market Rate for 2017. For instance, the 3brs are renting for anywhere from $1400 to $1800, but the 2017 FMR in Westchester for a 3br is ~$2,197. However, since it's a 6-unit, it's also subject to the ETPA, which means I wouldn't be able to raise the rent at all for 2017, and a vacancy lease would only allow me to go up a max of 20%.
So my question is, does one rule (either Section 8's FMR or the ETPA's max rent increase) trump the other? Or should I basically be figuring that these are the rents I'll be able to collect from here on out?
Secondly, the owner of the property lives in one of the units and is interested in leasing back their apartment. I have no objection to this, but does anyone have any input on how the rent stabilization laws would affect this? I would also love to allow the owner to live rent-free for a number of years, either by decreasing my purchase price or putting a set amount of money into escrow and deducting from it every month. Would either of these be more or less beneficial when the owner moves out in terms of setting a rent that complies with the ETPA?
Thank you all for your input! I look forward to hearing everyone's opinions.