All Forum Posts by: Frank Chin

 Dirk:

For your further information, I heard for a long time many rental units are held vacant by landlords in NYC since stabilized rents set by the city would cause them to lose money renting them out. See: Vacant rental units

According to the article:

"There’s a one-bedroom in Jackson Heights that looks like it’s absolutely falling apart. On TikTok, you can see the bathroom sink sitting uselessly in the tub, wires hanging crooked from the walls, and debris littering the floors. A place in Greenwich Village has torn-up boards and what appears to be the remains of a stand-up shower in the kitchen. In Harlem, closet doors lean off their hinges in a darkened one-bedroom. These sad little apartments are the victims of rent stabilization, according to the Community Housing Improvement Program (CHIP), which represents rent-stabilized landlords across New York City and the force behind the TikTok campaign. Too costly to renovate and too cheap to rent — a one-bedroom in Chinatown for $570? — owners say they have no choice but to leave them empty. No use to anyone.

CHIP says there are at least 20,000 apartments like these all across the city — dramatically below market rate, basically disaster scenes — all “forced vacant” because they can’t reset rents after doing necessary repairs. (A problem they have asked the Supreme Court to solve for them.) But the city, specifically the Department of Housing Preservation and Development (HPD), says that number is closer to 2,500. This is kind of how it goes. There is dizzyingly little consensus on the matter of our rent-stabilized housing stock — nearly a million apartments, and 28 percent of our housing — and even the basics have been contentious: the condition of these apartments, the money required to make them habitable (even nice), or how many of them are actually empty in the first place. Try to figure it out and you’re sent down a rabbit hole that leads to only more questions. So are these landlords bluffing? And why is it so hard to tell?"

I also don't have a problem disagreeing with a disagreeing post, but the evidence is out there that many landlords rather keep their rental unit vacant instead of losing money renting them out. That's been going on and reported for a number of years. 

So yes, many landlords do the opposite of my friend, they keep the apartments vacant instead of renting them out illegally charging more rent than allowed. Twenty thousand vacant apartments are no joke. I'm glad I'm not one of those owners.

 Dirk:

My friend did well but I wouldn't want to threaten deportation on top of overcharging the legal rent by purposely renting to ignorant people. I rather be able to sleep well at night and not risk doing something illegal. From what I heard, he's not the only on doing that.

Then back in the day, there's rent controlled tenants. I looked at a rental where a 95-year-old lady was renting it for $97/month whereas the market rent was several hundred. It was rent controlled as a result of WWII and this was the late 80's. Was told the landlord didn't bother to file paperwork to get 3% increases every few years since 3% of $97 is only about $3.00. The selling point of the property is the 95-year-old will drop dead shortly. But she's there for more than 50 years and still in good health. In other words, my cash flow would be great when she drops dead.

I looked at a number of rent-controlled and rent stabilized units and figured its just safer to stay way,

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Dirk:

I've done RE investing in NYC for nearly 40 years. I looked into rent controlled and rent stabilized properties and concluded it's too much uncertainty. I instead did foreclosures and pre-foreclosures where returns are more certain and requiring a lot less analysis and done very well, in fact much better. It takes a bit more work to find.

I know a good friend of mine who bought a 16 unit rental, all rent stabilized, with a free unit to the super. He kicked the super out, moved into the unit himself, then rented units out to un-documented immigrants increasing the rents beyond what's allowed, and replaced about half of the tenants that way. Told the undocumented tenants if they complained, he would report them to the authorities and have them deported.  Apparently, the doctor who sold him the building was so impressed with what he did, bought the building back for several times what it was sold for. 

I think my method of investment is less risk and more ethical. 

 Aleksandra:

RS is for Rent Stabilization, where they regulate rent increases on rental units rendering RS properties unprofitable. 

See: RS Rent Stabilization

Reza:

Find out where the zoning department for the property is located. It's usually part of the Planning Department on the county or city level. There are numerous issues involved such as zoning for your area, is it a one family zone and can you do a duplex or fourplex in a one family zone, land building ratio if you have to add on to the house? I have a duplex which I was not allowed to expand to a triplex, based on zoning regulations. Even if they approve it, duplex is built to different standards and does not require fire escapes, cement walls for furnace rooms, sprinklers among other things that the triplex requires, and the upgrade is cost prohibitive. Besides fire escapes are considered unsightly in single family zones. They usually have a help desk at the zoning department that answers simple questions for free. 

Hello Jon:

I had a similar problem with various triplex I had with municipal regulations on garbage cans, when they can be pulled out, when they can be bought in. In one triplex, I was fortunate enough to have a retired gentlemen next door, another triplex, who's handling garbage pails for his landlord, to handle mine, and he gets a needed a driveway for his 2nd car, and a rented it to him for free in exchange for handling garbage pails. I had another triplex where I gave one tenant a rent rebate, some years back of $75/month to haul the pails out at night and haul it back in the next morning.

Here in NY, with recycling, there's four types of garbage and a can for each. An absentee landlord next to my triplex assigned 4 pails to each tenant, a total of 12, and on garbage night,12 pails are pulled out. With so many pails, most are not full, they get blown over even before pickup, and after pickup, there's 12 empty cans rolling around on the sidewalk, and blown into the street, especially if the tenant gets back late from work, and the cans are on the sidewalk or in the streets all day obstructing traffic. This compares to my building, where one tenant is responsible for garbage pulls out the cans, and mostly 3 or 4 cans, not 12, therefore heavier, and is responsible for pulling it back in. Since he gets paid for doing it, the onus is on him to pull it out on time and pull it back on time.

I don't know if the landlord next door gets fined, and if so, deserves it. I had his cans rolling onto my sidewalk and fortunately, never got a ticket because I had someone handling my pails, and he didn't complain about the rolling cans. But I can see tenants not being able to leave work early just to pull in garbage pails the day after garbage night.

Hello David:

Years ago, I had a CPA who done my books and taxes for a few years, decided to quit accounting and go into politics. At the time, I had several rentals, a side software business, and then bought a business with 8 employees. I finished my MBA in finance, which included accounting courses, so I thought I know enough about accounting, especially depreciation,1031's, taxation that I can handle doing accounting and filing taxes myself.

At the time, I've been advised that I should have good CPA's and tax advisors if I'm engaged in so many businesses. In real estate, for instance, especially during the Reagan tax cuts, you need someone that's up to date with the changing tax laws. Another reason for using CPA's is if you run into problems, you'll have professionals who can answer to the authorities as to what went wrong so you can stay in the clear.

The business I took over had a CPA. With employees I have to get all kinds of insurance, and unemployment insurance, for one.  Then one day, an inspector from a state agency showed up, asked me for all types of records. She's a bit nasty, demanding and had a bad attitude. I didn't know what to do and remembered the guy who sold me the business had a CPA. I found his number and fortunately he was in the office that day. He asked me to put the inspector on the phone. I heard him yelling at her over the phone "what are you doing there, you should talk to me first". The inspector was shocked and replied,"I'm sorry, I didn't know he's your client". She went from nasty to smiling and apologizing to me, and promptly left. I talked to the CPA later, and says she's the inspector for the area, chatted with her, and all is clear. Didn't charge me anything.

That caused me to get a local CPA to take a look at my taxes in real estate, my IT business, and he asked for the returns I submitted the last few years when I did it myself when my former CPA quit and switched fields. He found I missed a few large deductions, and he can file amended returns.

That's a while back, and I used CPAs since. I did most of the book-keeping myself but used the CPA's to file taxes and double check my work. For me, it's the cost of doing business.

Hello Poonam:

Did you have a roofer check for the source of the leaks, or did you just assume a 20 year roof cannot leak on it's 13th year. I bought a number of properties through the years, held a few for over 20 years. I had several roof leaks long before the 20th year time span of the new roof that I installed. Turns out in the beginning I did not have roofers do inspections bi-annually to see if everything was OK. I had roof leaks due to clogged gutters. Now I have roofers every other year to do roof inspection, and gutters cleaned out if needed. I also have gutter guards installed.

The problem is when gutters are clogged, it fills up and overflows, and the water then seeps into the attic at the roof line where the gutter meets the roof. For me, it's cheaper and simpler to hire a roofer, pay him $150. have him climb to the roofs of the buildings as I don't keep a roof ladder on each property and don't have a vehicle to lug the ladders round. The paltry sum I pay the roofer saves a ton of money in repairs, and the danger of me tripping and falling off the roof. I even had roof tiles blown off the roof during heavy windstorms.

As to paperwork, lots of folks can't find paperwork from 5 years ago, let alone from 13 years ago. Some friends of mine thought it was ridiculous of me to still have files from 40 years ago, and in fact I managed to find some paperwork from 1983 for a recent closing.

All in all, figure out why it's leaking and honestly, I don't believe it's the seller's fault, fraud or negligence. 

 Hello Weronika:

You should check first to see if there are any "rooming house" regulations. Early in my real estate career, I looked for real estate deals, and had quite a few referrals where the property cash flows when rented by the room but does not if rented conventionally. Turned out the investor landlords were not aware of this, were found out, and forced to sell. My mother-in-law owned a duplex, and the landlord across the street, rented by the room was found out by authorities and forced to sell. Somebody bought it and she was shocked it went up for sale a year later. Turns out the new buyer thought it make a good rooming house, rented out rooms, seller never told him anything about his trouble with the authorities. and got into trouble.

I owned a SFR in an "A" neighborhood and had rooming house regulations originally. It was later abolished, no more rooming houses allowed, but replaced by a regulation that no more than 3 unrelated persons can live in an abode. I recall my SFR tenant had trouble with a retired couple who needed extra income, rented out the extra bedrooms when their grown children left home. The couple's tenants held weekend card games, their friends parked cars in parking spaces in front of my rental, on the street. When my tenant complained the couple replied they are legally parking on a public street. My tenant replied,"that's fine, but you are in violation of rooming house regulations, and I won't report you if they park elsewhere". Yep, they parked elsewhere.