Why Doesn’t Anyone Want Prepaid Rent?

giant check

In the last few months, I’ve had several people searching for a rental ask me if they could prepay a year’s rent. So what happened?

First, let’s talk about why they wanted to do that, and the answer is simple–they didn’t meet the landlord’s requirements for renting. As we all know, renting in New York City is hard. One of the toughest requirements for many people to meet is the 40x one month income bar. That means that if the rent is $2000/month, you must earn $80,000.  Now if you a) have been working for a few years in finance b) are a first year law associate at a large firm c) are a professional athlete, you can just shrug your shoulders at that minimum (and by the way, if you are any of those, you probably are not looking at $2000/per month apartments). If, however, you just graduated from college and have a non-paying internship, you’re a full-time student, you’re self-employed with variable income, you work for a start up and have more shares than weekly dollars, you have a working class job, or hey, you are an heir/heiress and you have plenty of savings, but no verifiable emplooymnt or income, well, then it’s a real problem.

Most people deal with this in two ways–they find a roommate (or roommates) whose combined income gets them all over the 40 times income bar, or they get a guarantor (guarantors are usually required to earn 80 times the one months rent). Those options weren’t available to the people I met, so they thought that they could get around the requirements by offering to prepay a year’s rent. And you know what? Most landlords didn’t go for it.

That seems crazy, right? I mean, why wouldn’t a landlord be thrilled to have the one lump sum payment? Wouldn’t it be nice to know they have at least one tenant taken care of, with no late payments, no missed payments, nothing to worry about. Done and done and done. But no deal–almost all of them said they preferred a guarantor, and one said that they would take a prepayment, but the tenant would still have to fill out the application and show some kind of reasonable income. Maybe a small landlord who is renting out shares of their two or three family house would have been willing to do it, or maybe a co-op or condo owner who is subletting might go for it (though the co-op board usually has to review rental applications and they might be as tough as a landlord). But your average building management company? No.

The renters (who both came from out of state and were not used to the obstacle course that is renting in NYC) were completely puzzled by this. One pair eventually scaled down their max rent until it met the requirements, ending up with a much smaller apartment and different neighborhood than they wanted. The other got a guarantor.

But it did make me think a lot about why landlords are so resistant to the prepayment offer. I did a little research, but didn’t find many answers. So here are the best guesses I came up with:

  • The landlord worries that for some reason the tenant will have to break the lease and the landlord will then have to pay back the tenant for the months not used. Landlords do NOT like writing checks to tenants.
  • Management offices just aren’t equipped to handle a tenant whose account is different than everyone else’s. I swear I’ve walked into some management offices that looked like they were straight out of 1994, with ancient computers and overstuffed filing cabinets and the occasional typewriter. I really feel for the poor administrativve staff working in these kind of places. So these places just aren’t cut out for things like “These numbered apartments get a bill every month, and these don’t, and was their lease renewed and they now DO need bills?” It’s not hard to imagine some kind of error happening where the billing department loses track of the fact that the renter has prepaid and starts sending out late notices and late charges to the tenant, creating a mess for both parties. I honestly think that’s the reason why landlords are reluctant to accept prepayment–just to avoid confusion.

    The moral of this story, then, is that if you were hoping to get around a landlord’s income requirements by prepaying, bury those hopes. A guarantor or roommates are still your best bet. And if you have enough cash lying around to prepay a year’s rent on a typically high-priced NYC rental, well, maybe you should see how far you are from a downpayment to buy an apartment…

What Is A Land-Lease Building…?

You see a listing at a price that seems too good to be true. A 2 bedroom? In Manhattan prime for $450,000? That must be a typo, right? Hmm, no, it looks legit. Well, it must need a gut renovation. Let me read that again…no, it actually HAS been renovated. Seriously, what’s the catch? Okay, that maintenance is high, but still…What’s this now? A note on the listing saying this is in a land-lease building? What’s a land-lease building?

Land...

Land…

...Lease

…Lease

A land-lease building is actually one of those things that is wonderfully what it sounds like. The owners of the building own the building, but not the land it is built on. Instead, they lease the land. This is typically found in co-op buildings (I doubt it would occur with a condo, but in New York real estate, never say never), which means the co-oop’s shareholders are responsible for paying the lease on the land. That’s why the maintenance charges for land lease apartments are so high–in addition to the the usual common charges, RE taxes, and any mortgage payments included in the monthly maintenance, there also is a charge to help pay the monthly land lease. And as you may guess, the lease rate on New York land is not exactly cheap. Plus the owner of the land has the co-op owners over the proverbial barrel during lease negotiations: “You don’t like these terms? Fine, I’ll sell the land. Hope your new landlord doesn’t want to tear you down.”

And that right there is why the prices are low. There is a feeling of instability that comes with a land-lease building, that when the lease is up, the land owner could say, “Hey, I don’t care what you’re willing to pay, I’m getting 80 kabillion dollars from Big Condo Developer to sell this land, and oh yeah, they’re going to raze the building.” The co-op doesn’t have 100% control over the property they own, which is why many people shy away from buying in a land-lease building.

So should YOU stay away from that incredible apartment with its high monthly charges? Here’s who I think should actually consider it: if you’re an all cash buyer, this might be a great deal for you. In most buildings, your amount of cash might get you just little one bedroom, but in a land-lease buiding you’ll get that spacious two bedroom you thought was out of your reach. Since you wouldn’t have a mortgage, you’d just have to deal with the monthly maintenance. And you think the monthly maintenance is high? You’ve seen rent in Manhattan, right? Chances are good that even though the maintenance charges are high for a co-op, they’re less than you’d be paying to rent a similar apartment in the same neighborhood.

Okay, so if you think you fit that picture, there are two very important questions you should ask:

  • How much is left on the current lease? If the lease runs until 2050 (and yes, I’ve seen some of these deals in place), then you’re probably safe, unless the building owner has some kind of out that can break the lease (put that under questions to ask the co-op). If the lease only has ten more years on it, I’d hesitate, no matter how much the co-op assures you that they have a good relationship with their land owner and plan to renew it easily as usual. I’d rather not be a shareholder in that building to find out that this time is going to be different.
  • I would also ask about the sublet policy. If they allow subletting with relatively few restrictions, then you can make some money off the apartment if you decide you’re not comfortable with the situation. Even with the high maintenance, you’ll still turn a profit because as I said, rent in Manhattan is just crazy.

So land-lease building, yea or nay? Don’t dismiss it immediately, find out the facts, think about your finances and your tolerance for some instability in exchange for a good deal, and of course, discuss it all with your broker ( who may have some dirt on the building that the seller isn’t anxious to share).

Getting Started: How Much Cash Do I Need To Buy in New York City?

Piggy Bank

Oh no. There it is again. Your landlord is raising your rent to some ungodly number just so you can have the privilege of living in a top floor walk up in a building where the amenities consist of a door. Is it time to buy?

It certainly is! Of course I always think it’s time to buy, mostly because a) New York real estate is always a good investment and b) it sucks being a tenant. So the real question now is CAN you buy? How much money do you exactly need?

Let’s imagine that you found a $500,000 apartment with $1,000 a month maintenance charges (numbers chosen for easy math, like the kind I can do without a calculator). You know you’ve got the paycheck to cover your monthly mortgage payments and maintenance charges, but that’s all in the future. How much cash do you need to have on hand now just to get approved by a co-op board and close on your $500K apartment?

Down Payment Most co-op and condo buildings in New York City require a down payment of 20% of the purchase price. There are some that require more, like 25% or even 35% (these buildings tend to be found on the Upper East Side). Occasionally you may find a condo that only requires 10% down or even an FHA approved building that only calls for 6%, but I wouldn’t plan my sales search with those numbers in mind.Let’s go with the 20%:

20% of $500,000 = $100,000

Closing Costs A lot of things are covered in the big category called closing costs: attorney fees, title fees, court recording fees, any move in fees the building may require, etc. The amounts for each of these things can vary widely, so it’s pretty much impossible to give anyone a definitive number before the closing; as you get closer to the date your attorney may be able to give you a clearer estimate, but I would feel safe if I set aside $10,000 to cover everything. That may be way too much–it could be as little as $5,000–but I’d rather overestimate than underestimate. And if you end up with extras, you can go buy some candy (or a drink, because nothing says, “I need a drink” like a few hours of handing over large checks to attorneys).  So let’s say you need another $10,000

$100,000+$10,000

Savings to Impress the Co-op Board You’ve probably heard stories about co-op boards analyzing your reference letters for signs of character flaws, or asking difficult personal questions at interviews to find out if you will be the right kind of neighbor, but you know what they’re really interested in? How much money you have. You could have the best personality in the world and the heart of a saint, but if they don’t see that you a serious amount of liquid assets, that won’t matter one bit. Co-op boards want to be sure that if you lose your job, you’ll be able to cover your monthly maintenance fees for a year or two; The amount of years will vary from building to building. The seller’s broker should be able to give you some idea of how much the board would like to see. If it looks like you don’t have enough, someone will let you know; no one wants a buyer to go through the process of filling out a board package and waiting weeks for word on that if there’s little chance the buyer will pass financially. That would be a waste of time for both the buyer and seller. Let’s go with the two year number for our sample case:

$100,000+$10,000+$24,000

…and Something Extra The co-op board won’t be that impressed if you only have $24,000 saved because they won’t believe that you may not do something like, oh, I don’t know, buy some furniture for that new apartment. Let’s throw in another $10,000 (and that’s probably skimping on things) just to show that you’re not going be pushed down to nothing if you have to tap into those savings.

$100,000+$10,000+$24,000+$10,000

Okay! Time to add it up:

$100,000 + $10,000 + $24,000 + $10,000 = $144,000

So yeah, to buy that $500,000 apartment, you probably should have about $144,000 easily accessible to you. Does that sound doable? Of course it does (provided you don’t work in the arts–but you knew that already). Now get ready to say goodbye to your landlord!

Stacks of Cash

Open Houses: What to Do, What to See, What to Ask

Look, old time New Yorkers waiting to go to an open house at a brownstone...Oh, they're waiting for word about the Titanic. Never mind.

Look, old time New Yorkers waiting to go to an open house at a lovely brownstone…Oh, they’re waiting for word about the Titanic. Never mind that.

The weekend is here! I bet you’re planning on spending part of yours indulging in New York’s second favorite Sunday activity: going to open houses. (Brunch is the first favorite Sunday activity. I know I didn’t even need to tell you that.) If you are, here are some tips for getting the most out of your tours of apartments.

Take your own photos Sure, the broker is going to give you a lovely show sheet with professional photos showing the apartment at its best. Take your own photos to show what it looks like today. You may also want to take pictures of things that the broker didn’t think were important…or didn’t want to show.

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Renting An Apartment in New York City–With a Pet

Okay, you have a dog or a cat or you plan to get one (or two–friends are great). That’s great! Life in New York is better with pets. Now how does that complicate your apartment renting experience?

Pet Friendly Buildings – Check Your Lease

Okay, so you found a building that you have been told is pet friendly and you’re ready to sign the lease. MAKE SURE YOU READ THE LEASE. Landlords often use generic leases and some of these have “no pets” written into them. The landlord might not even have noticed this because he (or an assistant) just printed a bunch f standard leases off the Internet without really looking at them. If you see that the lease says “no pets,” point it out, cross it out, and get the landlord to initial it. Better yet, get a pet rider added to your lease. Why is this important? Your current landlord might be okay with pets, but what if the building is sold? The new landlord might not want to have a pet friendly building, or might be looking for ways to get out current tenants so they can renovate your apartment and then rent it out at a higher rate. When the building is sold, the new landlord has to abide by the terms of the leases of the previous landlord. The new owners CANNOT tell you, “This is now a no pet building, either get rid of your pet or get out.” They also can’t start charging you a “pet fee” if your previous lease did not include one. (And for heaven’s sake, make sure you keep copies of your leases!!)

“No Pet” Buildings and the Three Month Law

Now what if you moved into a building that you were told was a no pet building, but you notice that other tenants have dogs or cats? This happened to me. I moved into a no pet building, but then realized that there were clearly a number of dogs in the building–at one count nine dogs in a twenty-four apartment building. The super’s family even had a dog. After a few years of staring longingly at my neighbors’ dogs (my roommate was allergic to cats, so that was out), I wondered why I couldn’t get one too. Luckily I happened to be working with someone who knew a lot about having a pet in New York, and he told me about the “The Three-Month Law” or “Pet Law.”

Officially known as ” Section 27-2009.1 of the Administrative Code of the City of New York,” (read the whole legalese here), this law essentially states that if your landlord or an agent of your landlord (the building super, a doorman, a plumber who comes to fix something in your apartment, etc.) sees that you are “openly and notoriously” (that is, not hiding) keeping a pet, he or she has ninety days to lodge a complaint. If the landlord does not file a complaint within those ninety days, you can keep your pet, free and clear.

Open...

Open…

In order to protect yourself, start accumulating evidence that you are “openly and notoriously” keeping a pet as soon as you adopt your dog or cat. Adoption papers and vet records are a good start, but photographs can really help you out. Put your dog or cat (though really, no one should have any problems with a cat in an apartment–why wouldn’t a landlord want to have help scaring off rodents?) in open and notorious situations, like on your building’s front steps, in front of your apartment door, with neighbors, and photograph him or her. The date stamped photos will provide bullet proof evidence that you are not hiding your pet and that you made it through the ninety days without any complaint.

...and notorious.

…and notorious.

(Of course this is all with the understanding that your pet is well-behaved and not causing a problem with your neighbors. If your dog is anxious and tries to bite people in the elevator, you have a problem. If your dog barks all day while your at work, you have a problem. If you are hoarding thirty cats and the smell is seeping into the hallways or the apartment next door, well, you have a lot of problems. Be a responsible pet owner and make sure your pet is a good neighbor.)

Final Thoughts

  • I will remind you again that the best thing to do is find a pet friendly building. They are out there and I haven’t noticed any difference in the rental rates between no pet and pet friendly buildings. If you have a broker who says that it’s too hard to find a pet friendly building or that there are “hardly any in New York,” find a different broker who understands how important your current or future pet is to you.
  • Don’t let a landlord evict you or try to make you get rid of your pet if you believe you are keeping your pet legally. Just google “NYC pet lawyers” and you’ll find help. Even if you think you can’t afford to hire a high-powered lawyer to take your landlord to court, you still may be able to find someone who will help you. I’ve found that the lawyers who specialize in this area are very willing to help in any way they can, even if it’s just tipping you off to the finer points of a law that might be enough to make your landlord back down.
  • And finally–If you do decide to go the route of bringing a pet into a building that isn’t “officially” pet friendly, then I am begging you with all my heart to please make sure you have a back up plan in case you can’t get your pet through the ninety days. When I decided to take that risk in my first apartment building, I did it with the knowledge that my parents would let my dog or me and my dog live with them until I found a new apartment that would allow me to have her. Please don’t put yourself in a situation where you may have to bring your dog or cat to a shelter. It is sad to see any dog or cat in a shelter; it is twenty times as sad when you look at them and know they have memories of a home where they were loved and don’t understand why they are no longer there.

5 Things I Wish I’d Checked Before Renting My First Apartment

We were so excited. Finally, we had found an apartment we could afford in exactly the location we wanted. Okay, it was actually a little more than we had hoped to pay for rent, but not so much that we couldn’t manage it; after all, we had belatedly realized that we had targeted an expensive area and knew after a few weeks of looking that we were lucky to find anything close to our price range. It also was something called rent-stabilized, whatever that was.

We wandered through the apartment, and it looked okay, I guess. The current tenants hadn’t moved out and it was hard to tell anything with their oversized furniture packed into every space. But it wasn’t a railroad apartment, and it had two real, separate bedrooms. We said we’d take it.

My roommate and I stayed in that apartment a lot longer than we had ever thought we would, mostly because we moved in right before New York rents blew up, and it became too expensive to move–especially once we figured out that rent-stabilized thing and understood the difference between what we were paying and market rate rents. So financially it was a good deal, but oh, was it miserable to live there. And if we had known a little bit more about what to look for in an apartment, maybe we would have thought twice before taking it, or at least gotten some problems solved earlier on.

Here are five things I wished I had checked during that first walk through:

  1. Look for cracks, spaces, openings We didn’t think to look at the base of the walls when we walked through our apartment, because why would we do that? Well, once the previous tenants’ furniture was gone, we saw that in some areas the floors were beginning to sag away from the walls. We noticed that there were little cracks and small openings around the radiators. There were tiny gaps around the edges of the windows. This created two problems: on cold, windy days, the wind came howling through those cracks and gaps, leaving our apartment ice cold. We tried complaining but all anyone was interested in was whether our landlord was providing heat, and yes, technically he was; it was just that the heat was losing a battle to the amount of the great outdoors getting in. As long as the heating system was working, no one was interested in hearing anything else from us. Oh, and speaking of the great outdoors, guess what else came in through those cracks? When our building was hit by a mouse invasion several times, we got it bad. We tried to stuff all the openings with rags, foil, brillo pads (because they’re supposed to keep out mice), but nothing worked. It was an ongoing disaster.Lesson: Don’t get distracted by furniture, layout, room sizes. Make sure you check that the apartment is sealed tight.

    Our apartment wasn't this bad, but it was close.

    Our apartment wasn’t this bad, but it was close.

  2. Make sure the windows are double-paned If you are saying, “What is double-paned?” then you are saying the same thing I would have said back when I was renting my first apartment. I didn’t notice that all that was standing between me and a cold New York winter was a thin, old, single pane of glass. When the tempers dropped and the wind began to blow, I could stand in front of our windows and feel the cold air pouring through. On very windy days (of which there are so many in a New York fall, winter, and spring) I would feel my hair blowing around when I sat at my desk. We might as well have had plastic wrap up instead of glass. We tried putting up that plastic insulation stuff and it just fell down. We got the heaviest shades and curtains we could find, and that helped a little, but not enough (especially with the aforementioned leaky walls). Instead we wore coats and scarves indoors and blew up our electric bills with space heater use.Lesson: Make sure that the windows are at least fairly new, preferably doubled paned (that’s two panes of glass to really trap and keep out the cold air) and completely sealed in the window frame.5 Things_double pane single pane
  3. Look for stains or bulging patches on the ceiling These are indications that there have been leaks from the apartment above you. If you see them, ask the broker, property  manager, super, whoever is showing you the apartment, for an explanation. If you can’t get a good answer, try to look for another apartment option. If they promise they’re going to fix the problem in the apartment above you, and you believe them, take photos just in case water does leak through and anything you own is ruined. They shouldn’t give you a hard time about paying for replacement items anyway, but it never hurts to be able to show them some “We told you so” photos.Lesson: Look up!5 Things_Water stain
  4. Don’t move in right after another tenant moves out I know this isn’t always possible–sometimes you’re just trying to find an apartment by a certain date, and you take the best decent place you can find, even if they’re moving out on the 30th and you need to  move in on the 1st. But if the apartment is empty when you go to see it then not only will you get a good look at any wall gaps,  cracks, or openings that might have hid behind furniture (as mentioned above), but there’s also a good chance that the landlord has done some work in the apartment after the other tenants moved out–maybe they painted, or regrouted the tiles, or  replaced the windows. It’s amazing what a difference these little things  can make, and guess what? Your landlord is NOT going to do them after you move in. What motivation is there? You signed a lease and now all your landlord cares about is whether you send those checks on time, not that you realized after three weeks that peeling paint is really depressing.If you’re working with a savvy broker, and you don’t need to move in the first of the month, maybe you can negotiate to get some work done in the apartment, but you can’t guarantee how that will go. You don’t want to find yourself (or your broker) on the phone on your move in day, standing in the apartment screaming, “You said you were going to paint!!” as the movers arrive with all your stuff.Lesson: Just in case you weren’t sure, your landlord does not care about anything except your check.
    5 Things_peeling grout
  5. Check the light When we looked through our apartment, it was early evening, so I didn’t pay that much attention to the windows other than that there seemed to be a decent number of them: one window in each bedroom, two in the living room, and one facing the teensy open kitchen. If you have windows, you have light, right? Wrong. The windows in one bedroom, the living room, and opposite the kitchen all faced directly west into the building next to us, and that building was twelve stories high. It towered over our five (later six) story walk up, completely blocking any light from those rooms. The only way I could see what the sky looked like to check the weather was to try to see its reflection in one of the higher floor windows of the building next to us. Things weren’t much better in the other bedroom, where the north facing window was  overshadowed by a nineteen story building. Our apartment was dark most of the time; I almost always had to keep a light on in my room. My roommate worked in an office during the day and could handle it better, but I worked at home most of the time, and the lack of light was incredibly depressing. And no landlord, Home Depot kit, or city agency can fix that.Lesson: If you want to make sure there is light in your apartment (and not everyone does), visit it during the day. Don’t just count the number of windows or look at their size or the direction they face–check out the heights of the buildings next to you. That highly touted southern exposure doesn’t mean a lot if there’s a twenty-five story condo to your south.5 Things_dark

So there you go! Hopefully you don’t need this because you’re a lot smarter than I was when I went to rent in New York for the first time. Or that you’re a lot richer and don’t have to deal with these kind of issues as you choose an apartment from several luxury towers. And if that’s the case, let me know and I’ll help you work through issues like whether you can live with just a shared roof deck or if you must have a private terrace.

Eleven Reasons Why You Should Consider a Walk Up

Stairs_downward

Are you New York enough for a walk up? Yeah, I mean you. Are you ready to take the plunge and deal with ascending a few flights of steps every day in exchange for an apartment that’s a lot better than what you’d pay for in an elevator building?

New York is an old city. Not old like Rome kind of old, but old for the United States old. So that means the buildings are old, and we like that–the way cobblestone, twisty streets downtown mix in with shining towers of steel and glass is part of what makes New York the way it is, different kinds of places mixed together, different kinds of people.

You're almost home!

You’re almost home!

But many people move here with only a passing familiarity with stairs, like that one flight of twelve, thirteen steps in the house where you grew up. You know, the one that you ran up as soon as you got home from school so you could get to your bedroom and slam the door shut and cry or crank up your music really loud or play video games instead of do your homework. And those twelve or thirteen steps were fine. But four flights of that? Most people find the thought–well, they don’t find it because it’s completely unimaginable.

It's not like you can avoid stairs in New York anyway.

It’s not like you can avoid stairs in New York anyway.

However, what would you think of those three or four flights if you knew it could save you several hundred dollars a month? Or thousands of dollars off your purchase price? Suddenly it doesn’t sound so bad, does it?

Of course there are perfectly good reasons why someone might not even consider a walk-up. If your best friend or favorite relative can’t walk up stairs, don’t move into a walk-up and exclude that person from your life. If you own a large dog, don’t move into a walk-up unless you’re a large, strong person because otherwise you’ll be in trouble if your favorite pup grows into a senior citizen with arthritis. If you own a grand piano, don’t do it or you’ll have the worst move in ever.

But for everyone else, here are Eleven Reasons Why You Should Consider a Walk-Up!

1) Okay, I said it already–walk-ups are cheaper. With a walk-up, you can live in that neighborhood you thought was out of reach, or get more square footage for your money. Walk-ups are bargains. For example, I just did  a search for Upper East Side one bedrooms from $2000-$3000. There are plenty of walk ups in the $2000 range (and they’re not all on the top floor), but the first elevator building listing doesn’t hit until $2200. So you’re paying an extra $2400 for that elevator…

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