How feasible is renting out a condo while living in another city?
March 2, 2010 4:48 PM Subscribe
I am thinking about buying a specific apartment (condo) in Brooklyn, NY. For this question, let's assume that this apartment is a smart investment / better than renting, financially. While I don't have plans to leave New York in the immediate future, I'm not 100% committed to staying here, either. So my question is about contingencies: if I got this apartment, then in a few years needed to move to a different city, how much pain would I be bringing upon myself to keep the apartment and rent it out?
A few things about the place:
A few things about the place:
- The apartment is located in a neighborhood where it would be very easy to find tenants.
- The monthly payment is 75% of the current monthly rent for a similar apartment.
- The building is brand new, so maintenance issues could be less than average.
As lobstah said, you need to find out whether the condo bylaws allow rentals. Many do, particularly in this market, but you need to verify this. During the purchase process, you should receive the offering plan and the condo bylaws. Read them carefully.
If the bylaws do allow you to rent out your apartment, your main concerns should be finding a local property manager to manage the unit (meeting and doing credit checks on potential tenants, making sure the apartment is kept well, handling any complaints) and working with the building super so that any maintenance issues that would normally be covered if you were occupying the apartment are taken care of.
Personal anecdote - my friend just rented an apartment from a woman who manages units for several landlords who are not local to NYC, and she does just what I mentioned re: property management, and deals with a local super who takes care of several buildings in the area. It's doable, but you'll need to do some legwork.
posted by bedhead at 5:07 PM on March 2, 2010 [1 favorite]
If the bylaws do allow you to rent out your apartment, your main concerns should be finding a local property manager to manage the unit (meeting and doing credit checks on potential tenants, making sure the apartment is kept well, handling any complaints) and working with the building super so that any maintenance issues that would normally be covered if you were occupying the apartment are taken care of.
Personal anecdote - my friend just rented an apartment from a woman who manages units for several landlords who are not local to NYC, and she does just what I mentioned re: property management, and deals with a local super who takes care of several buildings in the area. It's doable, but you'll need to do some legwork.
posted by bedhead at 5:07 PM on March 2, 2010 [1 favorite]
Response by poster: I checked into the condo rules for the building: they're fine with renting. I was told there is one owner who bought a unit entirely as a rental property and has never lived there.
posted by the jam at 5:11 PM on March 2, 2010
posted by the jam at 5:11 PM on March 2, 2010
Look around for rental management companies. They'll handle everything for a monthly percentage of the rent. There are good ones and bad ones, with a huge quality and price range.
In theory, you could even find a person living in the city to handle this for you. Got any trustworthy friends / family that want to earn 10 percent per month?
posted by Cool Papa Bell at 5:18 PM on March 2, 2010
In theory, you could even find a person living in the city to handle this for you. Got any trustworthy friends / family that want to earn 10 percent per month?
posted by Cool Papa Bell at 5:18 PM on March 2, 2010
The rapid over-development and condo-ization of BK has in many cases led to building-wide issues and subsequent increases in maintenance or common charges, among other headaches. Older buildings with larger reserve funds and the kind of constructional integrity today's developers often lack, may yield fewer "maintenance issues." If you have the option to live in Brownstone Brooklyn, do you really want to live in a shoddily built and aesthetically offensive dorm for adults?
posted by ranunculus at 6:41 PM on March 2, 2010
posted by ranunculus at 6:41 PM on March 2, 2010
First of all, I'm highly skeptical of your assertion that the monthly payment is 75% of the cost to rent a comparable apartment. Unless you're putting down a large down payment (and therefore ignoring the time value of money), omitting the taxes and maintenance charges, or assuming an unrealistically high rent, that's simply not possible in Brooklyn today in my experience.
But assuming it's true, let's take a look at your other questions.
You'll need a property manager to handle maintenance, repairs, rent collection, legal issues, and showing the apartment when it becomes vacant.
You need to be prepared for rents to decline, to cover the carrying costs during prolonged periods of vacancy, and to deal with the nightmare tenant that stops paying rent and refuses to leave. I.e., you need to be able to go a year without income worst case.
Summary, renting out a condo in New York is not a great investment these days in my opinion, but as a "contingency" it's quite common and usually won't bankrupt you.
posted by boots at 7:15 PM on March 2, 2010 [1 favorite]
But assuming it's true, let's take a look at your other questions.
You'll need a property manager to handle maintenance, repairs, rent collection, legal issues, and showing the apartment when it becomes vacant.
You need to be prepared for rents to decline, to cover the carrying costs during prolonged periods of vacancy, and to deal with the nightmare tenant that stops paying rent and refuses to leave. I.e., you need to be able to go a year without income worst case.
Summary, renting out a condo in New York is not a great investment these days in my opinion, but as a "contingency" it's quite common and usually won't bankrupt you.
posted by boots at 7:15 PM on March 2, 2010 [1 favorite]
As a long time co-op owner in NYC (Manhattan), who has also sublet I think you need to check on the following.
In addition to knowing what the condo rules are (probably more flexible than a co-op) you'll want to consider the following:
Are there sublet fees?
How much of the building can be sublet at any one time. Less than 50% owner occupancy can hurt the financial standing of the building.
Do subletters have to apply? If so, what's the process.
I have by and large had no serious problems with subletting my apartment. Only one bad tenant in 10 years and that was mostly a cleanliness issue. They all paid on time. They all had to apply and sign a lease with me including security deposit. The managing agent for my building for many years handled finding tenants, that might be a possibility for you as well, depending on what the managing agent does for this condo.
You'll also want to make sure that your tenant is good about informing you of maintenance issues. I have had one instance of an issue being left to fester and it leading to a larger than necessary repair.
I've never had a huge problem finding a tenant to occupy my place so never dealt with extended vacancies, but again, my unit is in Manhattan.
posted by brookeb at 10:01 PM on March 2, 2010
In addition to knowing what the condo rules are (probably more flexible than a co-op) you'll want to consider the following:
Are there sublet fees?
How much of the building can be sublet at any one time. Less than 50% owner occupancy can hurt the financial standing of the building.
Do subletters have to apply? If so, what's the process.
I have by and large had no serious problems with subletting my apartment. Only one bad tenant in 10 years and that was mostly a cleanliness issue. They all paid on time. They all had to apply and sign a lease with me including security deposit. The managing agent for my building for many years handled finding tenants, that might be a possibility for you as well, depending on what the managing agent does for this condo.
You'll also want to make sure that your tenant is good about informing you of maintenance issues. I have had one instance of an issue being left to fester and it leading to a larger than necessary repair.
I've never had a huge problem finding a tenant to occupy my place so never dealt with extended vacancies, but again, my unit is in Manhattan.
posted by brookeb at 10:01 PM on March 2, 2010
"The monthly payment is 75% of the current monthly rent for a similar apartment."
Spend days researching this, at least, to see if this is truly accurate.
Are you basing this only on the mortgage payment, or are you including all your costs (taxes & commons fees)? You should look at all-in costs.
Are you prepared to pay a broker to fill your apartment (many condo owners are now paying brokers fees after watching their apartments sit empty for 3-6 months)?
I find that 75% number extremely hard to swallow, as in "prime manhattan" the ratio is more like 150-200% of monthly rent. Remember not to compare listed rents vs listed asking sale prices. Find out what the rents & sale prices are actually settling at (lower).
Don't make any purchases that are only financially viable assuming XX% increase in apartment value / YY% increase in rent you can charge.
I think the old guideline used to be about 5 years was the "break even" point where if you plan to stay in one place, it is worth buying.
posted by gomess at 6:43 AM on March 3, 2010 [1 favorite]
Spend days researching this, at least, to see if this is truly accurate.
Are you basing this only on the mortgage payment, or are you including all your costs (taxes & commons fees)? You should look at all-in costs.
Are you prepared to pay a broker to fill your apartment (many condo owners are now paying brokers fees after watching their apartments sit empty for 3-6 months)?
I find that 75% number extremely hard to swallow, as in "prime manhattan" the ratio is more like 150-200% of monthly rent. Remember not to compare listed rents vs listed asking sale prices. Find out what the rents & sale prices are actually settling at (lower).
Don't make any purchases that are only financially viable assuming XX% increase in apartment value / YY% increase in rent you can charge.
I think the old guideline used to be about 5 years was the "break even" point where if you plan to stay in one place, it is worth buying.
posted by gomess at 6:43 AM on March 3, 2010 [1 favorite]
This thread is closed to new comments.
posted by lobstah at 4:57 PM on March 2, 2010