Condo conundrum
February 14, 2018 5:20 AM Subscribe
Our Brooklyn apartment building is becoming condos, and I can't tell if this is a lucky chance to buy or just time to look for a new apartment.
If you've been through this process before or have some general expertise, I'd love to know:
My spouse and I rent a decent 1 bedroom is an somewhat shabbily-kept but otherwise pretty handsome pre-war apartment building. Last week the building distributed book-sized docs announcing the intention to convert to condos -- albeit as a proposed offering (called a "red herring"?), not anything finalized. From what I've read, the book outlines the general plan and provides specific numbers for everything except actually offering prices for the units (e.g., I can find estimated taxes, maintenance, and utilities for our unit, but the offering price section is blank). It's a non-eviction plan.
We got our new lease at the same time, which is month-to-month with an option for the owners to order us out (with a 60 day window to apartment hunt).
We're set to move. Spouse's mother recommends we stay and see what happens -- from seeing friends go through the process, she expects that prices offered to current tenants will be well below market rate and require a smaller percent down. As much as 1/2 market rate and 10% downpayment. That seems to good to be true, but the booklet confirmed that it would be 10% down and, as luck would have it, we could afford that on a place that was (well) below market. However, I worry that her frame of reference is Manhattan 30 years ago, and we're in Brooklyn today. I also don't want to be stuck scrambling to find a place in the middle of summer if buying doesn't work out.
Finally, it's a lovely apartment but it is a 1 bedroom. I doubt it will work for us past another three years; but even if we have to sell it in the near future, I like the idea of three years safe from rent increases, and maybe ending with the downpayment for another place. In your experience is that a reasonable expectation?
We're not even sure where to begin. Folks who've been through this before, can you share your experience? Were you able to get an apartment for below-market rate? Did you try to buy unsuccessfully, and regretted not moving out earlier and taking your time with an apartment search?
(I've checked the 'condo' and 'condobuying' tags but didn't see anything specifically about conversions for current apartments within the last decade.)
If you've been through this process before or have some general expertise, I'd love to know:
- What to expect from the process overall?
- Generally speaking, if you can afford rent on an apartment is it reasonable to expect you'd be able to buy when it's converted to a condo?
- If so, what does "talking to a professional" look like in this case? Lawyer? Broker?
My spouse and I rent a decent 1 bedroom is an somewhat shabbily-kept but otherwise pretty handsome pre-war apartment building. Last week the building distributed book-sized docs announcing the intention to convert to condos -- albeit as a proposed offering (called a "red herring"?), not anything finalized. From what I've read, the book outlines the general plan and provides specific numbers for everything except actually offering prices for the units (e.g., I can find estimated taxes, maintenance, and utilities for our unit, but the offering price section is blank). It's a non-eviction plan.
We got our new lease at the same time, which is month-to-month with an option for the owners to order us out (with a 60 day window to apartment hunt).
We're set to move. Spouse's mother recommends we stay and see what happens -- from seeing friends go through the process, she expects that prices offered to current tenants will be well below market rate and require a smaller percent down. As much as 1/2 market rate and 10% downpayment. That seems to good to be true, but the booklet confirmed that it would be 10% down and, as luck would have it, we could afford that on a place that was (well) below market. However, I worry that her frame of reference is Manhattan 30 years ago, and we're in Brooklyn today. I also don't want to be stuck scrambling to find a place in the middle of summer if buying doesn't work out.
Finally, it's a lovely apartment but it is a 1 bedroom. I doubt it will work for us past another three years; but even if we have to sell it in the near future, I like the idea of three years safe from rent increases, and maybe ending with the downpayment for another place. In your experience is that a reasonable expectation?
We're not even sure where to begin. Folks who've been through this before, can you share your experience? Were you able to get an apartment for below-market rate? Did you try to buy unsuccessfully, and regretted not moving out earlier and taking your time with an apartment search?
(I've checked the 'condo' and 'condobuying' tags but didn't see anything specifically about conversions for current apartments within the last decade.)
Getting it for below market rate might be possible, but getting it well below market rate is definitely not likely.
I would make plans to move.
posted by lydhre at 6:42 AM on February 14, 2018
I would make plans to move.
posted by lydhre at 6:42 AM on February 14, 2018
Best answer: This is a NYC thing. My cousin rented an apartment in Manhattan for many years. At some point the building went condo and they had to offer the apartments to existing tenants at a much, significantly, reduced cost. Her apartment is now worth at least 10 times what she paid for it.
Talk to a lawyer, it's worth it. Don't listen to random internet strangers and well-meaning relatives. If it turns out that you can buy it for a relatively low cost, and can scrape up the down-payment, do it. You can sell it when you need more room.
posted by mareli at 7:21 AM on February 14, 2018 [20 favorites]
Talk to a lawyer, it's worth it. Don't listen to random internet strangers and well-meaning relatives. If it turns out that you can buy it for a relatively low cost, and can scrape up the down-payment, do it. You can sell it when you need more room.
posted by mareli at 7:21 AM on February 14, 2018 [20 favorites]
Best answer: We went through this in 2007/2008. The difference is that we were rent stabilized, so they couldn't force us to move. We were offered an insider price on our apartment. And it was about 65% of market rate at the time.... but what market rate would be for a renovated apartment. At the insider price, we would be getting our apartment as-is, which was, like you, a shabby pre-war apartment. That was still well out of our price range... the carrying costs and taxes alone were more than we were paying in rent.
But if you did buy your apartment, be aware that you would be living in a construction zone for a long time. Our condo conversion went on for two years. They did a massive renovation of the lobby and hallways. They installed new elevators They installed central air conditioning (but only for the condos, not the renters). They redid the roof. Since we were on the top floor, we had a ton of noise, and leaks in every room of our apartment. They were gut renovating the apartments around us... so more noise and dust. Water on and off. Power on and off. Using the service elevator for weeks.
They did eventually have to fix all the damage to our apartment, but it was pretty disruptive and unpleasant during those years of renovation.
posted by kimdog at 7:22 AM on February 14, 2018 [6 favorites]
But if you did buy your apartment, be aware that you would be living in a construction zone for a long time. Our condo conversion went on for two years. They did a massive renovation of the lobby and hallways. They installed new elevators They installed central air conditioning (but only for the condos, not the renters). They redid the roof. Since we were on the top floor, we had a ton of noise, and leaks in every room of our apartment. They were gut renovating the apartments around us... so more noise and dust. Water on and off. Power on and off. Using the service elevator for weeks.
They did eventually have to fix all the damage to our apartment, but it was pretty disruptive and unpleasant during those years of renovation.
posted by kimdog at 7:22 AM on February 14, 2018 [6 favorites]
How big is the building? According to this (pdf) from the NYS Attorney General's office eviction-based condo conversions can only happen if 51% of the pre-condo tenants accept the sale terms. Barring that, you cant be removed from your apartment even if the building is successfully converted.
posted by Exceptional_Hubris at 7:51 AM on February 14, 2018 [1 favorite]
posted by Exceptional_Hubris at 7:51 AM on February 14, 2018 [1 favorite]
How big is the building? According to this (pdf) from the NYS Attorney General's office eviction-based condo conversions can only happen if 51% of the pre-condo tenants accept the sale terms. Barring that, you cant be removed from your apartment even if the building is successfully converted.
Sorry, this is misleading. Most conversions are non-eviction plans, which require only 15% bona-fide purchasers (not necessarily tenants!) to be approved. Under a non-eviction plan, assuming your apartment is not rent-stabilized, you can't be charged an "unconscionable" rent in future, but good luck establishing that, especially if (as if very likely) they do extensive renovations and upgrades as part of the conversion. Also, you have to actually be a tenant on the day the offering plan becomes effective to have even the more limited protections of a non-eviction plan. The landlord has OP on a month-to-month lease now so that he can maximize rent until he thinks the plan is about to be approved by the AG (usually a few months) and then terminate the lease.
You will not get a great early-90s-style offer out of this. However, if you do like your building and are flexible enough to be able to move with sixty days' notice coming any time in the next year, it's not necessarily a bad idea to hang around and see what happens. If you're on a month-to-month and you happen to find a great place in the meantime, you're not locked in, either.
P.S. 10% is a normal condo downpayment. It's not a special deal for anyone. Someone is thinking of the 20% co-ops usually require.
posted by praemunire at 8:11 AM on February 14, 2018 [5 favorites]
Sorry, this is misleading. Most conversions are non-eviction plans, which require only 15% bona-fide purchasers (not necessarily tenants!) to be approved. Under a non-eviction plan, assuming your apartment is not rent-stabilized, you can't be charged an "unconscionable" rent in future, but good luck establishing that, especially if (as if very likely) they do extensive renovations and upgrades as part of the conversion. Also, you have to actually be a tenant on the day the offering plan becomes effective to have even the more limited protections of a non-eviction plan. The landlord has OP on a month-to-month lease now so that he can maximize rent until he thinks the plan is about to be approved by the AG (usually a few months) and then terminate the lease.
You will not get a great early-90s-style offer out of this. However, if you do like your building and are flexible enough to be able to move with sixty days' notice coming any time in the next year, it's not necessarily a bad idea to hang around and see what happens. If you're on a month-to-month and you happen to find a great place in the meantime, you're not locked in, either.
P.S. 10% is a normal condo downpayment. It's not a special deal for anyone. Someone is thinking of the 20% co-ops usually require.
posted by praemunire at 8:11 AM on February 14, 2018 [5 favorites]
You mentioned that the book includes your estimated taxes... so dig around the property tax section of NYC.gov and develop some assumptions about abatements and tax rates so you can back into the probable assessed and market values informing the tax figure provided. It should give you a better idea of whether purchasing the unit will be financially feasible. Caveat: your calculation may generate a figure that doesn't reflect the promised purchase discount.
posted by carmicha at 9:42 AM on February 14, 2018
posted by carmicha at 9:42 AM on February 14, 2018
Response by poster: Thanks everyone! We've asked a friend for lawyer recommendations, but if you know someone offhand please feel free to memail me.
> Our condo conversion went on for two years.
Ouch. that's very good to know, thanks.
posted by postcommunism at 4:39 AM on February 16, 2018
> Our condo conversion went on for two years.
Ouch. that's very good to know, thanks.
posted by postcommunism at 4:39 AM on February 16, 2018
This thread is closed to new comments.
If I understand this correctly, the maximum you could afford to put down is 10% on a well below market apartment? Does that include monies set aside for closing costs and a standard buffer of 3-6 months of living expenses? That kind of buffer is required once you're the one responsible for ponying up for repairs and maintenance that is unplanned.
If not - then ignoring the fact that 50% of market rate seems highly unrealistic in an ultra-competitive real estate market, you just don't have the money saved to buy a place.
However - if you're keen on pursuing it, you need to go towards getting pre-approval for a mortgage and ask for a purchase price for your place. That will give you a definitive answer on whether it's even possible.
I like the idea of three years safe from rent increases, and maybe ending with the downpayment for another place. In your experience is that a reasonable expectation?
You may be safe from rent increases, but not other increases. If you get a variable rate mortgage, interest rates can change. Depending on how good the tax estimates are, you could see a huge spike once the unit's been re-valued as a condo. Depending on whether you pay for heat now, those prices can be volatile. Home ownership also includes a lot of unintended expenses (plumbing, heating, maintaining and repairing some of the shabby things in the building that you now have a collective ownership interest in) that are built into rent pricing. Point being - we are homeowners and do not get the luxury of a fixed amount of $$ for housing costs anymore. The pros are - we are building equity, improving things, and the value of our property is increasing, however the cons are - any given month could cost $5000 for housing if something goes wrong.
posted by notorious medium at 6:22 AM on February 14, 2018 [3 favorites]