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The Rental Market Warms Up

Each year rental activity increases along with the rising temperatures of Spring. Is it because of the longer summer hours? Tax refunds? The college semester cycle? Regardless of the reason, the busy season means that rents go up along with demand.

Manhattan has a notoriously low vacancy rate – less than 1%! However, there’s a lot more competition. You need to know what you’re looking for and be ready to make a fast decision once you find an apartment you like.

Landlords expect you to move in within the next four weeks, so there’s little use to starting your apartment hunt more than a month in advance.

If your lease is up, how can you still get the apartment you want?

  • Figure out how much you can afford to spend. Talk to one of our experienced agents or use this budget calculator.
  • Have your papers ready. The best apartments get snapped up quickly. Nearly all landlords require the same paperwork, so you can get your papers together as soon as you start looking. You (and your guarantor, if you have one) should be ready with: a letter of employment, your most recent bank statements, three most recent pay stubs, and last year’s tax returns. 
  • Know what the most important thing on your wish list is. Go into the viewing knowing what’s important to you and what you are willing to compromise on. Do you care more about location or would you rather have more space? Does it have to be newly renovated or do you like old-world charm?

Having the answers to these questions will save you time and make sure you end up in the apartment of your dreams.

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Understanding Co-Ops, Part 1: What’s a Co-op?

Co-op buildings are the most common type of housing in Manhattan, but are rare outside of New York City. There are three times as many co-ops as condos in Manhattan. This is why it’s especially important to work with a real estate broker and attorney who are familiar with New York City.

Co-ops are apartment buildings owned by a corporation. Rather than buying the apartment itself, you are buying shares of stock in the corporation that correspond to your apartment unit. Rather than a deed, you have a stock certificate. The corporation pays real estate taxes, building maintenance, doorman and superintendent salaries, and upgrades and any underlying mortgage on the building. Your maintenance payment corresponds to your portion of these expenses, based on how many shares of the corporation that you own. Typically, much of the maintenance fee is tax-deductable because it covers real estate taxes and interest payments on any underlying mortgage.

Your use of the apartment is subject to the terms of a proprietary lease. Subletting your apartment, getting a pet and making renovations all typically require board approval.

Co-op buildings tend to have a community atmosphere, since they work together to elect the Board of Directors that run the building. This board interviews all prospective owners, protecting the other tenants by allowing only qualified candidates to buy into the corporation. As a result, many co-op boards require a large down payment. Some buildings don’t allow any financing at all. Typically, they expect that the buyer’s salary is at least four times their housing expenses (maintenance and mortgage). They may want to see a certain amount of liquid assets available after closing. Your broker should be able to tell you about the building’s financial requirements. Co-op buildings may also have strict policies regarding subletting. They also may require a “flip tax” to cover the expenses of approving new share owners.

In order to buy a co-op apartment, you will have to submit an application to the board and attend an interview before you can close on the sale. The application and interview can be time-consuming and intrusive. You may have to be flexible about your move-in date, because it may be hard to predict how long the board approval process will take.

Are co-ops worth the hassle? Many New Yorkers think so. Numerous co-ops are gorgeous pre-war buildings with generous layouts and architectural details. They hold desirable locations near parks and transportation. Co-ops may have fantastic views and luxury amenities. Since most Manhattan buildings are co-ops, being able to own your dream home requires meeting the requirements of a co-op board.

Understanding Mortgages

Finding the right mortgage is almost as important as choosing the right property. If you’re thinking of buying, read on to learn some of the basics.

Before you start looking, be sure to know what you can afford. Even if you don’t keep a budget, it can be helpful to track your expenses for a month and factor in annual costs to determine how much you can afford to spend on a home.

We highly recommend getting pre-qualified for a loan when you start looking. This way you will know what your budget is from the outset. Pre-qualification will let you know approximately how much financing you can get. To be pre-approved for a loan, a lender will check your credit, and verify your financial and employment information. Having pre-approval is a strong mark in your favor when making an offer.

How can you get the best mortgage? By improving your credit score, increasing your income, save for a large down-payment, reduce your debt, and make sure you’re not paying more than the property is appraised for. Shop around for your mortgage – compare costs, interest rates, and discount points.

Are you afraid that you don’t qualify for a mortgage? There are a number of ways to deal with that.

  • Share the mortgage with your spouse or another person who will be living with you;
  • Have a trusted friend or family member co-sign, even if they don’t live with you;
  • See if the lender will make an exception to their requirements;
  • Find a property that is less expensive, so you will require a smaller loan;
  • Remember that lenders have different requirements, so one may reject your application while another will approve your loan.

People who are self-employed report having a hard time finding loans. Don’t give up! Know what to expect and get guidance on how to find a lender.

Investopedia gives us information on 5 Risky Mortgage Types to Avoid.

New York City is unique because of the number of co-ops on the market. Even if you’ve bought property before, understanding the advantages and disadvantages of co-ops can be confusing.

There are some financing options that are often overlooked. These include borrowing from your life insurance policy or IRA and using seller financing.

After the closing, remember to keep receipts for home improvements! The cost of improvements can lower your basis in the home and will lower your taxable income when you eventually sell the home. Another important thing to remember is getting your home properly insured.

We have a selection of trusted mortgage brokers and other professionals that we rely on. Remember, we’re here to guide you every step of the way.

A few things to consider if you’re considering a move downtown

I frequently have clients uptown who ask about moving downtown. They’re tempted to move to neighborhoods like Gramercy, Union Square, east/west village, Greenwich Village, Soho, or Tribeca because of the night-life, shopping, and a number of other reasons.

Before you start looking to move downtown, here are a few things to consider:

  • Rental buildings with doormen are in short supply downtown. Because they are in such demand, they tend to be much more expensive. Most of them do not allow pressurized walls or permit roommates to share one-bedroom apartments.
  • Condos and Co-ops: Most doormen building downtown are privately owned. Most owners don’t want to deal with the hassle of rental paperwork, meaning you will rarely deal directly with the owner and will have to pay the broker fee (usually 15%) as well as the board fees. If you want to rent in a co-op building you will also have to pass a board interview. You can rent directly from an owner from Craiglist, but finding an apartment on your own can be time-consuming and risky.
  • Value: Neighborhoods like Murray Hill, Midtown, the Upper West Side and the Upper East Side are flush with modern, newly renovated apartments. The price you pay for a luxury doorman building uptown will likely get you a small, un-renovated walk-up downtown. There are always people willing to make these sacrifices to live in a high-profile neighborhood, so owners have less motivation to maintain and upgrade apartments.

In summary: Doormen building are more expensive and most likely will include fees and higher rent, unless you are willing to take the extra steps. Most will be small and not in the best condition. You will pay mainly for location. If you aren’t willing to give up comfort for location or if you are a young professional who goes out once or twice a week downtown you may be better off finding (or renewing your lease on) a nice apartment uptown. It’s a lot less expensive to take a cab than to find a comparable apartment downtown. Location is important, but this is your home and even a busy professional will spend a significant amount of time there.

Good Luck,

Assaf

Take advantage of the winter season

http://www.flickr.com/photos/davidberkowitz/4199539843/

Photo by David Berkowitz

My clients often ask me when the best time to move is. Is there a certain time of year when you can get the most bang for your buck?

Yes. Winter is definitely THE  time to move. Many people don’t want to move at the end of the year, when they are busy visiting their families and shopping for the holidays.

Traditionally, this is when landlords offer promotions – such as paying the broker’s fee, giving you free rent and being flexible with the moving date.

Landlords base their pricing on inventory, so you are at an advantage when few other people are looking. Landlords who are unwilling to negotiate in the busy summer season are happy to talk during the slow winter months.

Signing a lease during the winter means that your annual renewal will happen during the low season each year, which means you will be more likely to get a very reasonable increase, or none at all, for years to come.

If your lease expires anytime soon or you’re on a month by month basis, this is the opportunity have been waiting for.

Good Luck,

Assaf

Your Questions: How soon should I start looking for a new apartment?

I always advise my clients to begin apartment hunting about a month before their lease expires. The NYC rental market is like no other in the country. It’s a high turn over market with a vacancy rate that hovers around 1%.
Starting too early will not always give you the advantage you are looking for. Here some of the reasons why:

  1. Landlords are constantly changing prices and concessions based on vacancy rates. Since they usually receive notice from their existing tenants 30-45 days prior to the move out date, prices may vary from one month to another.
  2. Landlords will usually require that the lease start date be within 20-30 days from when the application was submitted. This means that looking too early can result in having to pay double rent or  risk losing the apartment you really want. However, some clients enjoy looking super early and don’t mind paying a little extra for an apartment they love.
  3. Apartment hunting isn’t as time consuming as many clients expect it to be. Working with a broker saves you from having to read through hundreds of listings – we work with you to narrow it down to only the apartments that meet your criteria. If you are looking in a specific area it may only take three hours to view a number of apartments. Many clients will find the apartment they’re looking for in a weekend.

I hope that covers the issue. We welcome your comments and feel free to let us know your real estate questions.