Ready to rent out your property? The first thing you will need to do is create your apartment lease. Not just any lease will do. You need to find the right type of lease that applies to your property. When considering a purely residential property there are a few apartment lease options that will apply to your needs.
Before we get into the details you may want to think about which apartments are rent stabilized. (“Rent stabilized apartments are in buildings of six or more units built between February 1, 1947 and January 1, 1974. Tenants in buildings of six or more units built before February 1, 1947 and who moved in after June 30, 1971, are also covered by rent stabilization.”- Source: Barshay.com)
A rent stabilized apartment sounds like a landlord’s nightmare. Rent values are going up, your neighbors are getting far more than what you can legally charge to your tenant who has no intention of moving out. You’re stuck with a rent-stabilized apartment lease agreement causing you to miss the opportunity in the market trends.
However, it’s not as gloom and doom as it sounds. A rent stabilized apartment exists for those who qualify for regulated housing. The city makes sure that the system protects both the tenants and the landlords. In New York, the city calculates what is called a “Maximum Base Rent” or “ MBR.” The MBR is a value that reflects the cost in building maintenance, renovations, basic utility charges, and the vacancy loss collection. The city updates this value every two years to reflect the market changes.
Note: Rent stabilized apartments are not the same as rent-controlled apartments. Rent controlled apartments are very rare and are most likely occupied by elderly low-income tenants who have lived in the unit since before 1971. Or by there next of kin who lived in the apartment and inherited the lease upon their death.
With a deregulated lease the landlord may charge the market value for their apartment. If you have a newly deregulated unit or own a building or apartment that is outside of the rent-stabilized system you have a huge opportunity to get the most ROI out of your investment property.
A co-op is essentially the same as a condo except in the ownership structure and tax structure of the building. Like condos, co-ops are also owned by individual owners but in a different manner, for the most part, condo owners have much fewer restrictions than co-op owners because the condo owner owns the unit as if they would own a single family home, they own the deed, pay the maintenance and taxes for that individual unit.
A co-op owner although similar doesn’t hold the deed to the unit, they own shares which gives them ownership to the unit and they pay the taxes in their maintenance charge which also covers expenses of the building.
Essentially there are three types of multi-family buildings in NYC. That is condo, co-op & rental. Condo and Co-op units within a larger building are each owned separately by individual owners whereas rental buildings are owned by one entity that rents each individual unit to tenants that have no ownership.
Apartment lease agreements not only vary depending on the status of the ownership and age of the property. The length of time can also greatly affect the type of rental agreement you have with your tenant.
This particular agreement designates a final move out date that is agreed upon by the tenant and the landlord in advance. In this case, there may be no written advance notice from the tenant when they leave the apartment. Whether the term in two weeks, ten months or three years this type of agreement is very finite and doesn’t necessarily give the tenant the opportunity to stay or renew the agreement with the landlord.
This might sound like the closest agreement to a pay as you go system. The landlord established a rate for the rent on a weekly, monthly or even yearly basis and the tenant pays the rate based on how long they plan to stay. The lease may or may not state the length of stay for the tenant explicitly.
Most apartment lease agreements are defined by a six month, one year, 18 months or two year period. When subletting, it could be much less. Landlords want to know that they won’t have vacancies in their properties, but also have the opportunity to raise the rent based on the market value.
Whether you own a single condo or a multi-unit property, the lease sets the expectations for the tenant. Knowing the proper terms will set you up for income stability and provide a good foundation for your tenant-landlord relationship.
It may seem overwhelming, so consider a company like Blueground to step in and help. They sign long-term leases and can handle every aspect of the tenant-landlord relationship.