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In normal negotiations this is true. However in this situation the balance of power is skewed very far in favor of the tenant initially.
There was an interesting article in the NY Times about this last year: http://www.nytimes.com/2011/02/06/re...pagewanted=all One tenant was initially offered 10,000, then 20,000, then 75,000, and kept turning them down. She ended up getting bought out for an undisclosed, substantially higher amount. She never made an offer of her own.
It wouldn't hurt to try to find out what other tenants have been bought out for, though.
I think I would only take a buyout of a rent-stabilized apartment if it were enough for a down payment on my own place...the only time a landlord would pay that much is on Park Avenue or something where the market rent is $10,000.
Interesting...thanks for the article. I will have to keep that in mind when I move next and have to buy my next place.
unless it was an apartment i was going to sell off i wouldnt pay a dime to buy out a tenants lease.
we have paid 50 to 100k on central park south but no way would i rent those out again . we only did it to get the origonal tenants out so we could sell the co-op apartments.
I'm also inclined to say not worth it. The only way you should give it up is if you are okay with moving to a different part of the city where you can find another rent stabilized apartment for the same price you are paying now. You can definitely get one in Queens for around that price (for a one bedroom anyway..I have no idea how big your apartment is but you can probably find something comparable). It won't be in Williamsburg though. If you love your neighborhood and want to keep living there don't do it.
This whole "being bought out" thing fascinates me. I'm of the mentality where take the money. I never understood the attachment to a rental, something that you don't even own! I mean, I can understand if your rent was so ridiculously dirt cheap, like $500 for a 1BR, that you would be very resistant but at $1,555, you can certainly find something in a decent neighborhood. Sure, it might not be Williamsburg, but it's also not going to be an area where you go to bed to the sounds of gun fire. If it were me, I would first make sure that I can find something comparably priced to rent, figure out the appropriate amount for the buy out (eg one year's worth rent times X), and make sure to factor in the cost of moving with that figure too! Then once you get that all lined up, start negotiating down to that buy-out price point you've calculated.
I have been looking around and seems like $2000 -$4000 but all the apartments in the area are nicer then the building I live in know. I havent really been able to find one that compares more closely.
How much could you reasonably afford, if you were to purchase an apartment, in the area or another desireable neighborhood? More than $1550?
I suggest the best way to take advantage of this windfall w/b to use the monies for a down payment on a Condo or Coop.
So, the question is how much do ou need for a down payment?
I wold investigate the cost of condos/coops either in various neighborhoods. Of course, one must be reasonable, in your expectations and demand. They are not going to give you a million dollars!
So, for example, a 20% downpayment on a $250K apt, is $50K. So, can you find a desireable apt for $250K? Can ou afford the paments of a $200K mortgage? Can you qualify for a mortgage?
Those are the questions, the answers of which s/b the beginnin point of determing how much to demand from your LL.
This whole "being bought out" thing fascinates me. I'm of the mentality where take the money. I never understood the attachment to a rental, something that you don't even own! I mean, I can understand if your rent was so ridiculously dirt cheap, like $500 for a 1BR, that you would be very resistant but at $1,555, you can certainly find something in a decent neighborhood. Sure, it might not be Williamsburg, but it's also not going to be an area where you go to bed to the sounds of gun fire. If it were me, I would first make sure that I can find something comparably priced to rent, figure out the appropriate amount for the buy out (eg one year's worth rent times X), and make sure to factor in the cost of moving with that figure too! Then once you get that all lined up, start negotiating down to that buy-out price point you've calculated.
I agree absolutely with this statement.
I understand tenants that have live in a RS apt for decades and pay dirt cheap, but the rent of 1,555.00, that is market rate, and once it reaches 2K, it is no longer RS, and that won't be much longer.
How would I go about coming up with an amount to ask for?
The ideal number you want is a greater amount than that required to to get you the same type apartment in the same type area for the rest of your life adjusted for stabilized increases, making sure to add in costs for moving, searching, adjustments to anew neighborhood, etc. while considering the effect of capital gains taxation. That's MINIMUM.
The amount should be precisely ONE PENNY less than the MAXIMUM he is willing to pay.
So that's your range.
Get between these number and you are doing okay.
He is fishing for a good deal, don't fall for it.
Make HIM give you an offer.
Off the cuff, I would not be wowed by any amount that didn't have 6 figures in it unless you are living in an ugly small studio or you would LIKE to move. A market priced apartment will burn through your money with lightning speed.
The ideal number you want is a greater amount than that required to to get you the same type apartment in the same type area for the rest of your life adjusted for stabilized increases, making sure to add in costs for moving, searching, adjustments to anew neighborhood, etc. while considering the effect of capital gains taxation. That's MINIMUM.
The amount should be precisely ONE PENNY less than the MAXIMUM he is willing to pay.
So that's your range.
Get between these number and you are doing okay.
He is fishing for a good deal, don't fall for it.
Make HIM give you an offer.
Off the cuff, I would not be wowed by any amount that didn't have 6 figures in it unless you are living in an ugly small studio or you would LIKE to move. A market priced apartment will burn through your money with lightning speed.
That's ridiculous and quite frankly greedy. Why should they pay the OPs rent for the rest of his/her life? The OP has only been living in the apt for one year AND he/she is already paying damn near market rent. You are not uprooting a life long tenant (who pays $500/mo) with deep ties to the area/building. For someone thats been there for years, I would suggest a calculation of your rent times the number of years in the apt, but since you've only been there a year, that obviously won't work! Maybe consider this, it's likely that your building is being turned into condos. The owner is buying you out but still needs to make a profit. Figure out what the cost of a condo would be for a similar sized place in your area then ask for 25%-30% (+ the cost of moving) of that number. I looked at the cost of condos in S Williamsburg and it actually works out where that amount would set you up with rent for a few years OR be sufficient for a down payment on a similar sized apt in the same area. After down payment, your monthly payment is similar to what you pay in rent now.
Why should they pay the OPs rent for the rest of his/her life?
They can pay whatever they want to offer. I had trouble wording the phrase...let me try again. OP is paying $1500...she should not pay a penny MORE than that, adjusted for expected stabilized inclreases, perhaps 3% in any place she would move to.
Thus if she had to rent a 2 bedroom apartment in the same area with similar amenities for $3000, she needs at LEAST to be able to use $1500 of her buyout every month for the rest of her life AND pay all expenses related to moving.
She would be crazy to accept even a dollar less than that amount. If he offer her less, her best economic choice is to stay put. If what she gets will only provide an inflation adjusted $1400 a month for life, she will be screwing herself with every future rent payment.
One might even use the actuarial tables of the IRS or an insurance company to work out this MINIMUM amount. Perhaps add 5-10 years to life expectancy as a buffer against winning the life lottery.
Of course the MAXIMUM is any amount over this that the landlord could get for the place.
I repeat, if he offers only enough that it will not cover her increased rent ad-infinitum, she should stay put.
Of course, if she is eager to move in with her daughter in Arizona...then a different calculation might be called for. Same if she is paying MORE than market rate and could bet a cheaper comparable rent-stabilized place.
jad,
You are looking at it from the angle of a good price for the LANDLORD to offer. BUT it was not a landlord who was the OP, it was a tenant. The tenant need not worry about whether it is a good deal for the landlord...a landlord can do his own math and make an offer that is good for him, perhaps even with the aid of an accountant, and a lawyer.
It is VERY RARE that a landlord and a tenant would have the same goal.
In this case I think the landlord threw a Hail Mary pass in hopes of getting a dumb tenant to come up with some bargain basement price.
Of course, NOBODY could ever recommend the tenant offer a number unless it was something like a MILLION, perhaps with a big smile. to toss the ball back. What that will say is "Who are you kidding? I wasn't born yesterday!"
Last edited by Kefir King; 09-15-2012 at 08:10 AM..
It's probably not worth it if you plan to stay in the NYC area. Whatever they give you, will go right back out of your pocket once you get into market rate housing somewhere else. There is no indication that rents in NYC will go anywhere but much higher.
Well this depends on how much the person makes and has in savings...
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