Thinking of Renting Out Your Apartment Instead of Selling?

These days it matters more than ever to keep your finger on the pulse of the real estate market. The NYC market is currently experiencing a shift towards a buyers market that is putting a lot of pressure on sellers. Similarly, landlords are also experiencing problems due to the recent rent reforms and the glut of luxury rental properties. So, what’s a seller to do? Continue trying to sell or put their apartment on the rental market? The answer depends on what type of asset you have. Despite the current oversupply problems with the ultra-luxury market, the more affordable submarkets like studios and one-bedroom apartments are far steadier in both prices and sales. This puts holders of these types of assets in a much stronger position to sell.

However, the same reasons also put you in a strong position to rent out your apartment. If you’re not currently in need of a large payout, the present market suggests that renting is the better alternative. But only if you have the flexibility to survive the rental market. Ask yourself these questions before deciding to rent or sell.

If You Choose To Sell Can You Price the Apartment Correctly?

If you desperately need the equity that’s tied up in your property, then the decision has already been made for you. Selling a property is a surefire way of acquiring the necessary funds for a new home purchase or business venture. But if the current market says your target price isn’t attainable and/or you would take a loss from selling, then it may be better to hold onto your apartment for now. The current market is killing sellers, many of which have had to make drastic price cuts to stay competitive. As mentioned, though, this is a problem that mainly plagues the three-bedroom and up luxury market. Anyone that’s trying to sell a one-bedroom or studio apartment stands a much better chance of getting a fair market price or even eliciting a bidding war.

If you’re unsure about your property’s worth in the current market, then schedule a meeting with a real estate agent. They can perform a comparative market analysis (CMA) that will determine what your property is worth and what you can expect to get if you chose to sell.

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Do You Understand the Recent Rent Reforms?

There’s rarely a shortage of demand for rental units in NYC, so you’ll probably have no trouble finding tenants if you chose to rent. However, the rent reforms passed last June have made the business of being a landlord a little more complicated. If you’ve never tried your hand at being a landlord before, then you should start reading up on the current rent laws to understand what you’re getting into. The recent changes include, among other things, new limits and deadlines related to the security deposit.

Can You Accept the Responsibility of Being a Landlord?

At first, being a landlord sounds like easy money. Hire a listing agent to market the apartment, find and qualify the right tenant, then sit back and watch the money flow in. But on further reflection, you’ll find that there’s a lot more to the job. You’ll need to ensure your insurance is up to date, that you have a system for financially qualifying tenants, and that you have plenty of cash in reserve. Being a landlord means having to pay for regular maintenance and unexpected repairs. When you have a tenant, you need to ensure you’re charging enough to cover the cost of monthly mortgage payments, common charges, taxes, and other payments. When you don’t have a tenant, these charges still come due. This is why you must ensure you have enough cash reserves to cover you when the apartment is vacant.

There’s also the moral responsibility that comes with being a landlord. Are you ready to deal with late-night calls about broken water-heaters and troublesome tenants that don’t pay on time? If your answer is not a resounding ‘yes!’ then maybe you should reconsider becoming a landlord. The job can wear out a lot of people, and even hiring a property manager doesn’t solve all the problems.

If You Sell Can You Compete with Luxury Developments?

The softening of the high-end market has put sellers of these properties in a very tight spot. With each passing month, more and more sellers of high-end condos are acknowledging that the current market is making it very hard to expect a quick sale or top dollar. If you’re in the high-end bracket (typically anything at or above the $2 million price range), it might be better to hold and wait. Until the market has absorbed more of the current surplus, we can’t expect things to change much. Fortunately, the rental market for high-end condos is currently doing pretty well, making this a better option than selling. So long as you have the funds to hold onto your property, it could potentially become a very lucrative income-generator.

Are You Trying to Upgrade to a Larger Apartment?

The market right now is tough on sellers. But it can also work in your favor if you’re looking to upgrade to a larger apartment. As mentioned, the lower-end market (studios and one-bedrooms) is doing fine. It’s the high-end market that is seeing less activity and sharper price cuts. With that in mind, it makes perfect sense to sell now if you intend to buy a larger, more expensive property with the proceeds. Anyone that’s simultaneously buying and selling benefits the most when market conditions favor buying the more expensive property. Of course, to take advantage of this, you’ll have to be buying and selling in the same market.

Is Your Apartment a Co-op?

If you’re a tenant shareholder in a co-op building, then the decision may already be made for you. Co-ops tend to have very strict subletting rules, with some banning the practice completely. Read your co-ops subletting rules to see what the requirements are and learn if this is even an option. Most co-ops require owners to live in their unit for 1-2 years before being permitted to sublet for 1-2 years. There’s usually also a fee involved, and the co-op board will need to approve any potential tenants you do find. Given the complexity involved, subletting is rarely an adequate option. This puts co-op owners in a difficult position, especially if their property is a high-end luxury unit. If you can’t afford to make a competitive price cut, it may be better to take your property off the market for now.

Have You Considered a Renovation?

Looking to upgrade to a larger apartment but can’t get the price you need on your current one? In that case, the next best option might be a home renovation. When done right, a renovation project can revitalize an old home, make it more spacious, and raise its market value. However, this needs to be approached with caution. It’s very easy to go over budget with a renovation, and there’s no guarantee that you’ll recuperate your investment. Large projects can take quite a while to complete, and you have to live through most of it. Do plenty of research on how to plan a renovation project and seek consultation from a qualified architect. If you don’t have much leverage to sell in the current market, then a renovation is probably the smartest option.