(post by Dee) Back in May, we posted a story titled Rent Stabilized Buyout NYC. Just yesterday, a fellow named Greg responded… it seems his landlord is trying to get him out and he thought the $15,000 buyout number was ridiculously low. Well, if he’s paying $500 and by moving out he’d now have to pay $2 grand, I would agree.

Greg, first of all, thank you for reading and for your response. $15K figure was told to us by an investor who does business in Ridgewood, Queens. Rents in that neighborhood run $1100-1300 for 1BR and $1200-1600 for 2BR. In Manhattan, where rents and values are a lot higher, the same investor pays as high as $100K to buy people out of leases. Either way, it’s business and numbers. If you can get $3000 and someone is paying $500, and the price of the building is reflecting the $3000 rent, why would you ever buy the building? You would be losing a lot of money every month, as your expenses and mortgage would be higher than what you collect in rent. The only way it makes sense to buy, is if you can get rid of current tenants and rent those apts for market rent. At the same time, you can only offer what makes sense…. if you were to pay $50K for 6 tenants on a building that sells for 700K, your price would suddenly be $1 million and you’d have to come up with $300K cash to buy tenants out, plus the typical 25% down on commercial property (that’s another $175,000). This deal would make NO SENSE now.

The point I am trying to make is that there is no reason to get upset or offended. You don’t have to take an offer that does not work for you. Same as the landlord should not make a deal that will break his wallet. We’ve seen too many people overpay for under-performing properties in the past few years. They are in foreclosures or bleeding negative cashflow on buildings they won’t be able to sell at profit for years. Real estate is business, not some magic piggy bank. The past several years turned everyone into a real estate “investor”, myself included. More about THAT another day!

In New York City, where prices and rents are high, you still need people who can’t afford these prices. You know, the folks who make this city go. Out of 8 million, how many can pay $1000 per sq ft for property, or $4,000 rent? Only a small percentage, that’s how many. Some affordable housing is being mandated by NY State Governor Peterson. The State will provide $357M for Affordable housing to help ease this issue… But what does this mean to property values? Depends what kind of affordable model they choose. Projects and subsidized housing is sure to kill any neighborhood. Let’s hope it’s neither of those!!!!