Leasing becoming more of an option

6/15/07 / The Record / Real Estate

Leasing becoming more of an option

By: Jennifer V. Hughes

Realtor Nelson Chen said he’s seen a definite increase in condo and co-operative clients who choose to lease rather than take a loss with a sale. He helped a couple lease their unit in the City Place condos in Edgewater. Kimberly and Jason Lovelace put their one-bedroom condo in Edgewater’s City Place up for sale about a year ago, but due to a sagging housing market, the offers were slim. “The one offer I remember was so lowball that we were debating whether we should even respond to it,” Kimberly Lovelace said. After six months on the market, the couple turned to an option that some experts say is becoming more popular with condo and co-op owners: leasing. With the help of their Realtor, Nelson Chen, the couple found a tenant for their apartment so they could move to a rental in Manhattan that was closer to where they work and where she attends law school. “I really can’t complain with the outcome,” Lovelace said. She said they ended up with a corporate tenant that uses the apartment as short-term housing for overseas business travelers. The apartment was listed at about $498,000 but Chen said he recalled one offer coming in at about $420,000. The rental price, about $2,200 a month, covers the mortgage. Lovelace said she’s not sure how long they will continue to rent, but said the option is working well for now. Chen said he’s seen a definite uptick in condo and co-operative clients who choose to lease rather than take a loss with a sale. Some tenants are corporations but most are individuals, he said. “If they can afford it, they’re going to hold on to the property and rent rather than sell at what they consider too low a price,” he said. “The value will return if you can wait long enough, and some of them make great rental properties.” Condo sales, in general are down, according to the New Jersey Association of Realtors. In the first quarter 2008, there were 236 fewer condos sold in Bergen, Passaic and Hudson counties than in the same time period in 2007. But condo and co-op owners need to be aware of the rules and regulations that go along with leasing their units. The first step is to check with your managing agent or board for details. Co-ops, by their nature are generally more restrictive than condos and often require a prospective tenant to provide financial information to the co-op board. Some co-ops will stipulate that only a certain number of units in the building be occupied by renters, said Joel Ellis, a Hackensack attorney whose firm has represented co-ops and condos for 35 years. Co-ops also sometimes indicate that a unit can be leased only a certain number of times before it must be owner occupied, he said. Another consideration is whether there are any maintenance increases on the horizon. If you know that your fees will be rising in the next six months due to a lobby renovation and consequent assessment, you might want to take that into consideration when setting your rental price. Like many condos and co-ops, Winston Towers in Cliffside Park requires owners to live in their units for one year before they can lease out to tenants, said Maureen Elwell, assistant property manager. Out of 676 units about 45 are now leased, she said. Tenants must attend an orientation session before moving in so they understand the condo’s rules and regulations, she said. The condo provides a standard lease owners can use, or they can draw up their own. She said owners should be aware that they are liable for any damage a tenant does, not only to the unit but also to common areas. Elwell said she could not recall any problem tenants. While most condos don’t require tenants to go through financial background checks; owners should require them, said Bergen County Realtor Mark DeLuca. “The tenant should be creditworthy and financially capable of making the rental payments,” he said. Not surprisingly, DeLuca recommended using a Realtor to find a tenant. In almost all cases it is the tenant who pays a commission to the Realtor, and the Realtor can run credit and background checks, he said. “A Realtor can write an acceptable lease and also navigate the condo or coop boards, which can sometimes be a difficult process,” DeLuca said. Owners also can consider hiring the Realtor to manage the property, taking in rent, arranging for repairs and paying certain bills. DeLuca said he manages about 30 condo units for owners and charges a percentage of rent collected, usually between 6 percent and 10 percent. DeLuca said that in some cases, owners are having difficulty renting their units because their mortgage exceeds the amount they can charge for rent. “This can put a damper on the concept,” he said. But if an owner wants to rent the unit versus sell it, DeLuca said, it should be done only if the owner is ready to be a landlord for at least five years. “The real estate cycle does not turn around in just a year or two,” he said, “especially with the foreclosures and volume of property that has come on the market in the past two years.”