Daily Archives: September 19, 2011

Rent Stabilization

Frank here…………Here is where I agree with my more conservative bretheren – rent control laws are plain idiotic. I confess to onetime thinking it a great thing, a way of equalizing. Of course, I was probably just angling for a cheap apartment. Nonetheless, 8-10 years working within that system made it pretty clear that controls actually choked out the working poor, rather than reinforced their ability to live in New York (or Port Chester, for that matter. New York is stabilized almost throughout). This rule http://greenline.stnicksalliance.org/?p=83 was by far the dumbest. If somebody moved out of a rent stabilized apartment, you could only return it to market rates if you did enough repairs inside the unit so that 1/40th of that work, added to the exiting rent, exceeded $2,000. Then, of course, you could rent it for whatever you want. The result was a building with slums door to door with apartments so costly they had to rent for 15-20 times what the neighbor did to break even. That was an investment spiral that could never reverse, so inevitably the whole building would go ultra-expensive. Boom, no affordability. So, housing advocates figured they would stop owners from doing this by making it more expensive to “deregulate” by increasing the fraction to 1/60. Makes no logical sense. If Cambridge MA could do away with controls, anyone can.

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Actual Real Estate

Frank here…………..Spent the weekend actually working. As it happened, three clients were buyers of small multifamily houses. Two and three family houses are pretty much the same anywhere in Connecticut, so the trips through Greenwich, Stamford and Bridgeport kind of looked the same. Problem was that it didn’t seem that any of the owners had the slightest grasp of basic math. Rent + rent – property taxes – maintenance and management is supposed to not = a loss. Pricing seems to be based upon a combination of “what I paid”, “Greenwich never loses money” and “you could convert it to a lovely single family”. The last one is code for “through economic principles out the window because it has a lovely front porch”. Stamford is no better prospects, as the amount of overpaying in 2005-2007 has left a lot of economic wreckage with radically lowering rents. You can buy a three family house in Bridgeport for $30,000, however you would have to live there to be closer to Housing Court. We keep looking, but these are barren days for actual real estate investors around here, at least until sellers learn the difference between facts and fantasy

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