Multiple dwelling buildings are highly sought-after because of their high return on investment. No, they are not coal pits. Here’s why. With multiple apartments and with the increasing market rates, multiple dwellings offer their owners a higher rental income than income from one and two-family properties—all in one location. A responsible multiple-dwelling owner, who seeks the highest net operating income from their multiple dwelling would know landlord and tenant rights, multiple dwelling law, and would know the tax benefits they can receive from their property.
Through proper management of their property, a multiple-dwelling owner can reap the economic benefits of their high market-value rental units. Proper management involves correcting violations issued by the Department of Buildings (DOB) or the Department of Housing Preservation and Development (DHPD). Each violation, if not corrected, results in a fine, which increases daily. This can cause a hiccup in the possible sale of the property. A landlord should know that tenants can be afforded rent abatement, or a rent reduction if violations are not corrected. To remove violations, an owner needs to connect with an experienced contractor, repair the premises, and pay the fines that accumulated. An owner should also follow the procedures, as specified on the DHPD and DOB websites, to clear violations. They can consult a landlord-tenant attorney for assistance on these matters and to stop the DHPD from starting a civil lawsuit against them.
To ensure that they retrieve the expected income from the property, owners should ensure that tenants’ rent are properly documented on the rent roll. Owners can even look into automated software to quickly accomplish this. This allows the owner to keep track of payments, exact dates of missed payments, and the amount that is due. Such rent ledger can be useful when recovering arrears in Court.
In Court, landlords of multiple dwellings need to understand that their property may be rent stabilized. This often applies to buildings with six units or more. Landlords should consult with a landlord-tenant attorney for further help with this determination, even before they purchase their property. If a unit is rent stabilized, there are specific rules and regulations concerning the grounds for eviction. Eviction of a rent stabilized tenant is not usually awarded for the non-payment of rent, but chronic non-payment of rent may be grounds for eviction. A landlord will need to prove this, of course. Don’t just sit back and wait for tenants to pay. Your property is your investment, and you need to make the most of it.
To further reap the benefits of their multiple dwelling, a landlord can take advantage of the tax benefits available. If a multiple dwelling has been renovated, the owners can take advantage of the J-51 tax abatement. If a building owner or developer receives such incentive, then the building becomes rent stabilized until the J-51 expires. Another tax benefit available to multiple dwelling owners is 420-c, where the owner, which may be an LLC or Corporation with 501-c-3 status, develops units to be solely for affordable housing. Other tax benefits are geared toward affordable housing and social services.
If an owner of a multiple dwelling building does not want to take the time to upkeep their property, they may hire a property manager. Property managers are devoted to ensuring that your investment does not go to ruin. They take care of violations, keep track of the rent roll and ensure that your property is in good standing. After all, a property in disarray can lose value when it is time to sell.
So, multiple dwellings are not coal pits, but their owners need to put in the work that is necessary for high profits, take advantage of the tax benefits and keep track of rental income to get the most gold out of their gold mine. They should consult a landlord-tenant attorney to advise them on rent stabilization matters which can affect how they handle tenant issues and can affect their net income.
We are happy to help and share our insight and experience to help you with the buying process. Schedule an appointment today with one of our real estate professionals. Call us at 888-670-6791.
Chereen James is an aspiring lawyer who enjoys writing in her spare time. Chereen has written for publications such as The Statesman and is now a writer for Workers’ World Today. She also co-hosts a radio show, “Ask the Lawyer.”