In Condominiums and Cooperatives, one of the factors that will play into whether your Unit Owners, Shareholders or the building as a whole can easily get financing is the percentage of investor-owned units. Investor-owned, in this case, is a unit that is sublet out. If a building has greater than 15% of their units sublet out by the respective owners / shareholders, the banks will take notice and may give an issue when trying to obtain financing.

There are some buildings that don’t allow subletting at all, but most will at least make it difficult or onerous to do so. A sublet fee based on a per share basis, a flat fee or a sliding scale for different years can be put into place to create soft income for the building. The theory is that the person who is subletting out their unit is making money on the transaction, so why not also create a fee within the building.

Some buildings may also place a cap on the number of years that the apartment can be sublet, whether it’s 3 for every five years or a maximum of 3 years total, these are but two examples. Some cooperatives that we manage also institute a rule that states that a Shareholder cannot rent out their apartment for at least one or two years after their purchase. This will limit those looking to use their apartment solely for investment purposes when they are purchasing.

Banks get nervous. If a large percentage of unit owners or shareholders rely on their investment income (their rent) in order to pay the common charges or the maintenance on the unit, several non-payments by renters in the building could lead to non-payment of maintenance, and in turn non-payment of a mortgage.

Find us on Facebook:
Follow on Twitter: