3fam used as 4fam in NYC - Posted by newb

Posted by Frank Chin on March 07, 2003 at 14:47:04:

Hi Newb:

I owned some two familes with 3 units, and so does my mother in law.

I recently refie’d the one where I rent to the WEB designer, and I went thru the issues I mentioned previously with the bank. The 1st floor unit (called the basement unit) has a front door to the foyer, and a back door to the back yard. So its OK as far as the bank was concerned.

I rented the units to separate different tenants for many years prior. I had no problem with housing court as I did not have to evict anyone.

Mayor Koch was asked about cracking down on these units. He remarked that NYC will have a major housing crises, with at least 100,000 out on the streets if he cracked down.

In fact, the block that I have this rental consists of what they call 5-5-3’s from one end of the block to the other, all legal two families with three units. At least 15 families will be homeless if the city cracks down.

I did run into a problem with a REO which I bought as is, that apparently had a violation of an illegal unit on file. Basically, the difference between a legal and a non legal unit is the issue of a bathtub and kitchen.

Some inspectors came one day, but because I did not have the unit rented, I only used it for storage. they issued me a citation. A neighbor was issued an emergency dispossess order on his tenant as he got it rented out.

What I did was filed a plan that called for the removal of the bathtub and kitchen sink. The expeditor I used got an architect to redraw the living room/kitchen area as a recreation room with a bar. The ONLY change in the kitchen was a new countertop and a smaller bar sink. The stove was already gone.

Initially, the plan was rejected, but was approved after my expeditor appealed.

So it cost me about $1,000 in expeditor and architect fee, $350 to file the permit, $300 to remove the bathtub, and $500 for the plumbing inspection fee. If you don’t file for a permit within 30 days of the citation, there’s another $350.00 fine. My wife got a new countertop and Home Depot and bar sink, and we got a handyman to put it in for a few dollars more.

In other words, instead of ripping out the whole unit, plans were filed and approved with the unit as is with a minimum of modifications.

I spoke with an inspector about allowing extra kitchens and bathtubs, and he mentioned that exceptions are made for folks with extremely large families. Having your local councilman intervene helps. He mentioned of a case he knew of where the homeowner’s rabbi help win an appeal.

He also made mention of Italian families appealing on the basis that they need a traditonal summer kitchen. It used ot be allowed, but this exception is very difficult to obtain nowadays.

Frank Chin

3fam used as 4fam in NYC - Posted by newb

Posted by newb on March 06, 2003 at 12:03:20:

Hi,

Im looking to get into REI with rentals and I came across a 3 fam house for sale. The market is hot and the price is a bit high so the deal only works out if i rent out the 4 units (its a 3fam). House is in Brooklyn NY.

What are your thoughts about this?

Thanks

Re: 3fam used as 4fam in NYC - Posted by Frank Chin

Posted by Frank Chin on March 07, 2003 at 10:47:29:

Hi Newb:

This town is full of:

1 family used as 2 fam
2 family used as 3 fam
3 family used as 4 fam etc etc

Several issues:

1- Banks will not consider rent of additional unit in DTI calculations, in your loan application.

2- If the additonal unit does not have 2 exits, bank will lend only if unit is removed. Tenants have been killed in such basement and attic units, and the landlords are now subject to criminal penalties when someone is killed in units with one exit.

3- You will have problem evicting tenants (in all the other units) if you have an illegal unit. All the non paying tenant’s attoreny has to do is tell the judge you’re renting an illegal unit, and the judge will send you packing.

Having said that, these units are all over, and asking prices includes them.

One good way to get around this is to rent both units together to one tenant, with the additonal one being used for a home office etc.

A recent Wall Street Journal article mentioned the increased demand for in-law units all over as people either care for aging parents, or the increased popularity of home based businesses.

I rent such a unit to a WEB designer who uses the unit as a home based business. The problem I have now is his businesss has gotten larger, and he’s got an employee - and I’m not sure if I’m violating some other law. Oh well.

Frank Chin

is this a risk youre willing to take? - Posted by newb

Posted by newb on March 07, 2003 at 12:10:00:

your right, all mf houses in my area are priced by the actual # of units not the offical #. would you go for a deal like that? or is this a big no-no?

Thanks