JohnC46 (South Carolina)
Posts: 14,265
Posts: 14,265
Posted:
Has been discussed quite a bit, but the below article is interesting:
WASHINGTON (MarketWatch)—Question: We live in San Diego, but own an apartment condominium in Chicago that we rent out. The condo board is considering a change in the bylaws that would prevent all new and subsequent purchasers in the building from renting for their first two years of ownership. The board’s reasoning is this: Nearly half the building’s units are rented by their owners, and it fears that if the percentage of renters to owner-occupants rises above 50%, owners will have a tough time selling because their buyers won’t be able to secure financing. What’s your opinion? —C.L., San Diego.
Answer: Your condo board is right. Fannie Mae, Freddie Mac and the Federal Housing Administration all shy away from backing mortgages in condo buildings where half or more of the units are not occupied by their owners. That could change, either up or down. But for now, those are their rules, and these days the primary lenders who fund new loans play by those rules, to the letter.
For that reason alone, I would be in favor of the bylaw change, even if you are not interested in selling at the moment. But there are other reasons to limit rentals.
One is that values tend to fall in buildings where the majority of occupants are renters. Well, perhaps not fall, but apartments certainly don’t rise in value at the same rate as those in buildings where owner-occupants predominate.
Another is that owners tend to take better care of their places than renters, even when large security deposits are required. It’s just the nature of the beast. That also impacts future values, especially if the “it’s not my house” attitude spills over into the building’s public spaces, like halls, the lobby and so on.
From the viewpoint of a future buyer, though, I might hesitate to buy with such a rule in place because it limits what I can do with my apartment. Living in condominiums where the elected board tells you what you can and cannot do is already difficult enough without one more rule with which to contend, even if it is in place to protect values.
If the board does adopt the no-renting rule, it better make sure it does so correctly, in accordance with the bylaws. And it better make darn certain that all potential new buyers are made aware of the rule in advance, before closing. Otherwise, I suspect a lawsuit might be in order.
Hope that helps.
WASHINGTON (MarketWatch)—Question: We live in San Diego, but own an apartment condominium in Chicago that we rent out. The condo board is considering a change in the bylaws that would prevent all new and subsequent purchasers in the building from renting for their first two years of ownership. The board’s reasoning is this: Nearly half the building’s units are rented by their owners, and it fears that if the percentage of renters to owner-occupants rises above 50%, owners will have a tough time selling because their buyers won’t be able to secure financing. What’s your opinion? —C.L., San Diego.
Answer: Your condo board is right. Fannie Mae, Freddie Mac and the Federal Housing Administration all shy away from backing mortgages in condo buildings where half or more of the units are not occupied by their owners. That could change, either up or down. But for now, those are their rules, and these days the primary lenders who fund new loans play by those rules, to the letter.
For that reason alone, I would be in favor of the bylaw change, even if you are not interested in selling at the moment. But there are other reasons to limit rentals.
One is that values tend to fall in buildings where the majority of occupants are renters. Well, perhaps not fall, but apartments certainly don’t rise in value at the same rate as those in buildings where owner-occupants predominate.
Another is that owners tend to take better care of their places than renters, even when large security deposits are required. It’s just the nature of the beast. That also impacts future values, especially if the “it’s not my house” attitude spills over into the building’s public spaces, like halls, the lobby and so on.
From the viewpoint of a future buyer, though, I might hesitate to buy with such a rule in place because it limits what I can do with my apartment. Living in condominiums where the elected board tells you what you can and cannot do is already difficult enough without one more rule with which to contend, even if it is in place to protect values.
If the board does adopt the no-renting rule, it better make sure it does so correctly, in accordance with the bylaws. And it better make darn certain that all potential new buyers are made aware of the rule in advance, before closing. Otherwise, I suspect a lawsuit might be in order.
Hope that helps.