I was speaking to a French investor today about some of the different taxes in France, and some of the ways investors handle renters, different ideas floating around, what have you.
Apparently there is a proposal to make it illegal to raise the rent when a new tenant is found for an apartment.
That sounds pretty awful, though not any worse, perhaps, than some of what happens with rent regulations in NYC.
As you may know, we have rent control, started in 1946 for soldiers coming back from WWII (where “Pre” and “Post” war comes from), to keep housing affordable.
This has become a joke of itself.
Certainly in the 1970’s, when owners walked away from their buildings because taxes were higher than the rents, rent control was at fault.
Fast forward, and who would disagree that a $300 per month rent for a 3 bedroom apartment shouldn’t be higher?
Who “deserves” that rent?
When the monthly charges are probably $2000 per month, we can have a discussion about what’s fair, and what isn’t.
Certainly, inheriting your grandmother’s $200/month classic 6 is enviable, but probably not fair.
Moving on.
Rent stabilization offers a set increase based on a determination by an appointed board, based on cost of living and inflation increases, what have you.
Until a rent on an apartment reaches $2000 or $2500, its pricing is often governed not by the market, but this ruling.
We were discussing reverse mortgages, where an owner gets a small starting payment, and is paid every month based on a negotiated “sale price.”
At the end of a period of time, the apartment is paid for, and the seller moves out.
Nice way to turn a house into an annuity- assuming you die or have another place to move at the end.
My great-grandfather almost outlived his reverse-mortgage (at 105, god bless him).
I wouldn’t advise it.
In France, apparently there is a system in which a tenant is paid a small stipend per month by a landlord, in a situation where the rent is artifically low.
After a period of time, or death- the tenant should in theory have enough money to buy his “retirement home” and will move out.
Which got me thinking…
Hard to predict when your tenant will die
However, if we’re talking about a property which you own, and which you’d like to get a tenant out- who benefits from a rent-regulated situation- perhaps this type of structure could be appealing.
A tenant would be offered to live rent-free for a period of time, even until death.
During that time, they would receive a monthly payment.
However, at the end, they could not pass the property along, nor would they receive a big lump payment, common of the “buyouts” that are offered to get tenants out.
In this way, an owner knows when he’ll get the apartment back as a free market unit, and the tenant has some security as well- but it becomes less amorphous, and less dodgy, where a tenant no longer is governed by rules that actually limit the income he can make, and things that distort the system.
Something to think about. What do you think?