Hi, A friend of mine is leaving an apartment, and he asked me whether I want to rent it since I am looking for a new place. He was sub-leasing it from the original renter (not owner) for several years. The rent is very reasonable, and my friend told me that the original renter is sub-leasing to him at a loss. I believe him because the rent is low comparing to apartments with same size. My question is why would anyone sublease his own apartment at a loss for several years while this original renter has a house in the same city? Should I be careful? Thanks.
Maybe the master tenant intend s to return some time in the future and wants to preserve his rental rate in case he returns or has family he wants to live there
wesleman
Senior Member
posted: Sep. 3, 2010 @ 7:11p
Maybe the apartment is located in an excellent school district and the original tenent is using its address to qualify Jr. to go to school there!?
Either that or he is a Russian sleeper spy!
Kanosh
Senior Member - 1K
posted: Sep. 3, 2010 @ 7:30p
When you ask a real estate question, ALWAYS state your location. It makes a big difference. I have a feeling the apartment in question is in a rent-regulated jurisdictiion like NYC. The primary leaseholder is required to rent to the subtenant at the same rent he pays. The person renting "at a loss" is the owner of the apartment, forced to rent it out at rents far below market below, perhaps even below his operating expenses.
If you're going to get involved in such an arrangement, be careful to make sure you do everything "by the books". Landlords can and do find out about illegal subtenants and love to evict them, bringing the apartment back to their control.
biomedeng
Senior Member
posted: Sep. 3, 2010 @ 10:23p
wesleman said: Maybe the apartment is located in an excellent school district and the original tenent is using its address to qualify Jr. to go to school there!? First of all it is generally easy to fake an address for school enrollment. Where I have lived all you need is your name on a power bill. I would certainly put any of my friends or family as an additional name on my power bill as a personal favor. Often the district will go after people who clearly do not live within the county, but if you are just playing games to move between different schools in the same county you can fly under the radar. However, if this was a stricter district requiring proof of property ownership, it is not necessary to rent at a loss. The owner could simply rent at market rate.
GreenBack
Senior Member
posted: Sep. 4, 2010 @ 12:38p
There's got to be more to this. In a rent-controlled area, the owners are often allowed to raise rents after a tenant moves. So, the rental agreement would usually stipulate that the apartment cannot be subleased.
SUCKISSTAPLES said: Is there rent control in your area?
Maybe the master tenant intend s to return some time in the future and wants to preserve his rental rate in case he returns or has family he wants to live thereBut if having to rent at a loss, what good is preserving a rate that is clearly above market?
Perhaps he's deducting his lease payments as business expenses, then not claming the sub-rental income? Or he's maintaining his lease to block someone's else's right to the property?
Or maybe this is a story your friend was told to get him to pay more than he otherwise wanted to...... To continue this arraingement over a period of years indicates either he lied about the loss, or there's other shenanigans going on in the background.
I didnt get the impression the rental rate being preserved is above market.
As I understood it, the master tenant has a below market rate lease, and is subleasing for an amount even lower than that... making the rental rate low and attractive to OP.
There are numerous sublease provisions when rent control is concerned, and often one rule is that the sublease MUST be below the master lease rate (IE master tenant cannot profit by subleasing) so it is not surprising to me that the sublease rate would be less than the master lease rate, when BOTH are below current market rents.
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