Michael Vinocur

Major Capital Improvement (MCI) Rent Increases - How to Get them as a Landlord in New York City NYC

This posting is intended to give landlords who own multifamily rent regulated buildings in New York City an overview of the incentives for doing Major Capital Improvements (MCIs) to their buildings. We own several rent regulated buildings in NYC and have done extensive MCIs in order to achieve rent increases and thereby increase the value of our buildings.

In a nutshell, certain improvements to your building that effect "all the tenants" allow you under the rent stabilization law to increase the monthly rent in your building by 1/84th of your investment--basically a seven-year pay back. Such MCIs include things like a new roof, new electrical service, new doors, new windows, new cement flatwork, new mailboxes, new intercom, new boiler, new plumbing, and repointing and waterproofing. This list is not comprehensive, but does cover most of the common areas where you can do a major capital improvement. Doing MCIs can result in as much as a 14% return on investment, assuming you have no retail space and all rents are below market. Given that you can borrow money today at 5.25% or less, owners with a strong equity in their buildings might consider refinancing to pay for Major Capital improvements and reap the additional return.

Note that there are some limits on how much of an increase you can pass on in a given year. On rent stabilized apartments you are limited to 6% per year increases. On rent controlled units you can realize a 15% increase per year. However, if you hit the cap in a given year, you can collect any unrealized increase in subsequent years. These increases are in addition to normal rent guidelines increases or MBR increases, in the case of rent controlled apartments. If you own rent controlled units, between MBRs and MCIs, you can actually increase rents up to 22.5% per year. And remember, all these increases get compounded when you get future Rent Guidelines Board increases.

Building Equity LLC is capable of overseeing all area of MCIs and also can oversee the sometimes intimidating filing process to get your Major Capital Improvement rent increase approved by DHCR (Department of Housing and Community Renewal). If you have a building that might be a candidate for MCIs and would like to discuss a game plan, please contact me at mvinocur@buildingequitynyc.com.

Michael Vinocur
Building Equity LLC
631-680-9368
www.buildingequitynyc.com

A Design/Build Approach to Renovating in New York City

In approaching a remodeling project in a NYC apartment or townhouse, many feel that they should first hire an architect to design the project (often adding 10%-20% to the overall cost) and then have him/her put the project out to bid with a variety of contractors. However, where in this process does the client's budget enter the design process? What happens if the architect designs first for aesthetics and loses site of "buildability?" Do most architects really have any idea what it will cost to build their design while they are designing it? What if the client doesn't connect well with the contractor who is the lowest bidder? After all, this is likely to be a several month relationship where the contractor is a part of the client's daily life. Where in the process can the contractor suggest a "better way" to design and build the project?

One solution is to hire a design/build firm that looks more at the totality of the project and brings in architectural talent as necessary, both for filing/permitting requirements and possibly for more creative design elements. Obviously, the client has to have a certain trust/comfort level with principals of the firm. Once that exists, a design/build approach to renovation projects can make the entire process much more efficient, collaborative, and enjoyable. Instead of designing the renovation project and then determining that it can't be built within budget, a design/build program can design to the budget and allow the client to decide where money can be saved and where more money should be spent. This is difficult to do in a typical architect-driven project. There is still an opportunity for the client to bring in an interior designer to help with colors, finishes, and material choices, working closely with the the design/build team to cost things out in a fairly real-time fashion.

Particularly well served by a design/build firm are those who are in the process of looking to purchase a New York City coop, condo or townhouse. While and architect can come in prior to the purchase and offer his/her share of design ideas, he/she often has little idea what it will cost to build. A contractor can come in and suggest the cost to build something, provided that the client already knows what they want done, which is often not the case. However, someone offering design and build services can escort a client through a property. It certainly seems like a solution worth looking at for most taking on apartment or townhouse renovation project in New York City.  

Michael Vinocur
Building Equity LLC
144 E44th Street, 5th Fl, NY, NY 10017
mvinocur@buildingequitynyc.com
www.buildingequitynyc.com
631-680-9368