If you have a beat-up, rent controlled building that you’re considering selling and a vacancy opens up, DON’T FILL IT.
Here’s why:
- Unless you spend a lot of money fixing up the building before you rent it, you’re not going to get top dollar from the new tenant;
- So, you’re going to have someone in there at less than market value;
- That person is very likely going to want to stay in the building for a long time (after all, he’s paying below market!) and he’s got the right to do so under rent control.
Your potential buyers know this. They know they’re either never going to get that person out, or they’re going to have to pay a bunch of money to make it happen.
Either way, that means they’re going to be willing to pay you less than they would otherwise have paid.
Now, on the other hand, if you follow my advice, the buyer is going to be able to fantasize. He’s going to imagine the building all fixed up and pretty. Then, he’s going to be willing to project some very high rent for that unit, a rent which will help him justify paying you the (probably ridiculous) price you want for your building.