RENTAL GUIDE
When renting a home, please consider the following guidelines:
How much rent can I afford?
As a rule of thumb in New York City, you can expect to spend approximately 25% of your gross annual income on rent. If you earn $80,000 per year, plan to spend $20,000 on rent.
What do Landlords commonly require?
The basic requirements are that your gross annual income be 40 to 50 times the amount of the monthly rent, and that you have a good credit rating (see credit report section below).
What paperwork will I need?
Application Form:
The first step in the process, once you have identified an apartment, is to fill out an application form. Most management companies have their own forms that need to be used. If you are renting in a co-op or condo, you may find that you have to complete two applications: one for the individual owner and one for the board package.
Letter of Employment:
This must be on official company letterhead. The letter must state your position, length of employment or start date, and your annual income. The letter must be signed by a person who may be contacted to verify the information provided. In some instances, this information can be confirmed via telephone call only instead of written confirmation. Please note that a signed job offer and acceptance letter is usually not sufficient.
Pay Stubs:
Copies of your three most recent pay stubs.
Tax Return:
Some management companies require a copy of your most recent federal tax return. A tax return is always required when an applicant is self-employed or if there are multiple sources of income.
Landlord Letter of Reference:
A letter from your most recent landlord is always helpful and is typically required. If you are unable to get a letter, have the name, address, and phone numbers of your previous landlord ready.
Bank Statements:
The three most recent statements from your checking account, savings account, or any financial institution will usually suffice.
Bank Account Numbers:
These are often required on application forms. Have them ready just in case you need them.
References:
If you have an accountant or attorney, you might be asked to put their numbers down as a reference. Think of other people who could be references in case you need them and have their contact information handy. Not all landlords will require actual letters of reference.
Identification:
Most landlords require a copy of a photo ID at lease signing.
Credit Reports
As a rule, credit reports are run on every applicant and guarantor. The fees for credit reporting/application processing range from $25-$250 depending on the company or service used. As with the application form, you may find that when renting a condo or co-op the landlord will require a credit report to be done in addition to the one done by the managing agent. Unfortunately, credit reports obtained on your own will not be accepted.
The information contained in your credit report will be weighed very heavily in the approval process. So what is considered inadequate? A few old late payments are usually okay. A high revolving balance is not good. Past due payments that are still outstanding are bad. Delinquencies and collections are very bad. If you suspect that your credit is not good, be sure to advise your agent. This will allow your agent to properly prepare you and the landlord for the process.
Different landlords have different ways of dealing with credit issues. Some will allow you to increase the security deposit or to use a guarantor. Others may reject the application entirely. Your agent will guide you in a way that will save you time, money, and a lot of frustration.
What is a Guarantor?
A guarantor, also called a co-signer, is someone who is willing to guarantee your lease. The guarantor is responsible for all terms of a lease in its entirety; the guarantee cannot be limited to the interest of a single applicant in a share situation.
Do I need a Guarantor?
If you do not meet the landlord’s financial or credit requirements, a guarantor may be your solution. Students or individuals with no income or credit history, or anyone who does not meet the standard income requirements, will usually need a guarantor. When bad credit is the issue, whether or not a guarantor is allowed will depend on how bad the credit report is, and on how strict the management company or landlord may be. Sometimes a combination of guarantor and extra security is needed. If you think you might need a guarantor, advise your agent immediately so that together you can prepare most efficiently.
Who can be a Guarantor?
A guarantor does not have to be a relative. Many landlords in New York require a guarantor to live in the Tri-State area: New York, New Jersey, or Connecticut. Prepare your potential guarantor by speaking with them and advising them of what they will be asked for. You might have to act quickly, and their cooperation may be critical for your approval. A guarantor needs to fill out an application form and provide the required documents.
The requirements are usually good credit and double the income requirements of an applicant. If an applicant is required to show an annual income of 40-50 times the monthly rent, a guarantor is required to show an annual income of 80-100 times the monthly rent. The documents required are similar, although usually all that is needed are proof of income (usually by providing tax returns) and a credit report. Guarantors also have to sign the lease.
What Fees and Commissions can I expect?
Upon execution of the lease and prior to the landlord’s signing, you will be expected to pay the following fees with bank or certified checks. Your broker will securely hold the landlord and commission fees until leases are fully executed and board approval is received, if necessary. These fees are typically as follows:
Payment to landlord of first month’s rent and security deposit
Application fees, including any credit check fees
Building fees: these usually include move-in fees and deposits
Broker commission (subject to the terms of the listing agreement with the landlord)
PROPERTY TYPES
There are a variety of different property types available to renters in New York City. Below, we give you an idea of what each type of property will entail in its application process and requirements.
Cooperatives
With the landlord being a shareholder in the corporation rather than a traditional property owner, the process for renting a co-op is more complicated than with other types of ownership.
In addition to meeting the landlord’s requirements, applicants must also meet the building’s requirements as set forth in the lease application package, which typically includes an application form and requests for the following: a copy of the signed lease, financial statements, references, and additional fees for the various review processes.
Co-ops usually limit the term of a lease to just one to two years. In addition to requiring a complete board package (which is the same for rental or sale), a co-op’s board will usually ask to interview the candidate(s) after review of the board package.
Following the interview, approval will be given through the managing agent. It can take a minimum of thirty days to complete the review process, so if you are in a hurry, a co-op may not be the best choice for you.
Condominiums
Renting in a condo is a simpler process than in a co-op. Assuming that an applicant meets all the requirements, a condo cannot refuse permission for a rental unless it agrees to rent the premises at the same price and on the same terms from the owner. There is a board package that needs to be completed, which can be as thorough as that of a co-op; however, there is typically no board interview. Similar to co-op rentals, there are additional fees for board review, and the application package can be just as lengthy as if you were purchasing.
Rental Buildings
This is the easiest type of property to rent. The application is simple and there is no board package or board interview. Turnaround is quick, as you’re dealing with only one owner. The fees are also typically less than in co-ops or condos, with the entire approval process taking an average of just three business days. Approximately 75% of the housing stock in New York City falls in this category, so there are a wide range of price points and building types to choose from.