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Spring is almost here and people looking for a new rental are facing a competitive market.
U.S. rental prices rose to $1,959 in February, according to Zillow Group. latest Rental market report. That's just 0.4% more than the previous month, but a 3.5% increase from a year ago.
The national rental vacancy rate held steady at 6.6% at the end of the fourth quarter of 2023, according to the Federal Reserve.
Vacancies have increased in some cities due to new construction, and more new apartment buildings are expected to hit the rental market in 2024. However, some cities have few open apartments. New York City's vacancy rate recently hit 1.4%, the lowest level since 1968.
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Consumers looking for a new place can find different types of rental properties available on the market, from simple rental buildings to properties that may have their own particularities, such as condominiums and housing cooperatives.
“Buildings really determine their own policies about what an owner can do if they decide to rent the unit and for how long, and what the requirements are for doing so,” said Carlo Romero, StreetEasy concierge.
That means if you're looking to rent, you should consider what the application process is like, the fees involved and what services you'll have access to, experts say.
Initial fees can vary significantly
Properties like condos and co-ops tend to charge high upfront fees, while traditional rental buildings are more likely to be subject to local rent regulation policies.
“In a condo or cooperative building, initial costs and fees are determined at the building level and can vary significantly,” Romero said. “An application fee to rent a condo can be several hundred dollars, maybe even a thousand. And there are often move-in or moving fees associated.”
In comparison, for a typical rental building, under New York State law, the application fee is limited to $20and the security deposit is limited to one month's rent, Romero said. Wisconsin has a similar limit where the application fee should not exceed $20.
Rhode Island has a new state law which prohibits landlords, rental agents and property managers from charging application fees to rental applicants beyond the actual cost of conducting certain background checks if necessary.
In addition to the monthly rent, be sure to ask about any additional costs you may be responsible for in a potential unit.
What you need to know about renting a condo or cooperative
Condominiums and cooperative properties are primarily aimed at people who want to buy. They can appear on a rental marketplace platform if the owner decides to put the property up for rent.
There are key differences between condos and cooperatives. A condo is a piece of real estate that one can own within a larger complex. In a co-op, a resident owns a portion of the building based on the size of his or her unit, but does not own that property outright.
If you come across condos or co-ops in your rental search, here are some things to consider:
1. Condominiums
In general, condo owners have more flexibility when it comes to renting out their apartments, experts say.
“Having a tenant approved by the condo board tends to be simpler than a co-op application,” Romero said, because co-ops can often have more intense processes with their own stipulations, and those rules vary from building to building.
Condos tend to be newer buildings and have more amenities available, such as in-unit or building laundry, a community pool, or outdoor space.
Most condos involve a homeowners association and require HOA fees. Ask your potential landlord if you, as a tenant, would be responsible for such costs or other “common charges.”
For perspective, the average HOA fee for condo owners is $300 to $400 per month, but they can exceed $1,000 per month in some markets, according to RubyHomea luxury real estate site.
In most cases, a tenant who rents a condo has the same privileges that the owner would have, Romero said. However, as a potential tenant, it is important to ask before signing the lease whether tenants are granted access to such services.
Some buildings in New York, for example, have units available to both condo owners and renters, but condo owners may have access to some amenities that are not available to renters, Romero said..
2. Cooperatives
If a cooperative building allows shareholders to rent their units, the prospective tenant may need to apply to live in the cooperative and go through a cooperative board approval process.
The application process for a co-op is really under consideration by the building's board of directors, “and they can reject an applicant for any reason,” Romero said.
Each building may have its own set of requirements. It could require an independent background check with additional costs, experts say.
“A co-op is like a corporation. They have to like you, if you're one of them,” said Frank Dong, a Redfin real estate agent.
Additionally, co-op buildings may have rules that limit how long a tenant can live there, Romero said.
3. Traditional rental buildings
While condominiums and cooperative buildings may have limitations on how long a tenant can live there, tenants have more certainty that they can continue renting in traditional rental buildings. In these types of properties, there is usually no risk of an owner wanting to live in that unit, nor of facing construction policies that limit the time he can stay.
Additionally, “the application tends to be much simpler,” Romero said. You know what the application fee will be, you know what the security deposit will be, and you know how much you will have to pay up front.
