Spring is almost here — and people looking for a new rental face a competitive market.
Asking rent prices in the U.S. jumped to $1,959 in February, according to Zillow Group’s latest Rental Market Report. That’s up just 0.4% from the month prior, but a 3.5% increase from a year ago.
The national rental vacancy rate remained flat at 6.6% by the end of the fourth quarter of 2023, according to the Federal Reserve.
Vacancies have increased in some cities due to new builds and more new apartment buildings are expected to hit the rental market in 2024. Yet, 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 hunting for a new place may encounter different types of rental properties available on the market, from straight-forward rental buildings to properties that may come with their own particularities, like condos and housing cooperatives.
“Buildings really determine their own policies for what an owner can do if they decide to rent out the unit and for how long, and what the requirements are for doing that,” said Carlo Romero, a StreetEasy concierge.
That means if you are looking at a rental, you should consider what the application process is like, any fees that are involved and what amenities you will have access to, experts say.
Upfront fees can vary significantly
Properties like condominiums and co-ops tend to carry high upfront fees, while traditional rental buildings are more likely to be under local rent regulation policies.
“In a condo or co-op building, upfront costs and fees are determined at the building level and they can vary significantly,” Romero said. “An application fee for renting a condo might be several hundred dollars, maybe even a thousand. And there are often move-in fees or move-out fees associated.”
To compare, for a typical rental building, according to New York state law, the application fee is capped at $20, and the security deposit is limited to one month’s rent, Romer said. Wisconsin has a similar cap where the application fee must not exceed $20.
Rhode Island has a new state law that prohibits landlords, rental agents and property managers from charging application fees to rental applicants, beyond the actual cost of conducting certain background checks if needed.
In addition to the monthly rent, make sure to inquire about all the additional costs that you may be responsible for in a potential unit.
What to know about renting a condo or co-op
To be sure: condos and co-op properties are primarily targeted to people who want to buy. They may appear in a rental marketplace platform if the owner decides to put the property up for rent.
There are key differences between condos and co-ops. A condo is a real estate property that one can own within a larger complex. In a co-op, a resident owns a share of the building based on the size of their unit, but does not own that property outright.
If you come across condos or co-ops in your rental search, here are a few things to consider:
1. Condos
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 more straightforward than a co-op application,” said Romero, because co-ops can often have more intense processes with their own stipulations, and such rules vary building to building.
Condos tend to be newer buildings and have more amenities available, like in-unit or in-building laundry, a community pool or an outdoor space.
Most condos involve a homeowner’s association and require HOA fees. Ask your prospective 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-$400 a month, but they can go over $1,000 a month in some markets, according to Ruby Home, a luxury real estate site.
In most cases, a tenant who rents a condo has the same privileges as the owner would, said Romero. However, as a potential renter, it’s important to ask before signing the lease if access to such amenities are granted to tenants.
Some buildings in New York, for example, have units available for both condo owners and renters, but condo owners might have access to some amenities that are not available for tenants, said Romero.
2. Co-ops
If a co-op building allows shareholders to rent their units, the prospective tenant may need to apply to live in the co-op and go through a co-op board approval process.
The application process for a co-op is truly up for consideration by the board of the building, “and they can reject an applicant for any reason,” said Romero.
Each building may have their own set of requirements. It could require an independent background check with additional fees, experts say.
“A co-op is like a corporation. They have to like you have you be one of them,” said Frank Dong, a real estate agent with Redfin.
Additionally, co-op buildings may have rules that limit how long a renter can live there, said Romero.
3. Traditional rental buildings
While condos and co-op buildings may have limitations to how long a renter can live there, tenants have more certainty that they can continue renting in traditional rental buildings. In such properties, you don’t typically run the risk of an owner wanting to live in that unit, or face building policies that limit how long you can stay.
Additionally, “the application tends to be a lot more straightforward,” said Romero. You know what the application fee is going to be, you know the security deposit is going to be, you know how much you’re going to have to pay upfront.