NYC homeowners downsize, put apartments up for rent

During the real estate boom, many New York buyers withdrew cash through home equity loans, the New York Times reported, or flipped their properties for profit. Just a few years later, with property values fluctuating and the rental market strengthening, they’re now trying a new financial strategy — renting out their trophy apartments while moving into more modest dwellings.

In 2004, Michael and Christine Belotz bought a 3,000-square-foot loft in Soho, but the couple is now renting it out for $12,500 a month in order to pay the mortgage. Meanwhile, they’ve moved with their family into a 1,000-square-foot unit in the West Village for $4,200 per month.

“We thought we’d live there forever,” Michael said. “[The cheaper home] is a much tighter squeeze, especially with two little boys. But the financial upsides are considerable. The rent we’ll get from the loft equals the mortgage and maintenance on the old apartment, which is about $8,000 a month, plus the rent on the new one.”

This strategy is still somewhat under the radar, especially in the outer boroughs, said Sharon Barnes, a former member of the Society for Clinton Hill, a Brooklyn community group.

“People bought when prices were very high, and didn’t realize they were in the midst of a bubble. They sometimes stretched as much as they could to buy the properties, and when the market started to soften, the mortgage and tax payments became extremely challenging,” she said. “They couldn’t walk away because they had a lot of equity… renting temporarily, and taking a smaller space, sometimes in their own building, became a viable way to protect their investments.” [NYT]