What to know about renting an apartment or co-op

Spring is just around the corner – and people looking for a new rental are facing 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. This represents an increase of only 0.4% from the previous month, but an increase of 3.5% from a year ago.

The national rental vacancy rate remained steady 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 construction, and more new apartment buildings are expected to hit the rental market in 2024. However, some cities have few apartments open. The vacancy rate in New York City recently reached 1.4%, its lowest level since 1968.

More personal finance:
Equal Pay Day highlights a $1.2 million pay shortfall for some women
How to Use Rental Reporting Services to Improve Credit
Three ways Gen Z can build credit before renting their own place

Consumers looking for a new place may encounter different types of rental properties available in the market, ranging from buildings that are rented outright to properties that may come with their own features, such as condos and housing co-ops.

“Buildings set their own policies regarding what a landlord can do if they decide to rent out the unit and for how long, and what the requirements are for doing so,” said Carlo Romero, a StreetEasy concierge.

That means if you're looking to rent, you should consider what the application process is, any fees involved, and what amenities you have access to, experts say.

Properties such as condominiums and co-ops tend to have high upfront fees, while traditional rental buildings are more likely to be subject to local rent regulation policies.

“In a condominium or cooperative building, initial costs and fees are determined at the building level and can vary greatly,” Romero said. “The application fee to rent an apartment can be several hundred dollars, maybe even a thousand dollars. There are often moving fees or move-out fees associated with it.”

For comparison, for a typical rental building, according to New York State law, the application fee is a maximum of $20, and the deposit is limited to one month's rent, Romero said. Wisconsin has a similar limit 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 rental applicants an application fee beyond the actual cost of conducting certain background checks if necessary.

In addition to the monthly rent, be sure to inquire about all additional costs you may be responsible for in the potential unit.

Condos and co-op properties are primarily aimed at people who want to buy. It may appear on the rental market platform if the owner decides to offer the property for rent.

There are key differences between condos and co-ops. An apartment is a real estate property that one can own within a larger complex. In a co-op, the resident owns a share 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 during your rental search, here are some things to consider:

1. Apartments

In general, apartment owners have more flexibility when it comes to renting out their apartments, experts say.

“Getting tenant approval by a condo board tends to be more straightforward than a co-op application,” Romero said, because co-ops often have more intensive processes with their own terms, and those rules vary from building to building.

Apartments tend to be newer buildings and have more amenities available, such as in-unit or in-building laundry, a community pool or outdoor space.

Most condos include a homeowners association and require an HOA fee. Ask your potential landlord if you as a tenant will be responsible for these costs or other “overhead fees.”

For perspective, HOA fees for apartment owners average $300 to $400 per month, but can exceed $1,000 per month in some markets, according to luxury real estate website RubyHome.

In most cases, a tenant who rents an apartment has the same privileges as a landlord, Romero said. However, as a potential tenant, it is important to ask before signing a lease whether access to these amenities is allowed for tenants.

Some buildings in New York, for example, have units available to both apartment owners and renters, but apartment owners may have access to some amenities not available to renters, Romero said.

2. Cooperatives

If the co-op building allows shareholders to rent their units, the potential tenant may need to apply to live in the co-op and go through the co-op board approval process.

The co-op application process is already up for consideration by the building board, “and they can reject an applicant for any reason,” Romero said.

Each building may have its own set of requirements. Experts say it may require an independent background check with additional fees.

“A co-op is like a company. They have to love you, if you're one of them,” said Frank Dong, a real estate agent with Redfin.

In addition, co-op buildings may have rules that limit how long a tenant can live there, Romero said.

3. Traditional rented buildings

While condos and co-op buildings may have restrictions on how long a tenant can live there, tenants have more confidence that they can continue renting in traditional rental buildings. In properties like this, you typically don't run the risk of the owner wanting to live in that unit, or facing building policies that limit how long you can stay.

Additionally, “demand tends to be much more visible,” Romero said. To pay in advance.