Can We Stop With the NY Real Estate Rental Myths?

There's been a lot written lately in the New York area press about how renters can get an edge in the busy summer and fall season. The New York Times even dedicated a Sunday real estate section cover story to what was supposed to be Renting 101. That story, as well as another recent piece missed the mark slightly, for a few practical reasons.

The Times' story concentrated heavily on rent stabilization leases and laws, which is akin to explaining the anatomy of the cow when someone's trying to buy a pair of leather shoes. Yes, rent stabilized leases are a nice perk, but basing your rental decision solely on a rent stabilized lease is an easy way to limit your search and drive yourself crazy. True, with a rent stabilized lease your rent won't go up more than 3% or so the first year and roughly 5% if you renew for two years. But it also likely wouldn't if you were in a non-stabilized lease. Rent, by nature, has to go up at least a little every year, mostly because landlords have to pay for fuel and updates to the building.

Everyone has that friend of a friend whose deviant landlord supposedly raised their rent by hundreds of dollars after only one year of living in the unit. Chances are there were other issues at hand, and this mythical friend left those details out. The bottom line is that it is in a landlord's financial interest to keep a tenant in an apartment rather than chase them out. So don't worry about legal nuances in a lease. Worry about finding a place that you like, and that you can afford.

As a broker, it was even more frustrating to see the list of management companies offered in the piece of places where rent-stabilized leases could be found. What most renters in New York don't realize is that you could have the name of every landlord in town, but that doesn't mean they're going to return your calls. They don't have time or the resources to deal with every yahoo who dials them up looking for a place. In New York, housing laws heavily favor the tenant. It is a long and expensive process to get a tenant out, and you could realistically not pay your rent for about six months before the marshal comes knocking on your door.

That's why landlords rely heavily on brokers. We serve as a filter between them and the general public. We run credit checks, collect paper work and make sure that the person applying for the apartment can actually afford it. If they can't, we find a guarantor. Brokers are an important part of the rental process for that reason and a million more. True, lots of people have a broker horror story, which is unfortunate. Good brokers make the process easy and work out a lot more kinks on the back end of the deal than the client ever realizes. Yes, some brokers are pushy. But the good ones make it their job to make sure you get into the place you want.

AM New York, one of the free daily tabloids, also had a piece about how renters are getting everything from free rent to landlords paying the broker fees in a so-called "soft" market. First off, there is no such thing as a soft market when renting in New York City, because at any given time there is about a 1% vacancy rate. That doesn't sound soft to me.

AM New York used an example of a building on the Upper East Side called The Chesapeake. It's a new doorman high rise on 94th and First Avenue, which as any New Yorker knows isn't exactly prime Upper East Side. I should know as well, since I lived on 94th Street and Second Avenue for two and a half years. Given that the Chesapeake is a new building and it's in a somewhat "emerging" part of town, it's no secret that landlords are offering it as a no-fee deal. (The brokers still get a month's rent from the owner, as an incentive to bring clients.)

There are lots of no fee apartments in Manhattan, but most of them are going to be in new buildings, luxury buildings and probably not in a hot area like SoHo. Buildings become no-fee because owners need to fill them, not because they want to provide a service to the public. I've seen too many people get trapped in the no-fee maze that they're in tears when a no-fee unit gets rented before they can get their paperwork together.

If you really can't afford a broker, then no-fee is the way to go. Just be realistic that you will have fewer options to choose from. If you can afford a fee, which can also usually be put on a credit card, consider a no-fee apartment a happy surprise, much like the aforementioned rent stabilized lease.

Case in point: last week I had a young woman who was relocating to New York who had a tight budget of just $2,000 a month for a studio. Coming from Miami, she was slowly getting used to the idea of living in just one room, but laundry was a must. I showed her a few things, and then, as if the real estate gods were listening, we found a large, $1900 studio in a doorman building on 46th Street and Third Avenue. Had she stayed strictly no fee she would have ended up in a neighborhood she didn't really want and would have been farther from work.

New York real estate doesn't need to be the complicated blood sport that everyone makes it out to be. As long as you keep logic and realistic expectations on your side you'll make out just fine. Know the market. Learn how much things cost. Find yourself one smart broker (not a handful) who loves what they do and who doesn't pressure you to hop on the first thing you see. That broker will save you so much time that paying a fee will seem minor in the grand scheme of things.

Comments

[rainmann]

I know this article is a little broker friendly, but I still think it is accurate information. I recently used a broker to see apartments and the broker was friendly and showed me some great apartments that I couldn't find anywhere else. I just couldn't bring myself to pay that much so I decided to do much of the leg work myself. After searching free websites like Craigslist, SkipBrokers, StreetEasy and DailyApartment, I was able to find a no fee apartment right before I was about to quit and go back to a broker. Craigslist was my first stop and I saw two sublets that were ok but most of the other apartments were either posted by brokers or not my style at all. My second stop was StreetEasy and although there wasn't anything I liked, I did get some great apartment hunting info on their website. This is how I came across DailyApartment and SkipBrokers. I didn't find an apartment on either of these websites, but SkipBrokers did lead me to my current landlord. I went to see a different apartment that I didn't really like, but asked what else they had available. I rented the second apartment they showed me in a different building. So I agree that the nyc rental market isn't "soft" at all because if I didn't mind paying high broker fee, I would have gave in much earlier in the process. Anyway, its all good now.

[raydot]

While I don't disagree with anything you say in this article per se, it's somewhat broker-centric. The markets you describe -- 46th Street and the "not exactly Prime Upper East Side" I think appeal to a very specific segment of the rental market, that wants to do a limited amount of looking and get a "no worry" deal. And for that, of course, a broker is great.

I lived in 9 apartments in New York city over 15 years, only paid a broker fee twice, and mostly had absolutely great apartments. In neither case in which I paid a fee can I see any way in which the broker provided me anything in exchange -- including helping me find an apartment. In fact, in one of these cases I got the apartment only by winning the footrace back to the broker's office after she invited 25 of us to all see it at the same time. Should I have payed for this "privilege?" She also worked for the company that owned the building, so I can't see what convenience this provided to a harried landlord.

Along the way, of course, I had to "settle" for such neighborhoods as the East and West Village, Carroll Gardens, and even once -- gasp -- the Lower East Side. I never had a doorman, but with one or two exceptions didn't exactly need one. (Get a dog!)

So it might be about finding a broker, but it also might be about changing your mind