Welcome to the world of New York City Rentals
^ the presumed face of the person on the other line when I recite the below over the phone
a
Ah, yes, that magical time of year when you would rather step into oncoming traffic than within 5 feet of an uncovered mattress on the sidewalk. That truly wonderful span of time when homelessness is staring you straight in the face; the mere thought of looking for an apartment becomes reduced to some some sick amalgam of The Hunger Games, The Amazing Race, and Broad City. You will enter this season optimistic with thoughts of color palettes, throw pillows, and the delicious ambiguities of a new neighborhood. While I won’t lie that you will most likely exit the ordeal with a lighter pocketbook, your mental state upon completion of this Vitamix of hell depends on: how you approach it, what tools you use, and how realistic you are with the market and the process. That doesn’t mean set the bar at “Face down in the Gowanus Canal” but…as we move onward, we’ll discuss.
a
I am very well aware there are more smoke and mirrors around leasing in New York than in your chain smoking Great Aunt Barbara’s 1980’s interior deco living room with mirrors on the walls and ceilings. We’re talking broker-fee versus no-fee versus low-broker fee, incentives, pocket listings, bait and switch, slumlords…and some tragically horrible human beings mixed in there. Since I’ve already had this conversation about two dozen times in the last month, here’s to saving my voice and making the topic crystal clear.
^When you realize everyone else in New York is looking for a June 1 apartment the same exact weekend.
a
While I would love to personally try to make this process as far from “hypothetical waterboarding” as possible by working with all of you, I know that’s just not realistic. However since knowledge is power, here’s as clear of an explanation of how things work that you will hear from anyone.
a
There are a lot of start ups and small agencies out there touting themselves as a brokerage offering discount fees – this simply means that they will give you between one month’s rent and 10% when bringing you to an open (another word for no-fee) listing (which should be the case with any broker you use), however you’ll still be fronting the full 15% in a co-broke when you use their services. Everyone in this city pays a fee in some regard so the real priority should go to the quality of the broker you use and the trust you have in them finding you a safe and happy home.
a
a
The two main types of landlords/management companies in the city
First, there are two types of “landlords” in NYC. One manifests as the massive management companies and the other as the smaller independent landlords. Management companies typically either have large post-war buildings with hundreds of units or hundreds of small walk-up buildings (pre-wars). The post-war buildings are the standard doormen, elevator, hundreds of units, rental buildings that have NO FEE plastered on their facade. These are usually buildings that were constructed after the 1950s, they tend to be in less ideal neighborhoods, and developers found a way to minimize square footage and maximize amenities to justify the price tag. For this style of building, they can usually afford to have a central leasing office where tenants can visit and apply directly. Since these companies know people are avoiding a large lump sum broker’s fee fee (which we will discuss soon), they usually hike the rent up as people are more likely to stomach a higher monthly rent versus a lower rent + a hefty down payment, even though the amortized net over a given amount of time is essentially the same. The large management companies that own hundreds of tenement (5 story walk up) buildings conduct their “centralized leasing” usually with websites where you can apply online without a broker. These also may be a tad pricier and the kicker is that most of these landlords are actually slumlords. Some will aesthetically give off those glaring red flags, as with Jakobson properties it will look like you’re walking into a third world country. But some have a way of putting up a cheap but sleek façade, hiding a building that is in tragic shape, like 9300 and Magnum properties. Because these landlords know people are DYING not to pay a fee, they know their apartments will (when push comes to shove) always rent, so zero care is put into the quality of life for their tenants. This neglect ranges from no heat in the winter, fake superintendents, a landlord answering service with generated audio recordings, untreated bed bugs in the building, crumbling building structure, rodents, and refusal to give back security deposit to name a few. Since it’s very hard to bring these landlords to court and they don’t feel the financial burden of a few vacancies, the living experience tends to be hellish to say the least.
a
Then we have the smaller, independent landlords. Usually this is a single owner or family that has a few to a dozen buildings in the city and is, more likely than not, a family business. Since these properties have typically been owned for quite some time and are from the early 1900s, they tend to be in the most desirable parts of the city. Another bonus: they have the largest floor plans, being that there’s only so many ways you can cut up an older apartment and maintain proper plumbing. Independent landlords tend to take the best care of their properties, as it is their full time job and they would like you to return the favor by keeping the building in quality shape. For an owner who has a handful of buildings, a single vacancy will pose as a financial burden so they ideally want to ensure that the tenants are happy so they can collect rent without the interruption of having a tenant move out and a vacancy sit. Often the landlord even lives in the building, which assures you that the property will stay in immaculate shape because if you’re suffering, the landlord is also suffering. These landlords don’t have the time, funds, or manpower to have a leasing office, so they give their exclusive-rights-to-rent to an agent they use (who has pitched them for their business) from an agency like Elliman, Corcoran, or Compass. Once the agent has the exclusive agreement and keys to enter the apartment, it’s her or his responsibly to take photos, list the apartment, do proper advertising, show the apartment until it rents, conduct lease signing, and deliver all checks and leases to the landlord. Most landlords in NYC do NOT pay commission; the only times you really see that will be in the off season or when a listing has been sitting for an outrageous amount of time. So the commission falls upon the incoming tenant. Most exclusive brokers will charge 15% of the yearly rent to any tenants who comes directly to them, particularly in the heat of the summer market when it’s direly competitive. With a listing that is sitting for a while, an exclusive agent may trim a few percentage points off the fee, but only at the approval of a manager at their brokerage. On the positive side of things, since these landlords do know their incoming tenant is paying a large broker’s commission, they do tent to be more fair with pricing and amenable to offers.
a
What is a co-broke and where did this 15% fee come from?
In the occasion you enlist a broker to find your new home, and in their showing you a laundry list of properties, let’s say that you fall in love with one that has an exclusive agent (the landlord’s representative). Your agent and the exclusive agent will split the 15% in half – 7.5% going to each brokerage. This is nonnegotiable on either side because 7.5% is the absolute lowest we as agents are allowed to bring back to our housing agency. Trust me, I would make a lot more money bringing clients to no-fee apartments and charging them a month or 10%. However at the end of the day, the listings where there is an exclusive agent tend to be the best locations, most responsive landlords, more favorable situations, and lowest monthly rent.
a
What about those brokers saying they’ll charge a low fee or no fee?
So what if you’re trolling Renthop and there’s a listing that says “LOW FEE APARTMENT”? First error, you were on Renthop. Renthop, Naked Apartments, Zillow, Trulia, Padlister – all those sites are usually a scam. Streeteasy is the best site for the mass public to see both an accurate and up-to-date view of the market. This is because any agent with a listing must upload their exclusive agreement with the landlord onto Streeteasy in order for the listing to be verified and become live. With the other aforementioned sites, anyone can upload any photos for any apartment (even if it’s fake and not their own) and voila, you think it’s their exclusive and you’re being scammed. One popular tactic is the bait and switch: you think you’re going to see the apartment you reached out about and once you’re there, the agent will say, “DARN that just rented, but I have this apartment that is more expensive …” and try to close you on someone else’s exclusive listing or a no-fee. Or they will advertise the no-fee apartments as their own exclusive and try to collect a lower fee, or really any fee on that transaction. This is what puts up the smoke and mirrors around the “what do you charge?” question. Any good agent should cut you a deal when it comes to bringing you to a management company or no-fee listing – that’s a universal and the typical “reduced” fee is typically between a month and 12%. But like everything in life, you often get what you pay for. The no fee listings, like I said before, typically have part of a fee amortized into the rent and the landlord situation isn’t the most ideal. The smaller landlords where you often find the 15% co-broke situations tend to lead to a lower rent, better neighborhood, and better landlord. At the end of the day, it is often worth the upfront, especially when amortized over a multiple year time frame. Moving is hell, I’ll be the first to admit it, so looking at it from a longer term perspective makes the down payment a bit more tangible and worth it.
a
What about these discount brokerages offering deals. lower fees and incentives?
Oh lord. These. Brokerages. Are. Not. Special. They’re going to make it seem like you’re saving money with them but more often that not, that’s not the case. You won’t be seeing the best inventory and the widest range of the market if you do end up demanding to only pay a low fee. They’ll tell you 1) we’ll give you our “friends and family” discount 2) we’ll give you back X% of the commission 3) we’ll drive you around in fancy cars and yada yada yada. What happens is with a lot of these brokerages, they usually have new agents who are learning the ropes and don’t have a book of business yet who you’ll be passed off to. You are what we call a “Lead”. All agents have been in this scenario at the start of their careers but as with everything, experience is huge and new agents aren’t as aware of the landlords, the red flags, other agents, and how to recognize the 80% of the market that is typically junk. Anywho, so say you’ll only consider low fee apartments because you’re bullish against the 15%. Guess what listings these agents will be bringing you too?? You guessed it! The no-fee, open listings that are more expensive and you could have gone to yourself!!!! And those guys who are giving you a kick-back after the deal is done? Yep, by charging you more than 7.5%, which like I said are the better listings and the better deals, they have more capital to swing you way. Take a $3,000 rental – 7.5% is $2,700. 10% is $3,600. 12% is $4,320. From the brokerage’s and agent’s perspectives, it is way more lucrative to take a client to a more expensive no fee apartment and charge the “low fee” of 10-12% so the client feels like they’re winning. But when the client is facing a crazy hike in renewal off their already high rent, do you think they’ll be staying for another year? Those discount brokerages are discouraged from showing co-brokes and the agents aren’t usually seasoned – you’re typically getting a random one if you call the agency, directly to be honest.
a
So my top-line budget is (let’s say) $4,000 but look at this amazing apartment listed for $4,083 and it’s no fee. I WANT IT.
Incentives…there are so many incentives on the market right now. Incentives are a landlords way of driving down the advertised rent through posting the amortized, not the gross, rent. This way they don’t have to actually lower the rent (because they don’t have to record incentives in the yearly declared rent rolls) but will trick renters into thinking the rent is lower to get them in the door. Landlords like to keep their rent roles in the positive year-to-year and this is the way to achieve that when the market is soft. Let’s say your top budget is $4,000. You’re trolling Streeteasy and here’s this gorgeous unit for $4,083. Hmmp…strange number but looks great; I means it’s a bit above the top of the set-budget, but it checks all of the boxes. Let’s look to the fine print: “Two months free on a twelve month lease.” So the market rent is actually $4,900, WELL above your budget. No, the landlord won’t let you pay $4,083 every month – you’ll be paying $4,900 every month, with the exception of two months which typically fall during the second half of the lease term. Oh and guess what happens when you go to renew: the renewal isn’t based up on the $4,083 but upon the $4,900. So guess who will probably be moving again in 12 months…
a
I’m going to use a few different brokers because I want to see as much as possible.
This is a waste of your and everyone else’s time.
It kills me when people use multiple agents simultaneously – we as brokers have our own multiple listing services and can access countless landlord’s posted availability reports. So say you contact agents from 5 different firms and tell each to show their best hand – chances are 7/10 properties will all be the same. I can’t tell you how many times in the past I’ve confirm appointments with my client’s names and find that they’ve seen the property or are scheduled to see it with someone else- and this is after I give my whole, “I only work with people who only work with me” speech. Purely from an inventory perspective, what differentiates one agent from the next is how how well they know the market and neighborhood; how vested they are in your search; how well they listen to you and mediate your expectations; and their tactic with regards to finding you a home. Good agents will only show you quality properties that fit your search and are represented by solid individuals/are strong buildings; the not-so-good agents will bait-and-switch you or show you a handful of horrible homes and one stellar place, pushing you into the obvious choice. It’s a very warm, cuddly industry, I swear.
a
But this broker said he had listings that no one else had…
Someone told you they have an off-market listing? Or are you looking for a listing that isn’t on the market yet or is being held off market because of the pure sex appeal of the notion? These are rare and circumstantial. ANY and EVERY landlord wants his or her listing broadcasted on every listing site known to mankind to ensure the highest foot traffic, resulting in the fastest deal at asking rent. If I was representing a landlord and his or her listing was not being widely advertised, I would most likely lose my exclusive. There are seldom instances that we as agents may know through the grapevine of a listing that is coming to market in the next few days. Regardless, any savvy, business-minded individual will want his or her property to get due exposure on the open market to garner as many applications as possible. With rentals, the minute the landlord knows the tenant is leaving, the exclusive agent is notified with the expectation that listing is live to the world before anyone has a chance to breathe. If a listing agent happens to catch wind from a tenant that they are not renewing their lease, the agent will still need to wait for the price to be assessed by the landlord, which will likely coincide with the listing going live and those rental flood gates opening wide. Sometimes if a unit has construction being done or is undergoing renovation and that landlord’s agent knows about the listing, landlords may be open to leasing the unit prior to finishing & listing the property, but this isn’t a commonality.
a
When working with an agent, they should be clear which are co-brokes and which are direct management company listings. I don’t take my commission check and waltz straight to the bank and deposit that puppy in my checking account; the commission checks goes back to our housing brokerage, who takes a very large piece of the pie. Then we receive our residual chunk, which we further pay taxes on when fateful Tax day in April crawls out from it’s shallow grave. On top of that, brokers pay their own health insurance, pretty massive desk fees just to associate with a brokerage, our Real Estate Board of New York fees, Errors and Omission legal fees, and most business related expenses are out of pocket. We get zero salaried wages so the only way we pay our bills is through commission. Oh and we have zeo benefits too. *cue my main source of anxiety*
a
So again, I would love to work with everyone that I can but I understand that’s not going to be the case. For anyone who doesn’t get the pleasure of walking around New York with me in the dumpster fire that is summer time here (I give wonderful astrology advice *harmless plug*), hopefully this helps clear things up so when you do embark on your rental hunt, you aren’t misled, schmoozed, bamboozled, and left hating the world and cursing real estate agents across the city. We’re not all bad; just only a solid handful, but isn’t that every industry?
a
Please feel free to email or call me if you want to discuss any piece of this in (somehow) greater detail – [email protected]