Property Grunt

Sunday, November 26, 2006

Roll Call: What lies ahead

Shalia Dewan has written an excellent article about cities who are trying to attract more young people to their streets. One part that I found confusing was this paragraph.

In addition to Atlanta, the biggest gainers in market share of the young and restless were San Francisco; Denver; Portland; and Austin, Tex. The biggest losers included Washington, Philadelphia, New York and Los Angeles.

Back in August, the NYT published an article stating that New York was now a magnet for college graduates.

So who is right? Patrick McGeehan or Shalia Dewan? Perhaps a monkey knife fight is in order.

Overall, Ms. Dewan's article Cities Compete in Hipness Battle to Attract Young , displays how cities from Memphis to Atlanta there is a concerted effort drive more college-educated 25- to 34-year-olds to their cities. Afterall they are viewed as a valuable asset to a city since they will provide more growth and revenue.

As the article puts it.

These measures reflect a hard demographic reality: Baby boomers are retiring and the number of young adults is declining. By 2012, the work force will be losing more than two workers for every one it gains.

Baby Boomers are going to start retiring next year and there will be more jobs and more speaces to fill. Any city that wants to be viable in this century has to maintain an aggressive approach to get qualified young people into these positions.

The problem for cities, says Richard Florida, a public policy professor at George Mason University who has written about what he calls “the creative class,” is that those cities that already have a significant share of the young and restless are in the best position to attract more.

In other words cities like New York City are kicking everyon'e asses in. New York City already has the infrastructure and brand that attract tons of young people particuarly for college. And since coming back from the brink of oblivion, do not expect New York City to step aside and let other cities raid their tenant piles.

Real estate investors, take note of these areas that are on the hunt for young people. These cities, if they are smart, will offer a ton incentives for real estate investors who are able to house and attract these particular demographic. It never hurts to see what tax they issue.

Those of you who are screaming about how hard it is to rent an apartment in New York City are going to be screaming some more. The NYT gives the red alert with Only the Strong Survive which discuses how landlords are now issuing more demands that prospective tenants must fulfill in renting an apartment.

This is not suprising considering that vacancy rates have plummeted and it is abysmally expensive to operate a building in Manhattan. And as the article has pointed out all the real estate laws in New York City are in favor of the tenant. And when you have a delinquent tenant it means you are losing money on your investment until that tenant leaves, which if you are lucky will take a year.

The article also recommends dealing with smaller landlords in order to get around stringent demands.

If you have any blemish on your record, smaller landlords may be more lenient, especially for renters able to pay more upfront. “You’ll have a much easier time dealing with them,” said Barak Dunayer, the president of Barak Realty.

He recommended seeking individual owners who are leasing condo units. “I can usually kind of talk them into it,” he said. “Whereas with those big landlords, I’ll be lucky if they return my calls.”

JoAnn Schwimmer, an associate broker at DJK Residential, agreed that smaller landlords tend to be less selective. “I want to say it’s because they haven’t been burned as many times,” she said.

In theory, smaller landlords are supposed to be more pliable, however they can be just as insane as any landlord when it comes to filtering out clients. Remember, the rent they get from the condo goes to their mortgage payment. If they have only one tenant, that tenant is their sole cashflow source. For whatever reason if that source dries up, then the landlord has to pony up the money to pay for the mortgage payments. Of course a delinquent tenant increases a landlord's overhead in terms of legal fees and replacement costs.

Those of you who are seeking a condo rental, please remember that depending on how often the board meets you could be waiting a month to 3 months to get a response. And the application for a condo rental isusally a condo board package which is akin to applying to college. This means a ton of paperwork including, financials, recommendations and maybe even a back ground. And you will be paying alot more money for the processing fees. So it is not all joy and sunshine.

Also remember it is not just a matter of protecing your credit or having a high fico score to get in the good graces of a lanlord. As Jake Harrington of has pointed out.

“So the most financially sound person is going to pay off their credit-card balance in full, but the best credit-card customer is not that person,” said Mr. Harrington of, which weighs FICO scores against factors like references from prior landlords, housing court history, length of employment and cash flow. Applicants with FICO scores below 650 receive closer scrutiny, but high scorers are not given a pass.

“We have people all the time with a 700 to 800 FICO score, but their landlord-tenant record is horrible,” said Mr. Harrington, citing a recent incident in which his company called the former landlord of a woman who had moved to New York from Georgia. Although her income and credit were excellent, her ex-landlord reported that she had not paid the rent for three months and abandoned her dog when she left

In other words, try to avoid any type of litigation with your landlord.

As some of you know I did two entries on Jake Harrington regarding outsourcing rental brokers and comments about outsourcing. I am happy that is company has become a fixture in the real estate world.

It is my prediction that he won't be alone. Other companies will also sprout up offering similar services however whether they will provide the same quality of service is another story. But if you want to get a better idea of what the future will offer for real estate, watch Jake Harrington and very carefully. What they are doing is an indication of things to come.

In Kelly Kreth News, I recently recieved an email from our favorite real estate pr blogger with news that she will working as a reporter for GM TV, which is the British counterpart of Good Morning America. She will be taping 4 segments per week and is interested in any story ideas that any of you have to offer. Congrats Kelly. Maybe this will lead to a gig somewhere more local than the land of Fleet Street.

Speaking of Fleet Street and all things British, Property Day has announced brand new additions to their website which include two podcasts and extended coverage of the international real estate scene.