Property Grunt

Wednesday, April 11, 2007

Rent vs. Buy

The argument of whether to rent or buy reminds of that Miller Lite campaign which was Tastes Great, Less filling. I remember being bombarded with ads where D List celebrities would debate which was the best way to describe Miller Lite. As an adult, I see this a pointless argument because as long as it gets you drunk, who gives a f**k?

My position on whether to rent or buy is that it depends on who you are. You have to figure out what your own best interests are and what you are financially capable of. For instance, if you pay 500 bucks in a rent controlled apartment, it may not be in your best interest to buy something but instead save your money and putting into some other type of investment vehicle. Or maybe you did the numbers and realized that the rent you are paying now equates a monthly mortgage payment and you are better off buying a place, particularly with the tax benefits.

But I have to admit, the comments on Curbed about Rent vs. Buy are quite entertaining and educational.

According to Urbandigs, this is a great time to be a landlord in Manhattan.

In my opinion, the trend of decreasing rental inventories has been going on since 2005. This is due in part that a lot of people who were priced out, simply decided to re-sign their leases. This put a huge crimp in the real estate food chain because when buyers decided to stay put in their rentals, there were no vacancies for the incoming fresh meat.

I predict that the upcoming rental season will be just as bad as last summer if not worse for people looking for apartments and brokers. From what I know about last summer, it seemed that almost every deal was a co-broke. With the lack of inventory, rental agents were fighting tooth and nail for listings. I have heard that the merger between one rental agency and a famous brokerage (You figure it out.) has brought nothing but aggravation for the rental agents because their rental database is now fully accessible to that other company. In fact it was not uncommon for some managers to have pocket listings that were only known to their own agents.

There were also stories of agents who were willing to be flexible with the fee. All they did was cut their own companies out of the deal and had their clients write the check to them personally. I know of a couple of agents who got busted for this practice, which I do not recommend because it is illegal.

I expect to hear more broker horror stories, more rental client horror stories and more incidents of illegal practices. I think Craig Newmark will be swamped with dealing with more bait and switch artists and if I were him I would put the Craigslist community on notice that the New York City rental season is about to go Defcon 1. In fact I wouldn’t be surprised if Dateline decides to do a segment called “To Catch a Rental agent.”

And if it is a great time to be a landlord in Manhattan, it is also a great time to be a landlord in New York City in general. Because all of those people who can’t afford the rents or the fee will simply bug out and go to the other boroughs for cheaper places to live. I expect parts of Queens will be declared the new Williamsburgs as more young people flood the area.

Those of you who own condos or any type of residential property that can be rented, I strongly advise your investments in proper shape and to determine your condo's rental policy and the proper rent. You are going to have a lot of traffic coming your way.

Buckle up. It is going to be one helluva ride.