Property Grunt

Tuesday, April 22, 2008

A Preemptive strike for Hearts and Minds

It seems that every year before rental season kicks, the New York Times does an article on renting your first apartment. I usually avoid writing about these articles because I have covered the material before and it sort of feels like the chestnut that that every New York City paper pulls out when they need filler.
However this recent article by Ms. Toy has piqued my interest. It appears that with the changing economic landscape of Manhattan, the rental brokerage community is taking the offensive.

Besides the usual hub bub that Manhattan is really expensive and people are really shocked at what they can get for their money, I did find some points of interest.

Mr. Malin said that the volume of calls his agency has fielded in the last few weeks would suggest the city is headed for another strong rental season. The market was so tight last year that the vacancy rate hovered under 1 percent, but the rate has now inched a little over 1 percent, he said, so there will be slightly more inventory and prices may stay stable.

Daniel Baum, the chief operating officer of the Real Estate Group New York, a brokerage in Manhattan, said he felt the market had softened enough that there might be room for negotiation, particularly in areas that recent graduates would consider better suited for their parents, like the Upper East Side.
In certain neighborhoods, he said, “there may be opportunity to get concessions from landlords; maybe one month’s free rent or a chunk of the brokerage commission.”

With more firing than hiring on Wall Street and the real estate market imploding in the New York City area, I am a little skeptical of any reports of a strong rental season. I definitely do see more concessions on the table from landlords and brokers. And if you do not see any, well then you haven’t asked.

To understand the rental market, brokers and recent first-time renters recommend searching the Internet for listings and getting recommendations from friends who already live in the city. That elusive $2,000 one-bedroom apartment, for example, can be found in neighborhoods like Harlem, Morningside Heights and Washington Heights, probably in a nondoorman building. And the average price for studios is below $2,000 in the East Village, the Lower East Side and neighborhoods north of Midtown.
Most real estate agency Web sites have guides that explain the intricacies of New York’s rental world. Citi Habitats sends agents to about 20 universities nationwide to offer seminars on what it takes to get an apartment.

Cullen Hilkene, an agent who ran a Citi Habitats seminar at Princeton University last week, said that prospective renters need to know the limitations the market might impose on them. “I give them information so they can figure out how they’re going to be able to live in New York,” he said. “It’s better to know sooner rather than later that they need to bring in a roommate because they won’t be able to rent a studio on their own.”

According to his bio, Cullen Hilkene is actually a Princeton graduate. My initial response upon learning that was "How the hell did he end in this business?" Perhaps I am a being a little elitist, but this is Princeton we are talking about. Not NYU. According to Cullen's bio, he designed and implemented the graduate relocation program. So he is using his Ivy League pedigree for good use and not simply getting by on his rugged mid western good looks and sex appeal.

This is the first time I ever heard of a rental brokerage actually taking the initiative of actually sending agents to universities but I am not surprised that they are doing it. One of the aggravating aspects of rentals is that clients are completely ignorant of their options and what they can get for their money. Often I wasted my time educating these greenhorns only to have them leave me. That is why the saying in the business is “You do not want to be first agent.”

So this particular company is waging a hearts and minds campaign in order to educate their customer first before they look for an apartment. But obviously this agency is not doing this out of the kindness of their heart. In fact their agenda is to implement a mindset into these fresh minds that they need a broker in order to find an apartment,resulting in building a referral base for their rental agents.

It also shows how concerned this company is. From my perspective, this company realizes they can’t afford the luxury of having the clients to come to them. With the recession hitting full swing and the vast no-fee alternatives available online, what this rental brokerage is doing is no different than sales brokers who have gone to Great Britain to sell their Manhattan exclusives. In other words, the rental brokers need to go where the money is.

Alex Sooy, who moved into a two-bedroom near Union Square last June with his roommate, David Isaacs, said he knew the first thing they had to decide was whether to use a broker. For placing you in an apartment, brokers typically charge 15 percent of the annual rent or 1.8 times the monthly rent, which means $3,600 on a $2,000 apartment.
Mr. Sooy said he tried looking online for no-fee apartments, “but we would have to go to all these places on our own and work individually with the landlords and that was an overwhelming process.” Like many recent graduates, Mr. Sooy and Mr. Isaacs planned to travel after graduation and they had only three days to hunt for an apartment. “We hated to pay the fee, but it was the easiest way to look at a number of places in a row without having to do so much legwork ourselves,” Mr. Sooy said.
Their goal was to find a $3,000 two-bedroom downtown. They visited eight apartments with brokers from two firms before choosing one near Union Square with two real bedrooms, as opposed to ones carved out of a living room, for $3,600. They did not need guarantors because Mr. Sooy works for a consulting firm and Mr. Isaacs works for an investment bank and their combined income satisfied the landlord.
Mr. Sooy says his rent is much more than the $400 a month he paid when he was in school and it eats up more than 50 percent of his after-tax income. “I would prefer to have more disposable income,” he said, “but it’s a good apartment and the location is great.”

The added value of using a broker is that you avoid the aggravation and save time when finding a place. However that pretty much applies to only people like Mr. Sooy and his roommate. And if you have seen the news lately, those types of clients are getting pretty rare.

Alicia Schwartz, a former Citi Habitats agent and director of, said that trolling the Internet for no-fee apartments had become easier in recent years. The Web site Craigslist, for example, offers no-fee listings by owners, no-fee broker listings where the landlord will pay the broker’s commission and fee-based broker listings.

There are also listing services that charge a fee for providing no-fee listings. Ms. Schwartz said, though, that those Web sites can be outdated. “At the height of the rental season, landlord listings change from hour to hour,” she said. “And the only ones who talk to landlords hour to hour are brokers, not listing services.”

I have to disagree with one thing. Do not believe it is just brokers who only speak landlords. A landlord is more than happy to talk to well qualified candidates without a broker. And if you are aggressive enough in calling landlords, you should be able get that place.

Some management companies represent only high-end buildings that would be too expensive for a typical new hire, but others offer a range of apartments.
For instance Jakobson Properties, which manages some 2,000 apartments in about 30 buildings in Manhattan and Queens, offers what it describes as middle- and upper-middle-income housing. Peter Jakobson Jr., a principal, said, “Our clientele is in school, going back to school, first job, second job, and not from New York.”
He says that Jakobson leases most of its apartments through its Greenwich Village office and its Web site,, but that brokers bring in about 35 percent of its business. Ms. Schwartz said, however, that some management companies work exclusively through brokers.

Rental agents dread this particular company and in fact rental agents make an effort to only go to their buildings as a last resort because of those enormous obnoxious no fees signs outside their buildings. The broker knows that once a client sees that sign, the they are going to have a helluva time reeling their clients back in.

Lindsey Zuckerman, who has moved twice and found renters to take over her leases by advertising on Craigslist, knows that first hand. She said that the first time she listed an apartment, she had trouble getting through to her leasing company on behalf of prospective renters, but the company would take calls from brokers.
She also said Craigslist might work better for people who aren’t first-time renters. She recently sublet her $2,400 alcove studio in NoLita to someone who responded to her listing on Craigslist. “I got a ton of responses,” she said, “but they tended to be from people who already know the market. Students who wanted to see it a week from when I posted it would have been too late.”

Craigslist was created so that even the dumbest people could find an apartment. Can it be a pain in the ass searching for a place? YES! But it can be done. And knowing the market should take you less than a day just by doing your own online due diligence.

Below is information that is common knowledge for New Yorkers, but if it is your first time coming to New York you should definitely take note of these facts.

Because the competition for desirable apartments can be intense, brokers and renters say that having all the necessary documentation in hand when apartment hunting is crucial.

Leslie Lazarus, the agent for DJK Residential who helped Mr. Sooy find his apartment, said that because landlords have such different policies, prospective renters should have guarantors lined up even if they don’t think they will need them. For people in the financial industry, she said, some landlords will accept bonus potential, as part of their income and others won’t.

And while some landlords will accept the combined incomes of two or three roommates, some don’t and will require one guarantor who can cover the rent for all the roommates.

Many landlords require the same level of financial documentation for both a renter and the guarantor, which means a sheaf of personal records that includes tax returns, pay stubs, bank statements, proof of income for stocks or other investments and reference letters. “That can be a difficult thing for parents to understand because it is so invasive,” Ms. Lazarus said.

Brokers agree that being upfront about credit problems is also important because the $25 to $150 application fee that landlords charge goes toward a credit check. “Some people won’t have a credit history or they’ll have ruined it already with that $30 nonpayment to the cellphone provider,” said Senad Ahmetovic, a vice president at Halstead Property. “You would be surprised to see how many of those cases I’ve had, and they do not realize how damaging that can be to their credit score.”

The best time to plan a visit to the city to view apartments is four to six weeks before an expected move-in date. Brokers say that while most recent graduates want to stay downtown and want to look in the Village or in Murray Hill, more reasonably priced apartments can be found on the far east and west sides of town and on the Upper East Side, where there are more large apartment buildings, including Normandie Court on East 95th Street, a building so popular with recent graduates that it is known as Dormandie Court.

As for those bonuses, if I was a landlord, I would definitely not count on them, not in this economic landscape.

This is an excellent article, however it does feel very broker centric to me. In response to that I will be presenting two entries on the upcoming rental season that will hopefully shed light on how to navigate finding an apartment. Or it may just confuse the hell out of you. Either way it will be entertaining.