Property Grunt

Monday, August 31, 2009

Reality bites when you need it bad

It is biting hard.

The New York Times has published two articles that reflect the current realities of the real estate market.

For Now, It’s All Yours

The New York Times give the rundown on the rise of furnished rentals.

Here are some key takeaways.

Leaving the furniture behind can be a good way to make it through tough financial times — the owner doesn’t have to spend money on storage and the tenant does not have to pay for furniture.

According to Halstead Property, the number of furnished apartments in its database — which includes rentals by co-op and condo owners, as well as sublets by other renters — jumped by more than 50 percent from the first six months of 2008 to the same period this year.

In my experience, furnished rentals are the worse type of rental to rent out. The fact is that everyone has different tastes of how their home should be decorated. If it is not to their liking, it does not feel like home.

And for the owner it is not all rays of sunshine.

“This is really weird!” she recalled saying to the man, whom she had found on Craigslist. “I don’t even know you, and I’m leaving my apartment in your hands.”

The apartment, yes. And also the books, the candles, the rugs, even the standing mixer in the kitchen. “All of that stayed,” she said. “I just took down my photos.”

The arrangement, for $3,000 a month, went well, though Ms. Rey found the month-to-month renewal process frustrating. When her first tenant cleared out in May, friends of her brother signed a one-month lease, and she started looking for her next tenant. She returned to Craigslist for a replacement. This time, her luck was not so good.

She rented the place to a dancer who agreed to stay for the summer. But at the beginning of August, the young woman moved out without paying for most of July. She still owes Ms. Rey $2,000.

Ms. Rey could have been easily solved the problem by simply holding onto a safety deposit of one month's rent.

Gary Malin, the president of the Citi Habitats, a New York brokerage, says few brokers spend much time on sublets, furnished or otherwise. Many of those transactions are conducted online on sites like Craigslist and

“It’s not as lucrative,” he said. “A lot of owners don’t price their apartments appropriately, and some want to do things outside of their board’s approval.”

Malin is correct that a lot of brokers shun furnished rentals. It is just too much of a hassle for a broker to deal with because the furnishings become an added variable to the situation. Even in a hot rental market, a furnishings presents difficulties in renting it out.

As owners not being able to price their apartments appropriately, as long as owners look at the latest rental data, they should be alright.

Also, for all you owners out there. Do not mess with your board. Obey the rules or they will crush you. If you want to get cute and try to skirt around them, you are asking for trouble. Boards are vicious as hell, especially in this economy when they are looking for any opportunity to charge fees. Make yourself a target and they will come a hunting.

Farnoosh Torabi’s studio apartment on West 80th Street has been listed for rent since the first week of July, but she has yet to receive a nibble. Earlier this month, she decided that she would pay the broker fee herself.

“I feel like listing it as a no-fee is going to help it a lot,” she said. “Whoever is looking at a studio doesn’t have a huge budget.”

Awhile back in Joyce Cohen's The Hunt, a broker claimed that a broker fee was a way to qualify rental tenant's which I strongly disagreed with.

Ms. Torabi is very aware of that, which is why she is kicking in for the full fee.

There is actually one particular client that is perfect for furnished rental, that is the foreign businessman. Back in the 1980's, there was a influx of Japanese salarymen who were living overseas. In the suburbs where I lived, what a lot of these Japanese companies would do would buy houses and use it for housing for their overseas employees and families. So there would be a rotation of families every couple of years from Japan.

What these furnished apartment landlords should do is make a concerted effort to seek out foreign nationals, particularly from countries that are flush with cash and have emerging markets that wish to expand into the North American market. Those are the people you want because they need a place to crash for an extended amount of time and need a home that is ready made.

After Century of Growth, Tide Turns in Florida

Choked by a record level of foreclosures and unemployment, along with a helping of disillusionment, the state’s population declined by 58,000 people from April 2008 to April 2009, according to the University of Florida’s Bureau of Economic and Business Research. Except for the years around World Wars I and II, it was the state’s first population loss since at least 1900.

“It’s dramatic,” said Stanley K. Smith, an economics professor at the University of Florida who compiled the report. “You have a state that was booming and has been a leader in population growth for the last 100 years that suddenly has seen a substantial shift.”

Fear not Florida. For your saviors are. The Chinese.

I have heard rumblings that Chinese people are pouring into the sunshine state. Why? For purely educational purposes. They learning everything they can in the tourism and hospitality business and bringing back their knowledge.