There’s a lot of weird stuff about NYC real estate and this post attempts to cover some of the things that I’ve experienced. I’ve spent years renting apartments in NYC, mostly from rather small-time landlords with pre-war, rent stabilized buildings. If you’re looking for luxury rentals in new construction, a lot of this advice probably doesn’t apply.
The Mysterious Other Renter
When I’ve found a place I like, invariably the real estate agent calls me a couple hours later telling me that someone else is willing to take the apartment for $100-$200 more per month. Luckily, I’ve never been in a position where I need that particular shitty rental, so I’ve always said, “That’s too bad, I guess I’ll keep looking.” Then a couple hours later the real estate agent calls back and tells me that the other deal miraculously fell through, would I still like the apartment?
This is, I assume, a scummy trick on the part of real estate agent to get an extra $100 commission for a few minutes of extra work (and ingratiate themselves with the landlord). If you have options, don’t fall into a bidding war over a rental.
“Legal rent” vs. what you’re paying
This can actually works out in your favor (at least in the short term). If you are looking for a cheap place, you’re likely to end up with a rent-stabilized apartment. Often, when you sign the lease, there will be an alarmingly high rent listed on the lease (e.g., if you agreed to pay $1,800/month, the lease lists $2,600).
How this works: for rent-stabilized apartments, the landlord is only allowed to raise the rent by a certain city-determined amount each year. For example, if you’re paying $2000/month and the city says landlords can raise rent-stabilized rents by 2%, the landlord can ask you to pay $2200 next year. However, let’s say you’re a good tenant: you always pay your rent on time. You threaten* to move unless the landlord keeps the rent at $2000. So they do: they’d rather have another “guaranteed” $24,000 than risk months of vacancy, a bad tenant, etc. for an extra $2,400.
The city also sometimes puts the rent increase at 0%. Up until last year, there were ~5 years of 0% rent increases. If a landlord had been bumping the legal rent by the max allowable amount before that, though, they could keep bumping the actually rent (up to the legal rent’s ceiling).
Gentrification also is an issue: if you are renting a rent-stabilized apartment and the landlord wants to renovate it into luxury apartments, they have to get rid of their current tenants, first. A great way to do this is to suddenly bump your rent to the max legal rent. If you balked at paying an extra $200/month for a crappy studio with no view, how would you feel about a $1k/month bump? Only the old tenants are gone, the landlord is free to renovate the apartment. Renovations increase the allowable rent they can charge for the apartment, often bumping it out of the range that the city will consider rent-stabilized… allowing the landlord to charge the new tenants absolutely anything.
The migratory patterns of renters
Most people move in the warmer months. Once it starts to get cold, people seem to have a nesting instinct and just don’t want to go out and find a place. This means that landlords are more likely to make concessions and give discounts in the winter months, if you can move then. And they’re more likely to be friendly about letting you out of your lease in the summer months.
Rental agents: the crème de la crap
Real estate agents work on commission: they literally make $0 salary. Like strippers, they generally pay the brokerage for getting to use their space. Because brokerages can charge agents to work for them, they’ll often hire literally anyone that can pass the licensing exam.
Now guess which gives a better commission: signing a lease on a rent-stabilized apartment or closing a $2.5 million sale. The lease gives the agent one month’s rent (maybe a thousand). The sale gives them a few percent of the listing price (maybe $30,000 for the example above).* There are more expenses with selling a listing, but still. Thus, the real estate agents you’ll be working with will generally be the least-experienced agents at the brokerage. A broker once told me, “If a new agent has a deep network and skills, I’m not going to waste them doing rentals.” Putting together rental deals is the latrine duty of real estate.
Thus, if you can avoid it, don’t work with an agent. They’re unlikely to be good at their job and are generally a huge waste of money. However, landlords of big buildings (especially) will sometimes only work with real estate agents. This is because the real estate agents will do some pre-screening (if you make $30k/year they’re not going to waste anyone’s time showing you a $3k/month place) and they will steer tenants to the buildings that they work with (which works out well for everyone, pretty much: the landlords get tenants, the tenants find a place, the real estate agent gets a commission fairly easily).
If you are trying to avoid a broker’s fee, though, you’ll want to avoid those buildings.
In Manhattan, you’re almost certainly going to have standard year-long leases. The landlord sends you a new lease within 90 days of your lease expiring and you either sign it, ask for modifications, or decline and move out. If you need to move out before that, try to find someone to take over your lease (hey, I know a startup that can help with that) or your landlord is likely to fine you at least a month’s rent (good bye security deposit) for breaking the lease.
A perk of Queens and Brooklyn is that leases often turn into month-to-month leases after then initial year is up (and occasionally will start as month-to-month leases). This gives you a lot more flexibility: often you only have to give 30 days notice before moving out. (I don’t know much about renting in the Bronx or Staten Island.)
When dealing with landlords: remember that they really just want someone who will reliably pay rent. And, I mean, not burn the place down or turn it into a drug den, but hopefully you won’t have to work very hard to convince them of that side of it.
When working with agents: remember that they are in it for the commission and you are probably more skilled at literally everything than they are, but they have connections and (some) experience. But do your own research and don’t trust anything they say. And since I’m a real estate agent… and I wrote this post… well, I guess this was a huge waste of your time 🙂
I’d love to hear what your experiences have been, let me know in the comments.
* Threatening your landlord: I use the word “threaten” loosely. I’ve always had good luck with just calling the landlord and saying, “I’d really like to stay, is there any way you can see your way to keeping the rent at $2k?” So I’m not going all First Blood on them.
* Commission on sales and rentals: I’m assuming that a brokerage is likely to take at least 50% of the commission for either, although this varies widely.