Not too proud for rentals
As sales slow, brokers migrate to less-prestigious deals December 31, 2008 04:23PM By Julia Dahl
Bellmarc broker Michael Stansfield in front of 110 West 86th Street, a rental building where he recently represented a client.
With residential sales slowing, an increasing number of brokers who
once worked exclusively in sales are now taking on transactions that in
the past they never would have touched: rentals.
According to Daniel Baum, COO of the Real Estate Group New York, it comes down to dollars and sense.
"We are seeing a number of brokers who in the past, in all
sincerity, wouldn't even consider working the rental side of the market
— you might even say shunning the rental side of the market — who are
today now looking to bring rentals as part of their repertoire in order
to make an income," Baum said on The Real Deal Webcast last
month. "They're not making the income they once were, let alone even
doing transactions on the sales side of the market."
Others echoed that sentiment.
"It is absolutely a clear trend, no doubt about it," said Veronica
Raehse, executive vice president and sales manager at Bellmarc Realty.
"Normally, 98 percent of our business is sales," said Raehse. "But
last year, we thought, 'Things aren't so hunky dory,' so we started
doing trainings with our sales agents, training them to handle
rentals."
Raehse's trainings, which typically run about two hours, focus on
the basics, what she calls "Rental 101" — including how to show a
rental, what income requirements are necessary for potential tenants,
and the different forms of leases available in the city. She estimates
she's done the training for 150 to 175 of Bellmarc's 200 agents.
Bellmarc broker Michael Stansfield attended Raehse's training even though he had previous rental experience.
"The market has definitely shifted to more rentals right now,"
Stansfield said. "The sales side has slowed, so in order to compensate
for the loss and keep your customer base, you have to adjust."
Stansfield said in 2007, rentals made up barely 10 percent of his business. This past year, it quadrupled to 40 percent.
Some high-end brokers like Kirk Henckels, executive vice president
at Stribling, are moving into rentals because the owners of properties
they represent have decided to wait out the market and rent until they
can get the price they want.
For example, Henckels represents the owners of an
11,700-square-foot townhouse at 3 East 94th Street, which, according to
the real estate data site StreetEasy, appeared on the market in
September for $29.5 million.
The asking price dropped to $27.5 million early last month, and a
week later, the property — which features a temperature-controlled wine
cellar, indoor lap pool and elevator — went on the rental market,
asking $70,000 per month.
"They don't have to sell, so they decided to hang onto the asset rather than drop the asking price," explained Henckels.
Henckels said he knows of several agents who, like him, don't
normally handle rentals but are now doing them because their clients
require it.
"You can't make as much on commission from a rental transaction,"
Henckels said. For 3 East 94th, he calculates that his company will
receive, at best, 15 percent of the first year's rent, which comes to
approximately $126,000.
If Stribling sells the home, however, the firm will receive 4 percent of the sale price, a commission just over $1 million.
"Rentals tend to move more quickly," said Henckels, "but there are
always issues: Is it furnished? What if the renter wants to bring his
two rottweilers? What's the term of the lease?"
Still, Henckels isn't complaining. "I do what I have to to service
my clients," he said. That said, Henckels isn't exactly looking to dive
back into the rental market.
"There are some people who really like doing rentals — my
colleague Beatrice Ducrot is one. I think she's masochistic myself,"
Henckels joked.
For her part, Ducrot, a senior vice president at Stribling, isn't
fazed. "Typically, sales agents don't do rentals because they think
it's beneath them," she said. But she added, "I love rentals. They move
quickly, and most of the big sales I've done were through clients who I
helped rent 20 years ago.
"People have been very loyal," she added.
But while rentals have become a good refuge in some cases,
vacancies are up, and asking prices are dropping for Manhattan rentals
across the board. According to the Real Estate Group New York's last
market report, vacancies are up 17 percent since September, and rental
prices are down by nearly 7 percent in some neighborhoods.
Still, brokers say the shifting of gears isn't all that surprising.
"In a market where they are not [doing] so many sales, they are
not seeing so many condo buyers. Of course, to maintain their income
and their cash flow, they switch and start doing some rental
transactions," said Daniel Hedaya, the director of leasing and
management at Platinum Properties.
Bellmarc's Stansfield says that the shift means working more long hours, including weekends.
However, he said, the upside is that there is typically less
paperwork, and instead of waiting three months for a sale to close, you
can often sign a lease and get paid within two weeks. Plus, he said,
the hassles of dealing with co-op boards and banks, which are now
scrutinizing buyers' finances like never before, are alleviated.
Nonetheless, he said, diversification is key. "You definitely
don't want to be known as just a rental agent," he said. "You want to
be a full-service broker — someone who can change with the market.
"I'll keep doing rentals as long as I have to. Real estate is all
about references, and the connections I make now will grow my business
in the future."
So with sales agents back in the rental world, how are brokers and agents weathering the new competition?
"I've already done three rental deals this month and have two more
working," said Jimmi Circosta, an agent with Citi Habitats. However, he
added: "The rental market is tough now, too. You have to list a little
under market just to get attention."
Circosta — who represents both rental and sales properties — has
been in real estate for four years and says that in 2007, he did about
60 percent sales, but this past year, that's dropped to just 15
percent.
One high-end broker, who asked not to be identified, recalled
taking his rental and sales team to a $3 million apartment recently to
get their thoughts about whether the owner should try to sell or list
it as a rental.
"The sales team said, 'The sales market is really tight; they
should rent it,'" recalled the broker. "And the rental team said, 'The
rental market is very tight; they should sell it.'"
Gary Malin, COO of Citi Habitats, said his agents are prepared to do whatever their clients need.
"It's very difficult to all of a sudden change gears and become a
rental agent if you've never been one," he said. "Rentals are very fast
paced, and I think it would be a big adjustment. Training will only
take you so far — you've got to get out there and do deals."
"I always say, 'Focus on the client; don't focus on the deal,'"
continued Malin. "The color of money is green, whether it comes from a
rental or a sales deal."
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Comments
Anonymous
This article does not quote any Broker who is active in Rentals who can talk about the state of the rental market now. There are virtually no clients out there paying 15% fees anymore as the demand for rentals is much weaker than the supply with the huge loss in jobs in NYC recently. The whole rental market is made up of NO FEE rentals where the owners pay the Broker a ONE month commission. This is about 1/2 of 15% of the annual rent but still much more than the sales agents are making now which is Zero! Sales have been in a bubble for years based on "buying with a credit card/subprime mortgage and now with the new economy it will be in the dumper for quite some time. I suggest sales agents get off their high horses and rent rent rent!
Comment #1 Posted By: Anonymous 01/01/09
Anonymous
I agree with comment #1
Comment #2 Posted By: Anonymous 01/02/09
Anonymous
I agree with comment #2, but disagree with comment #1.
Comment #3 Posted By: Anonymous 01/02/09
Anonymous
Funny, that they shouldn't be to PROUD to do rentals.....HHEELLOOOO -- your profession relies on a 40-hour-course, dear brokers. Where DID you get all that ego from?? Get over yourself -- rentals and sales are the same thing - the same job. You are so low on the totem pole of respected professions anyway -- what difference does it really make if you are a slimeball in sales or a slimeball in rentals? GEESH I for one am glad that this bubble has BURST and perhaps now people can see how UNNECESSARY you all are. I hope the one big market correction that is made in NYC real estate is the EXTERMINATION of the infamous NYC real estate broker. We can learn to live and function WITHOUT you. Syanara --
Comment #4 Posted By: Anonymous 01/02/09
Anonymous
Commenter number 4 seems to have many vacancies. Are yuo paying op's?
Comment #5 Posted By: Anonymous 01/03/09
Hkman
I completly agree with comment #1. 15% fee almost never happens anymore. I will not even take a listing over $1350 unless it's an OP. Even making an apartment a no fee is not the magic wand it was even a year ago. I suspect a lot of the former sales agents doing rentals will be moving out of real estate all together in the next few months. There are a ton of rental apartments just sitting there with no takers so rentals are taking their hit too. A big factor is the bank of mommy and daddy is not so willng to pick up junior's tab at Normandy Dorm anymore having lost 25% on the stock market. Now it gets interesting.
Comment #6 Posted By: Hkman 01/03/09
Anonymous
you all sound like trapped poor renters that missed out on the $$$ of home ownership all of these years. or perhaps you are all just failed brokers who never got their act together in what was the greatest real estate opportunity in sometime for sometime-which would explain why you're still renter (now worried about your jobs).but PLEASE, dont worry about us brokers, we'll be just fine. YOU SEE, we'll be paid by both you and the owners of realestate:-).oh, and, good luck trying to break that over priced lease of yours.
Comment #7 Posted By: Anonymous 01/03/09
Anonymous
All I have to say is remember the 90's. Those were tough times too. NYC will always need and have brokers. All broker are not scum. It's just some bad apples make the rest look bad too. Also some clients are not very intelligent and really hard to please. Sometimes there are difficult people on both ends of the spectrum.
Comment #8 Posted By: Anonymous 01/04/09
Anonymous
You want a Brokerage that Specializes in Rentals? Visit www.rapidnyc.com/acardona and view 3,000 apartments for Rent
Comment #9 Posted By: Anonymous 01/04/09
Anonymous
Anyone who is not a broker has no clue what the job IS OR IS NOT ALL ABOUT. Hater in this thread and all others stay in your rent stabilized railroad and shut your jealaous nasty little lips.
Comment #10 Posted By: Anonymous 01/06/09
Anonymous
And thank you so much much number 8 There are some horrible brokers, some horrible renters, some horrible sellers, buyers....some horrible people all over this planet. The dumb and dumber will make a stereotype out of anything. Blessings. Broker
Comment #11 Posted By: Anonymous 01/06/09
Anonymous
With the exception of a few, real estate brokers are like stock brokers. They are generally poorly educated people who were not smart enough to either attend college or graduate school. So they choose these professions because they have the potential to make a lot of money and can some what make themselves believe that they are "professionals." But the reality is that the homes sell themselves.
Comment #12 Posted By: Anonymous 01/06/09
Anonymous
Comment #12, you win the generalization prize. Every real estate broker I ever met, and I know thousands, graduated college and are true professionals. I am one of them. Don't know about stock brokers, you may be right about them. Homes may sell themselves, true, but it is still a people business and a broker is needed to protect people from people.
Comment #13 Posted By: Anonymous 01/06/09
Anonymous
Broker fees are getting slashed across the board. 15% is not happening in this market. I am seeing some landlords pay broker's a flat fee but its usually $500 or so depending on the apartment type.
Comment #14 Posted By: Anonymous 01/08/09
Anonymous
#1 reason people in this city hate brokers? We take their money. Period. They think they can do it all by themselves, but they can't. I work in Brooklyn, and in the neighborhood I work in, no landlord advertises no fee unless their stuff is cr*p, and you can't get into a building without paying SOMEBODY - the super, the broker, etc. If you think you can just hop on craigslist and find any apartment that's vacant because things are a little slow you are nuts...
Comment #15 Posted By: Anonymous 01/08/09
Anonymous
I have got a graduate degree and I am in REAL estate..
Comment #16 Posted By: Anonymous 01/09/09
Anonymous
#16, you must have received a graduate degree in a useless subject area or weren't very good in that field. I do not see the difference between a car sales person and a real estate broker with the exception that you need to pass an exam based on pure memorization. #15, you may be correct if you are referring to the housing market at its peak. But simple economic principles would dictate otherwise in this economy.
Comment #17 Posted By: Anonymous 01/10/09
Anonymous
To the extent there is any upside to this mess, it's that there will be fewer real estate brokers.
Comment #18 Posted By: Anonymous 01/10/09
Anonymous
Real Estate Professional is an oxymoron. It is closer to the acting profession, or fibbing with a straight face, (same thing!)than a worthwhile profession (doctor, lawyer (maybe also actor), teacher,scientist, dentist, etc.) These professions produce something useful, albeit tangible and worthwhile. They contribute to soceity. Real Estate people takes your money and run. Once fees are paid in full, I have never seen a RE Broker earnestly attempt to help any new owner or tenant with a problem. Even if its life threatening or grossly inequitable. Brokers promise the moon and will tell lies as long as it is not in writing. They are interested in the land-owners, the bigger the better. Like Willy Sutton, infamous bankrobber, when asked why he robbed banks:..."'cause that is where the money is." There is nothing to be proud of, except the completion of the "deal". Nothing creative, nothing of lasting value, no benefit to society, no talent at all except for sales talent (read 'acting' again). If brokers were really any good,and served a beneficial purpose, you would't need lawyers to read the real estate agreements.
Comment #19 Posted By: Anonymous 01/11/09
Anonymous
Comment #19 sounds like one of those trapped poor renters! Or maybe some poor shnook who could only afford a small studio or tiny one-bedroom in not the neighborhood where they wanted to live. That is just tough. Move to Jersey City so you can see how the rest of us fine folks live. I understand there are some good vantage points where your tongue would hang out to see this Gilded Island of Manhattan. Bet you can get a great view of Bernie Madoff's flat! Which Broker did that deal? Isn't Madoff one of the fine residents of this Gilded Island. And arent't there so many more like him -- just functioning at different levels of deceit. If you can make it here...
Comment #20 Posted By: Anonymous 01/11/09
Anonymous
I own some apartments and I am a broker, but I rent out my own apartments through Craigslist so that my renters do not feel I raped them. And most of my renters stay for years and years because they got a good deal from me. What goes around comes around!
Comment #21 Posted By: Anonymous 01/11/09
Anonymous
#16 did you "have got" a graduate degree in English???
Comment #22 Posted By: Anonymous 01/12/09
Anonymous
i like how the broker's defense is, "you're broke, you don't know shit." classic reason why people hate brokers
Comment #23 Posted By: Anonymous 01/13/09
Anonymous
I just rented 3 Apartments today in the East Village and I have another 5 in contract for next week. I'm also in contract as a representative for both sides to sell a 8 Story mix-use building in the garment district for $14million... WHO'S COMPLAINING??????????
Comment #24 Posted By: Anonymous 01/13/09
Anonymous
In order to survive like in any business, you need to be able to adjust to the markets. Great part of NYC is that there are 2 markets to be able to work. Best advise right now is to work 3x's harder then you were the last few years, it will turn around!!!
Comment #25 Posted By: Anonymous 01/24/09
Anonymous
Finding a home in NYC can be a daunting task. There is a lot of inventory to choose from, but always only one best deal. Only the agent or broker will ever have knowledge of the one best deal, that knowledge is gained from years of experience. Good luck finding a real deal without a real estate professional. Most people when looking for a home in NYC are tapping in to all the fears and insecurities that the act of moving stirs up from their childhood. Moving to a new city, new school, new friends, mom and dad are divorcing etc. Jump too… adult looking for an apartment. Just divorced, just graduated need to actually put my degree to good use, lost job must downsize. Relocate to the big bad city and I need some help and guidance. A real estate professionals job is help make the task of looking for and securing a home in NYC, as painless as possible. Unfortunately looking for and securing a home in NYC is not a completely painless experience.
Comment #26 Posted By: Anonymous 01/24/09
Anonymous
Most landlords and developers can not or will not pay to have onsite agents. To show one or two vacant apartments 1-5 times a day is not a cost effective use of a supers time as they are paid to maintain and fix things at various properties. Constantly paying for marketing on the NYT, craigslist or various print publications is time consuming and expensive. Here we have the market created by the landlords and developers, not the brokers and agents If any consumer is not happy with the market as it is, buy a few billion dollars worth of property in NYC do research, preview advertise and show, compile financials, verify financials, negotiate on behalf of the buyer and or seller and do some deals and change the market for the better. It is really easy… Then I will go back to driving a taxi, tending bar or perhaps finish school and be a psycho therapist to help people with the stress of the break-up, job loss or post traumatic stress of relocating to the new city.
Comment #27 Posted By: Anonymous 01/24/09
Anonymous
How about those who work in the industry because they love the art form. Grew up in one on the greatest cities in the world with some of the most beautiful housing stock and complimentary communities; hoping to one day have an impact and contribute to further development that would have only enhanced it's functionality, communities and overall viability. Bloomberg and others may have passed that on as an objective, however many of the attitudes encountered on the blogs emphasize otherwise. Get rid of the NASTY ATTITUDES... We are all in this together whether we like it or not. The R.E. recession beginning in 1987 was not pretty and this one is promising to be uglier. For those not in the know its called a New York State of MInd.
Comment #28 Posted By: Anonymous 01/25/09
Anonymous
In most cities (albeit lacking in comparable size), rentals are handled between the owner (through local venues-ads, internet) and a renter. Only the dopes go to "rental companies", which are simply advertisers for existing rental complexes- easier to just go to the building itself, to the on site rental office of non-commissioned rental reps, who typically require a security deposit, and first/last months rent. No real estate agents needed.
Comment #29 Posted By: Anonymous 02/02/09