Where to hang your hat

In the post-boom market, what it takes to jumpstart a career in New York real estate -- and where not to
By Tom Acitelli | September 01, 2006 04:05PM

If you’re thinking about entering a field related to residential real estate in New York City, think again — at least in some cases. Or, in others, plunge right ahead.

The housing boom in the city is well over. The inventory of unsold apartments in Manhattan in the second quarter of 2006 reached a record high and the number of sales fell to a five-year low for a second quarter, according to appraisal firm Miller Samuel.

So, is now a good time to become a luxury broker, a developer, an appraiser, or a mortgage broker? The Real Deal talked with veterans and recent arrivals in these fields and others, and opened a mixed bag of advice.

One consistent theme was that newcomers must study the field first and shouldn’t assume the best — even if some parts of the business have low barriers to entry. Just as many joined the brokering ranks during the housing boom in search of quick, commission-fueled riches, many are now finding it’s tough to make money in a slow sales market. The same is true for development. Developers who once enjoyed relatively low construction costs and interest rates now face a higher initial tab to get going.

If you’re bound and determined, veterans say there’s no time like the present, since New York real estate is generally not tied to the calendar. “The last two weeks of August are normally slow,” said Adrienne Albert, president of the development marketing firm the Marketing Directors. “But we’ve had a great August.”

What it takes to be an appraiser

Manhattan home sales dropped 3.5 percent during the first six months of 2006, and the outer boroughs reported fewer sales as well. This means less business for home appraisers as the state raises the bar for professional qualifications.

Starting in 2007, New York will require more education for certified and licensed appraisers in New York City (one designation is not the same as the other in the minutiae-laden world of appraising). Prospective certified appraisers must already train for two years after appraisal classes to get the higher professional designation.

Once properly credentialed, an appraiser may find a difficult time landing a first job. Demand for appraisers grew during the housing boom of recent years. That’s not the case in a slower market.

“The last good time [to enter the field] was really any time in the last five years except, I would say, the last year,” said Jonathan Miller, CEO of appraisal firm Miller Samuel. Miller said he gets at least one inquiry a week from a prospective appraiser curious about the job climate. “Sales volume was growing and there was a need for additional appraisers.”

There’s still a need for appraisers. Appraisals are needed whenever property is sold, mortgaged, refinanced or developed. But landing a job as an appraiser and then cultivating the expertise that gets you a plum client like a developer or a development financer remains a years-long task with no guaranteed happy ending.

Drew Fautley teaches appraisal classes through the Real Estate Board of New York. A principal at Vanderbilt Appraisals, Fautley likens learning the appraisal trade to becoming a plumber. You can take all the plumbing classes you want, but no one’s going to hire you unless you’ve got a track record fixing pipes. And, Fautley says, you get that track record through mentoring at a firm.

“You kind of know the procedure,” he says of novice appraisers, “but you don’t really know the ins and outs. You need to get your hands dirty.”

What it takes to be an architect

The housing construction boom of the last few years — the city issued 6,689 building permits in 2005 alone — provided ample opportunities for architects to try their hand at designing in Gotham, birthing, along the way, the marketing concept of the starchitect, a famous architect whose name could be used to sell a project.

Richard Meier, one of the world’s leading postmodern architects, started his own firm out of his New York apartment four decades ago when he was in his late 20s. Meier designed his first residential tower in the city at 173-176 Perry Street in the West Village earlier this decade and followed those towers with one at 165 Charles Street.

The Pritzker-winning architect has simple advice for other architects who want to break into New York. “I think the first thing to do is to identify the people whom you admire and respect,” Meier said, “and attempt to work for one of them.”

Before this job hunt, however, would-be architects should be aware of the considerable hurdles to licensure in the U.S., the last one being the Architect Registration Examination, a nine-test exam in two formats. A prospect, however, first needs three years of documented, practical experience under a licensed architect before he or she can take the exam.

Meier himself worked under other architects for more than five years before striking out on his own.

What it takes to be a developer

Arun Bhatia has ridden out three bad cycles in the New York City residential development market, starting with the downturn of the mid-1970s. Now, the developer says the city may be heading into a similar downturn as construction costs rise as much as 45 percent in the last two years, interest rates increase and the city’s housing sales market cools.

Bhatia says anyone contemplating a first-time go at residential development should study the market first — and, only then, maybe dive in months from now.

“I would say to basically wait and watch the market for the next six months to a year to see what happens,” Bhatia said. “As we all know, housing has slowed down considerably from last year.”

The inventory of unsold apartments in Manhattan hit a record high in the second quarter, according to Miller Samuel, and apartment prices have started to either level off or to dip (see Lower prices, slower movement in Manhattan), meaning developers might not get the sorts of returns on for-sale housing that they were all but guaranteed in the hotter market.

Plus, doing development in New York is not for the novice anyway.

Joe Korff, president of Arc Development, started selling his first residential development in the city, the Solaria in Riverdale, this summer. Korff, who’s worked on projects outside of New York, says the variables involved in building here should give any newcomer serious pause.

Just assembling the talent needed to get a building up — the engineers, lawyers, architects, designers, financers and more — takes tremendous effort; it often also requires a track record of work in the five boroughs.

“Depending on the scope of the project,” Korff said, “lenders might be a little more reluctant to deal with people if they don’t have a local track record.”

Bhatia said he sees an impending exodus of those less-experienced developers who got into the market only to capitalize on the housing boom.

“There are a lot of people who are trying to develop in the market who’ve never done it before,” he said. “Every time, you see this happen again and again — it’s like a movie. People come into the business because they think it’s easy to make money. And, then, people who don’t really know what they’re doing lose their shirt, and they get eliminated and new ones come in.”

What it takes to be a luxury broker

Be connected. Or become connected very quickly.

That’s the advice from veterans to those wishing to break into luxury brokering, either from outside of brokering altogether or from lower price rungs.

Even if you’re socially connected with the sort of buyer who can pay at least a few million dollars for an apartment, that doesn’t mean the transition into luxury brokering will be smooth.

“Even if they were so amazingly socially connected, they would still have to give those connections the confidence that they know what they’re doing,” said Toni Haber, an executive vice president at Prudential Douglas Elliman and a luxury broker since the mid-1990s.

To gain that confidence, new luxury brokers need experience. To get that experience, they need to join a firm or a team within a firm.

It’s nearly impossible to start luxury brokering from scratch, now more so than in recent times, partly because of a slower home sales market at the higher end. The number of Manhattan luxury apartment sales in the second quarter of 2006 was down to 193 from 200 in the first quarter and from 218 in the second quarter of 2005, according to Miller Samuel.

At the same time, however, the city — and Manhattan in particular — has for the last few years been in the midst of an unprecedented luxury condo building boom. In 2005 alone, the state approved more than 9,000 condos for construction in Manhattan, many amenity-laden luxury units.

New luxury brokers must hit the sales ground running. Learn which co-op buildings on Fifth and Park avenues, one veteran said, take all cash from prospective owners. Find the charities that luxury buyers support and socialize at those charities’ events, said another. (For more advice, see How high-end brokers got to the top.)

Above all, position yourself for connections through a combination of savvy marketing and public relations. A new luxury broker regularly commenting in the media on New York luxury will develop a reputation among luxury buyers and sellers, said Christopher Mathieson, managing partner of brokerage JC DeNiro & Associates.

“It’s not so much about the hard sell,” Mathieson said. “It’s about developing the relationship with the type of people who have these properties.”

What it takes to be a mortgage broker

There’s not really a bad time to be a mortgage broker in New York City, even though the pool of borrowers in New York has shrunk recently because of higher mortgage rates. If brokers are not arranging financing for home loans, they’re pushing another kind of product, like refinancing plans for existing home loans.

“There’s never a bad time,” said Jeff Appel, a senior vice president at Preferred Empire Mortgage Company, who has been brokering in the city for nine years. “If the market’s a seller marker, it just means you have to be more innovative with buyers.”

Training spawns that innovation, mortgage brokers say. Part of that training is obvious — get a license, be good with numbers, familiarize yourself with the myriad of mortgage regulations — but a more important part may not be. Much of mortgage brokering in the city comes from referrals. New brokers should be comfortable already with conducting business by referral.

“Generally speaking, if someone’s going to consider becoming a mortgage broker, it’s helpful if someone has previous financial services sales experience,” said Steven Schnall, president of the New York Mortgage Company, a lending company that started in the late 1990s as a mortgage brokerage. “It’s also extremely useful if someone has strong networking ability.”

The best way to network from scratch is to ally yourself with a mortgage brokerage that has a good reputation in the industry. One old hand pointed to the danger of choosing a so-called “chop shop” where the lending flows a little too fast and easily to clients with rocky credit histories. Another said a newcomer can go it alone as a mortgage broker, but the nature of New York would make that difficult.

“We’re in a very competitive market and the market’s become more sophisticated in the sense of marketing,” Appel said, “so it helps to be part of a firm.”

Finally, any new mortgage broker should understand that firm commissions are negotiable. Mortgage brokers say that newcomers can negotiate their cuts up front.

What it takes to be a new development marketer

The thousands of fresh condos that hit the New York market over the last few years flooded new development marketers with work. The flood also spawned new marketing firms, and expanded the borders of where those firms operate.

“I got very lucky in the time I entered the market in 2003,” said Elan Padeh, founder and CEO of the Developers Group, based in Brooklyn’s Dumbo. “I entered the market in the housing boom. There aren’t as many possibilities for development over the next couple of years as there were two or three years ago to get involved in.”

To cut through the competition, marketers have to “think outside the box,” according to veteran Adrienne Albert of the Marketing Directors, one of the city’s oldest and biggest marketing firms. She says differentiating product in a city where every developer does luxury is essential. Firms covet a hire that can do that.

“In baseball,” Albert said, “you’re part of a team. You have to work as a team. But, then, you have to step up to the plate and have that moment of individual performance, where it’s up to you.”

It’s an amorphous, almost indefinable quality that makes a good marketer — and Padeh acknowledged the role luck plays in the field — but there are practical things a newcomer can remember. Albert said resale brokers joining new development marketing must familiarize themselves more than they’re used to with the product they’re selling. They will also have to follow up more with their clients.

“When you’re on-site,” Albert said, “you have one allegiance — and that’s to the seller. It’s a different way of interacting with your customer.”

What it takes to be a real estate lawyer

The New York real estate market will always need lawyers. It’s up to new real estate lawyers to decide their own needs.

Go with a smaller firm specializing in real estate, and you may sacrifice a higher salary. But, go with a large firm that has within it a real estate practice, and you may spend years working on only one aspect of real estate law — titles, zoning, mortgages, etc. Marshall Cohen has worked in both environments.

A founding partner in the boutique real estate firm Cohen & Perfetto, he says succeeding amid the complicated warrens of real estate law boils down, really, to a simple thing: customer service. “Real estate law is a relationship business,” Cohen said. “[A client] wants the attention of someone who’s dealing with him as if he were an only client.”

Aside from the obvious — a law degree, state bar certification — real estate law in any market in New York can be thought of as a fork in the road of a young lawyer’s career: one goes toward a bigger, perhaps international firm, the other winds toward a smaller firm. The smaller firm, lawyers say, offers the potential for hands-on experience in every aspect of real estate law; the larger one offers less such potential, but more money.

“It’s a chemistry issue,” Cohen said. “It depends on what you want at the start of your career.”