Home equity, away from home

Growing numbers of New York area first-time home buyers are looking further afield in their quest to build up home equity, sometimes staying on as urban renters while playing suburban landlord at the same time.

Savvy young couples are seeing that strategy as a way to sustain their city lifestyles while joining the rest of the country in home ownership, which is tougher and tougher to do in a pricey urban market.

Joanna Pajkowska and her fiance pay $2,500 a month for their one-bedroom apartment in Battery Park City, and that’s a comparative bargain. She says the rent will likely increase when incentives established after Sept. 11 expire in spring.

They love the neighborhood – but don’t see it as a permanent residence.

“It’s just too expensive,” said Pajkowska, a graduate student. “I’ve noticed there are quite a few young families with one or two young kids, but for us, I don’t think it’s doable.”

Instead, Pajkowska’s fiance owns a home in Connecticut that he rents out to cover the mortgage. The couple intends to stay in the city for about two years to enjoy the lifestyle, and then they’ll settle down – somewhere else.

“You can do that, because then you don’t feel guilty about throwing your money out in rent,” she said. Pajkowska said she knows another couple, soon to be married, who intend to do the same thing.

Though some mortgage lenders, such as Melissa Cohn, president of Manhattan Mortgage Company, say they haven’t seen many instances of this phenomenon, others say some groups are giving the trend momentum.

Teresa Donohue, a vice president with the New York Mortgage Company, said many Asian buyers opt for the rental-ownership mix. “There have been a number of young couples saving and waiting to buy homes in New York, but the prices keep going up,” she said. These clients have started exploring two communities in Pennsylvania – Mayfair and Castor Gardens – as well as Norwich, Conn., close to the popular Foxwoods and Mohegan Sun casinos.

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“We’ve financed several investment properties and second homes there because people are buying great little places ranging from $110,000 to $140,000,” Donohue said. “They’re getting a nice rental income off them.”

These couples still live in New York, and are waiting to see what develops in the communities in which they’ve purchased, she said.

Despite the prevalence of these types of buyers in urban areas, most residential real estate brokers say they’re labor-intensive and to be avoided. But some real estate experts believe agents can capitalize on this type of situation – especially as these buyers may make multiple purchases.

Typically, New York brokers will refer buyers looking outside the tri-state area to local agents, often negotiating a referral fee of 15 to 25 percent of the commission on the gross sales price. If the New York City broker handles the loan and the closing with a local lender, he or she may be able to negotiate a significantly higher referral fee rather than the typical 15 to 25 percent.

Brokers in different areas often form alliances. Carol Dorado, a broker with Century 21 Wolff Real Estate in White Plains, often receives referrals from Bellmarc Realty in Manhattan. She said she has dealt with buyers who want to purchase even farther away than Westchester.

“You’re usually looking at younger people, 27 to 35 or so, who do work in the city and have their lives there, and maybe got married recently and are starting to have a family,” she said. “A lot of times, I’ll try to send them to Atlanta, Florida, Chicago, Connecticut, Massachusetts. I know real estate agents there, so I’d refer them to someone that I know.”

Bernice Ross, chief executive officer of RealEstateCoach.com, said brokers should exercise caution when doing business outside their realm of expertise, and that referrals are the wisest path outside the city.

“Don’t do business outside the area – that’s a formula for a lawsuit,” she said.

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