TRANSCRIPT : EPISODE 54

Finding a deal as NYC landlords pull concessions and raise rents

Emily Myers (00:01):
I'm Emily Myers, and this is the Brick Underground podcast covering everything you need to know about New York Cty real estate, whether you're buying, selling, renting, or renovating. Now over the past six or seven months, we featured lots of stories of people moving to New York for the first time. In many cases they've been taking advantage of lower rents and freebies offered by landlords to fill apartments that were left empty during the pandemic. Well, perhaps you're thinking about moving to New York, perhaps you've lived in the city before and want to move back to take advantage of everything it has to offer. It's possible you moved out during the pandemic, but now want to get your kids back into the public schools. Maybe you even know which neighborhood you want to live in. This episode of the podcast is all about how to move into a New York city rental. It's much more competitive than it was earlier in the pandemic. All those empty apartments have been filling up and concessions are being yanked off the table. So to get into some of the details and help you get the edge in this market, I'm joined by Adrian Savino, director of leasing and business development at Living New York. Adrian. Hi.
 
Adrian Savino (01:08):
Thanks for having me.
 
Emily Myers (01:09):
Adrian, so renters looking for a place right now, perhaps enticed by stories of falling rents. Will they be disappointed? What should they expect?
 
Adrian Savino (01:19):
Yeah, listen, I think you alluded pretty perfectly to it. Timing is everything. So when the pandemic first started, you know, prices fell off a cliff. Concessions were, were applied to most every, a union site—walk-up, laundry, doorman ,across the board. We're seeing that change. We're seeing the, the momentary shift in power, from landlord to renter, kind of go back into the favor of the landlord. Some specific neighborhoods that are still kind of lagging that might be struggling a bit versus others within Manhattan, are Harlem, Murray Hill and the Upper East Side. Other sub-markets, like the Financial District, that historically have had,you know,supply problems are still offering heavy concessions, but overall, if you're talking about the historically,competitive sub, within lower Manhattan, those prices have rebounded. We're starting to see,prices jump up, concessions shift away, you know, bidding wars in some cases. So again, the, the narrative is shifting back in the favor of the landlord.
 
Emily Myers (02:22):
Yes, we've reported on some renters facing bidding wars for apartments, with landlords raising the rent or even renters offering to pay more than what they were being asked, to beat out the competition in some of New York's most popular neighborhoods. So how do you get the edge then on a New York City rental? Is it about neighborhood?
 
Adrian Savino (02:45):
Yeah, so, I mean, depending on where you're looking at this, this can be a very case by case answer. If you're looking at lower Manhattan, you're probably gonna experience this more so. You know, any competitive portion of the market, this is going to happen at a quicker pace. This is not to say that all of Manhattan, all of Brooklyn, you know, all of certain boroughs are going to be entering into bidding wars. But certain unit types, the landlords took their time to do renovations, improvements over COVID or throughout COVID, those unit types are, are very, very competitive landlords you know, are adding washer/dryers, small amenities, you know, dishwasher, things that were, you know, kind of enticing to, renters. We're seeing those, those unit types, very, very competitive, you know, again, lower Manhattan, Greenwich Village, West Village, historically those neighborhoods are, are insulated. And they were insulated throughout COVID. They were affected, but not as much as others, those are the ones that we're really seeing the bidding wars occur.
 
Emily Myers (03:43):
Okay. So it's quite a localized picture. You know, in Brooklyn near Prospect Park is competitive. What about Queens?
 
Adrian Savino (03:51):
Queens actually saw the smallest drop off in pricing throughout COVID? So that was pretty positive. A lot of people that were leaving, that didn't want to leave the city entirely, but didn't want to leave Manhattan ended up in Brooklyn and Queens.
 
Emily Myers (04:05):
Yeah. It's funny. When we talk to brokers and they talk about, you know, it, it being positive that rents don't fall. And of course our listeners have a slightly different attitude towards rent prices. So if it's increasingly competitive in these specific areas, what happens if you need a guarantor, is it going to be more difficult to rent right now?
 
Adrian Savino (04:27):
Yeah. So depending on, on how prepared you are, what your guarantor looks like, where your guarantor is located. You know, most landlords want to see that their guarantors are tri-state. So they're within New Jersey, New York, Connecticut. Some are okay with, you know, anything that's just domestic. But it very much like a you know, being contingent on a mortgage, buying a home, having a guarantor is not necessarily the best thing, but it won't outright you know, get in the way of you, of you finalizing an apartment.
 
Emily Myers (05:00):
Okay. So it may be that if you're using a guarantor or you're having to use a guarantor, you may not get the apartment that you want because you're going to be competing against people who are not using a guarantor, but that doesn't mean you won't find an apartment at all.
 
Adrian Savino (05:13):
No. I mean, I think the overall picture that you want to paint is preparation. Whether you're using a guarantor or you're, you're, you're renting by yourself it's it's to have that person prepared to have the conversation with them previous to getting them involved, having their paperwork ready, you know, giving them expectation of what to what the process will be like. I think that's very important.
 
Emily Myers (05:39):
Yes, of course. It's worth pointing out that, of course, landlords typically have quite strict income requirements. They want to see that your salary is 40 times the rent, and they'll also check your credit score. Presumably landlords were forced to be a little bit more flexible over the last year, but then, you know, now that they don't have to be?
 
Adrian Savino (06:00):
Yeah. So as we talked about the kind of power shift from landlord to renter as landlords had less demand for their units, they had no choice, but to be more flexible. So income requirements, you know, got a little bit, a little bit, you know, instead of 40 times a monthly rent, you know, people were looking at the 35 range and instead of the credit being at or above 700, landlords are looking at, you know, 650 and above, 625 and above. So there was definitely some flexibility there. And as this kind of unfolded landlords had no choice, but to kind of start accepting third-party guarantee services like The Guarantors, Insurent, whereas that was not as ubiquitous pre-COVID. Landlords would prefer 1) you're qualified by yourself. 2) You have the guarantor that you're using. And then 3) in order of priority, you would have a third-party service. That is now kind of even, and they don't really care as long as you're qualified, they'll generally move forward. Again, if there's a bidding war at play or, you know, you're in a more competitive market, you're still going to be qualified. You're still be able to move forward, but those that are not using guarantors and are qualified by themselves, well will generally win out.
 
Emily Myers (07:14):
So another concession that we saw over the pandemic was the broker fee was being paid by the landlord. Obviously broker fees are something that often come as a surprise for newcomers to New York city. Our listeners can head to our site to find articles on the push and pull of this contentious issue. But the latest interpretation of the law is that broker fees are indeed paid by a renter, they can be 12 to 15% of the annual rent total. So it's not a small figure. And of course, if you employ a broker to help you with your search, this doesn't feel so egregious as paying a landlord's broker, who might just simply give you the keys after you've done all the legwork. But having said all that, you know, over this past year, landlords have been paying broker fees. It was an incentive for renters to sign leases. Is that going away? How long will it last? We are still seeing it, I think, but is that going to change?
 
Adrian Savino (08:04):
Yeah. I mean the main concession that's being pulled away or now is free rent, not broker fees—that's still generally being covered by the landlord. So I don't see that shift changing too much in next, you know, maybe in the '22, as, as the supply and demand kind of balance out, that might change more. So but as of right now, people are just looking to remove free rent, the landlord, I should say.
 
Emily Myers (08:28):
So what's interesting, I suppose, is that it was about this time last year that some of the deepest concessions were being offered up to, you know, these three months free that you mentioned. With those leases due for renewal, do you expect landlords to increase the rents significantly?
 
Adrian Savino (08:46):
So landlords look at concessions first and then the base rent second typically. So they would look to, if you were offered three months free last year or upon your renewal during COVID, they would look to go into one or two months free. If you were given one to two months free, they would look to give you one month free or, or no for your renewal. If in more competitive neighborhoods that are, you know, kind of witnessing this, this huge rebound, they might try to give you no free rent and an increase from your base rent that, you know, they call it gross and net effective rent. So you would see an increase on your gross.
 
Emily Myers (09:19):
Yes, actually we have a calculator on our site to help you navigate this. This is a way that landlords entice renters by advertising the net effective rent, which includes these free months versus the gross rent, which is what your rent will be without the free month. I mean, would you say then that the most important thing to be aware of when you're dealing with the net effective and the gross, and the difference between, is it that when the lease is renewed, it would be at the gross, not the net effective rate?
 
Adrian Savino (09:49):
Your site is super helpful to use that or do that calculation. Streeteasy has also, required the brokerage community to, deploy both the gross and the net. So from a transparency perspective, it's, it's helpful to the renter to understand, you know, what they might be coming with out of pocket, you know, what they might be expected to do upon renewal. You know, that's been a helpful kind of transition, whereas historically, you know, the gross, the net rent was not so clear.
 
Emily Myers (10:16):
Yes. Yeah, you're right. That's, there's definitely been more transparency there. We have lots of articles on every aspect of renting in New York City at Brickunderground.com. I should also mention that the National Association of Real Estate Editors has awarded Brick Underground gold for best website. And if you head to our site, we have market reports, neighborhood guides, and tips for dealing with lots of New York City housing issues, like finding a no-fee apartment, but also preparing for your co-op board interview or entering the affordable housing lottery. We've got all the insights to help empower you to take on your housing goals, whether it's becoming an owner, renovating an apartment or landing a better place to live. I'm talking to Adrian Savino, director of leasing and business development at Living New York. Adrian, of course not all rentals are in rental buildings. How do you advise renters who aren't looking at rental building specifically, but going for more rentals in co-ops and condos is that somewhere where you can get a deal?
 
Adrian Savino (11:19):
It depends. Individual owners, you know, are generally more flexible than the landlords that own the entire building. The only issue that comes with renting and co-op condo is the barrier to entry or the process that you know is required to be approved. Condos are generally more lenient, just like on the purchase side co-ops can be more stringent, but the timeframe between applying, what paperwork is needed, you know, there can be an interview, there could be exorbitant fees. If you can't find anything that's in a rental building and you have no choice, but to look at a co-op or condo that's, if someone was coming to me, looking for advice, I would suggest looking at rentals, traditional rentals versus co-ops or condo.
 
Emily Myers (11:59):
Yes. And of course co-ops sometimes have restrictions on the time limits for sublets don't they? So that can be problematic if you want to stay somewhere long-term.
 
Adrian Savino (12:09):
If you have the, the owner, you're at the owner's will.
 
Emily Myers (12:12):
Sure. So how do you advise renters when it comes to neighborhoods? And you've talked about some being less competitive and more competitive, but it used to be all about the commute, but for many that's changed?
 
Adrian Savino (12:23):
When we were doing you know, rentals focused on helping the consumer directly. You know, you start off by asking, you know, a series of questions, where do you want to live? What's important price point or building style? A lot of those answers have completely shifted, to your point. So people that wanted to live close to work, people that wanted to live, you know, within commutable distances to work, they don't have to do that anymore. They're working from home three days a week. They don't have to worry about it as much, which is why to kind of go back to a point we made before about Brooklyn and Queens, we saw people that were leaving Manhattan, you know, kind of flee to those neighborhoods, you know, parts of Williamsburg, parts of Dumbo, parts of Sunnyside, Long Island City that have had more amenities that have lower prices. These are things that we saw kind of transition throughout the heart of COVID.
 
Emily Myers (13:11):
So what are you seeing on the ground? You know, what, what are people asking for? Are amenities important? You know, where are the pressure points then?
 
Adrian Savino (13:22):
I think the pressure point is always start with pricing and concessions, but if you're looking at amenities specifically outdoor space laundry in unit. People don't want to go to common spaces as much. So being able to conduct or have some sort of access to outdoor that was connected to your, your individual apartment, not having to go to the laundry room to conduct your laundry. Those are two, two of them, you know, the major kind of amenities that we saw in high demand.
 
Emily Myers (13:51):
Okay. So if you're wanting a deal, then you're perhaps going to find places that don't offer those?
 
Adrian Savino (13:56):
Yeah. Things that were, those are more competitive. Those, those two specific amenities, you know, drove up pricing for those, those units types.
 
Emily Myers (14:03):
I mean, obviously there's no substitute for physically viewing an apartment, but virtual tools and 3D apartment layouts have been, have become common over the past year. Do you have any advice for people looking at apartments virtually who perhaps they can't get to New York city quite yet?
 
Adrian Savino (14:16):
Again, to your point, nothing really replaces viewing something in person. I think if you have no choice using the virtual content to kind of whittle down your search before you come to the city is important. I'm not sure if I would use it to make my final decision, but if you're looking at 20 apartments to start and you whittle that list down to 10 and then come to this city to view them in person, that's kind of a helpful tool. There was an interesting article that was looking at Realtor and Zillow. And they were saying that 94% of listings online did not include immersive tours, 360 tours and most, or, you know, left unfulfilled by the marketing that they were saying online to kind of assist through that, through this process.
 
Emily Myers (15:02):
So what are you saying is virtual tours are either not offered or there's sort of a bit of a disappointment?
 
Adrian Savino (15:07):
A disappointment, marketing is not up to snuff. These things are transitioning, you know. That was a national survey, but in, in areas like New York where marketing and the handling of that is more, more sophisticated, you know, we saw those numbers a bit higher.
 
Emily Myers (15:24):
Okay. And obviously the trend at the moment for rents is that they are going up. Do you encourage your clients to try and secure the longest lease possible?
 
Adrian Savino (15:38):
The way that you would look at that as a renter—generally the fall and winter are less competitive times of the year, you know, as a cycle, the spring and summer are more competitive. So trying to get the landlord to agree, you know, at this point in time, if you're in July, you know, to 13 to 15 month leases, you know, it would be beneficial. Generally in that time of year, if you're going through a renewal, you'll have a better chance at getting discounts, getting offers on concessions but locking into longer leases will be a difficult thing, a difficult prospect right now.
 
Emily Myers (16:13):
Really? So you think landlords won't be offering the two, three year leases that they might've done?
 
Adrian Savino (16:19):
Yeah. Again, it can never hurt to ask you know, some landlords in some of the markets that we talked about before that are struggling, they might not have a choice. So again, if you're looking for the best deals as, as a, as a renter, I would suggest looking at the you know, the pain points within the marketplace.
 
Emily Myers (16:35):
So how do you advise renters who are in place and having to negotiate a renewal? Do you advise that they, they sort of push back against increases and how do you, how do you effectively do that?
 
Adrian Savino (16:48):
Yeah, so I think, you know, preparation and data is very important to have, even if you're a renter. You know, if you're going through the process to negotiate with your landlord, you know, seeing what's going on within the marketplace and using, you know, comparable listings, you know, as a driving force is important, there's a wide spread between Covid runs and current rents. So landlords are going to try to get you to come on the upper end of that range. And obviously as a renter, or I guess as a current tenant, you would look to keep your, you know, your rent as close to it, as close to where it is as possible. So meeting somewhere in the middle, like any negotiation is a kind of an important thing to at least have the expectation of before going into it, but using, you know, using data that you can use, you can find on StreetEasy on Brick Underground other, other platforms to go to your landlord I think is a helpful starting point.
 
Emily Myers (17:35):
I'm wondering whether there's anything you can offer to encourage a landlord to keep your rent lower and obviously being a good tenant is going to be important.
 
Adrian Savino (17:43):
Yeah. I mean, I think you can point to your payment history. You, you weren't late on any of your payments. Landlords do appreciate that. Starting the negotiation early, letting the person know, letting the landlord know that you're, you're interested in being a long-term tenant. And I think with any part of this process as a renter, you know, whether it's finding a new apartment or, or dealing with the current landlord, you get more bees with honey. It can never hurt to just have a good relationship with the landlord.
 
Emily Myers (18:09):
Not that bees are pets, but we should talk about pets. I mean, lots of new Yorkers got pets over the last year. Do you feel there's been a shift towards landlords being a little bit more flexible when it comes to pets?
 
Adrian Savino (18:23):
Yeah, so I mean, landlords are no longer, you know, historically they were able to charge pet fees. They're no longer allowed to do that. So I think the combination of that being passed, there was a huge surge in pets throughout COVID—you know, dogs, cats kind of skyrocketed. So I think landlords had no choice if they wanted to compete with their with their neighbors, they had no choice, but to be more flexible on, on the pet front. Other interesting trends we saw from a competition standpoint amongst landlords was offering lower security deposits. So historically that would be equal to one month rent. Landlords for qualified parties were offering you know, a thousand dollars, $1,500 security deposits, less than one month, rent to make sure that the barrier to entry to get into the apartment, the monies due at lease signing or lower than they normally were.
 
Emily Myers (19:18):
Oh. So if you didn't get the rental last year, that is presumably off the table right now?
 
Adrian Savino (19:24):
No things like that are still, some of the bigger landlords that have the ability to do this and are you know, not as, I guess, subject to default and issues with the apartments are open to that. You know, companies like what Rose Associates, TF Cornerstone, the bigger players in the game are, are generally more flexible.
 
Emily Myers (19:42):
Okay. So what you're saying is, if you go to some of the larger rental companies, it is possible that they may request a security deposit that is below one month's rent, which is obviously the cap?
 
Adrian Savino (19:56):
Yup.
 
Emily Myers (19:56):
That is interesting.
 
Adrian Savino (19:57):
They've also partnered with companies like The Guarantors, Rhino, Obligo, to offer what they're calling a security deposit replacement. So instead of having to come out out of pocket a month, you would just pay a fee either one-time or more monthly, that would be in place of a security deposit. So from like, from a cashflow perspective, you know, if you, if you needed that money or you didn't want to put all that money in escrow, it it allowed the renter to have that cash on hand.
 
Emily Myers (20:26):
Yes. But that's, it's a slightly false economy, isn't it? Because a security deposit is refundable at the end of your lease and a fee is not refundable. So you are paying that money that, that is not going to come back to you, even if you take good care of the apartment.
 
Adrian Savino (20:44):
Yeah, Exactly. That's the, you're paying a fee instead of instead of coming out of pocket. So it just depends on the preference for the, for the renter.
 
Emily Myers (20:51):
And are you seeing those used quite commonly?
 
Adrian Savino (20:55):
Yeah. Again, with the bigger, the bigger landmarks that are allowing these third-party services it's, it's fairly common and that's trickling down to a smaller mom and pop that have no choice, but to compete. We're starting to see a shift where historically these services were only offered at bigger buildings, I think, to compete, not, you know, the mom and pop landlords were getting, you know, more adversely affected through COVID so to compete with the bigger buildings, they were also offering these services.
 
Emily Myers (21:24):
I guess there are pros and cons then of going for the the larger rental or the mom and pop landlord because the larger rental, you might be able to pay less in security deposit, but the mom and pop perhaps, you know, trying to be as competitive with other perks.
 
Adrian Savino (21:40):
Yeah. You might get more pricing, flexibility, concession flexibility with the mom and pops. I think you might get more flexibility on, you know, monies due at lease signing and things of that nature with the bigger you know, bigger landlords and developers in the city.
 
Emily Myers (21:55):
That's helpful information for anyone who is looking right now. Do you have any other tips then for people, you know, looking right now, is there going to be you know, more advantage looking for perhaps a smaller place because we understand that the three bedrooms are, are extremely competitive where where's the edge?
 
Adrian Savino (22:17):
I think the, you know, we've, we've talked about preparation having documents ready, but I also think if you have the ability to start your search early, you know, most people search 30 days before their move date. If you can start that, you know, 60 to 90 days beforehand, you can be in touch with agents for upcoming inventory. You can be in touch with the leasing professionals at these communities for upcoming inventory and you'll get insights to the market that you might not get normally.
 
Emily Myers (22:42):
Okay. And so what about the next couple of months? What are your predictions?
 
Adrian Savino (22:46):
I think we're going to see upward pricing trends. So if you're, if you're advising your, your listeners to to do anything, I would say, you know, move relatively quickly. I think the pricing is going to continue to, I guess, bridge the gap between COVID and pre-COVID pricing. Concessions—I think that's going to continue to kind of trend in the wrong direction for the renter.
 
New Speaker (23:05):
I mean, I think there's a lot of competition in the larger apartments. Is that not right?
 
Adrian Savino (23:09):
Larger apartments, outdoor space, some of the amenities we talked about before.
 
Emily Myers (23:13):
If you're a student coming to New York city, do you think it's going to be more cost efficient or more cost effective to be in a smaller apartment or to get a larger apartment with roommates? How do you advise your students who come to you?
 
Adrian Savino (23:28):
Yeah, I think just in terms of looking at the overall cost for the apartment, if you have multiple parties paying towards that you're going to have a lower spend per person. So I think trying to find a larger apartment that, you know, if you want her to have, you know, a partition put up or a small wall installed, or you're splitting the living room that would be a more cost effective way to have your first year to two years in the city. Most that's, that's a pretty common trend with, you know, students that go to NYU, you know, Columbia and first, you know, first time renters, first time renters that are coming from the student population.
 
Emily Myers (24:05):
Yes. In fact, we have articles on pressurized walls. There are some laws to do with, with these partitions aren't there? They're not, there are some, some restrictions?
 
New Speaker (24:17):
Yeah. Usually there needs to be, you know, a six to nine inch gap at the top of the at the top of the wall. It can't go to the ceiling. Some landlords are flexible. It's all case by case. Again, I think all this kind of ties into having the conversation, proper conversation with the representative for whoever's handling the, listings. Understanding the dynamics of the listing, the building, the community is important because ultimately the landlord wants to have good tenants. And I think tenants want to have landlords that are gonna, you know, gonna take care of them.
 
Emily Myers (24:48):
Actually. it is worth mentioning. We're touching on some of the sort of legality of, of sort of legal issues in, in apartments, particularly when students are kind of getting roommates, it is worth mentioning. There are dimensions for what constitutes a legal bedroom, aren't there. The room that needs to have two exits, typically a window and a door and be 80 square foot. So eight feet minimum in each direction. So if someone's trying to pass off a walk-in closet as a bedroom, it's time to contact the authorities. I definitely slept in bedrooms without windows in my student days. So do you have advice? I imagine when you are dealing with clients, you know, obviously they've come to a reputable broker, but there are scams out there. How do you advise people when it comes to avoiding some rental scams? I mean, what, what are the big red flags?
 
Adrian Savino (25:46):
Yeah. I mean, in terms of where you start your search, I think is very important. Like anything else that you're purchasing or, or, or going through that process to do, I think, you know, getting advice from, you know, friends that are already in the city, you know, maybe you're friends with, with, you know brokers throughout the city that you might have the ability to call and get advice from. I think using, you know, consumer based platforms like StreetEasy and Localize that, you know, they allow you to really segment your search in so many ways. I think it's a very important tool. They let you save your search criteria. You know, they'll give you notifications when new units are entered, pricing has changed, concessions are changed, new units are added to that general criteria. It's a great tool to, you know, to help navigate. And then once again, once you get your list, you know, once you look through your, your 3D tours and your, your virtual tours and you get down to a healthy list, you want to see in person that's when kind of, you know, get down to brass tacks and reach out to the representative online.
 
Emily Myers (26:48):
Yes. Because of course, scams or scammers operate when it's more competitive. So I feel like we're sort of perhaps entering a stage where those kinds of situations might be on the rise. I mean, obviously crucially kind of know your rights, know that for example, the security deposit is capped at one month's rent. But also that you should never wire money to anyone, you know, who says you need to secure this apartment by wiring money. Are there some other situations that you sort of hear of frequently?
 
Adrian Savino (27:21):
Yeah. I mean, they've, they've capped application fees, so never pay more than $20 for your application fee security deposit should be, you know no more than one month's rent, wiring money, I would be very careful with doing that to secure apartments. You know, you should never be sending money to act as a deposit before the lease signing your deposit should only be your security. And you should only be paying one month rent at signing. So anything that deviates from those, you know, those guidelines, I would be careful.
 
Emily Myers (27:52):
Absolutely. Well, Adrian, thank you very much.
 
Adrian Savino (27:55):
Appreciate the time.
 
Emily Myers (27:56):
That's Adrian Savino, director of leasing and business development at Living New York. I'm Emily Myers. Thank you for downloading the Brick Underground podcast. For more information, head to Brick Underground.com. The podcast is produced by myself and Jenny Falcon. Terry Rogers is our executive producer.