Thursday, April 20, 2006

The Hard Facts...

Well friends, things are just humming along as we are getting into the spring and summer seasons. This is the high season for both sales and rentals alike. Before I continue my series about new developments, let me warn you of a few hard facts:

This year's rental market is going to be the tightest in a long time. The New York economy has grown for three years straight, more people are moving to Manhattan than leaving. Land prices have made it nigh impossible for a developer to build a rental project that makes financial sense. As a result, very little new rental housing has entered the market.

Now I understand there are people out there who are saying "of course you would say that, you are a rental agent." Friends, I am telling the truth. People are paying the prices, and in the law of supply and demand, that means the rents are going to keep going up.

A lot of people are seeing that indeed, prices have already gone up in the past year. (In fact, this year rents will have surpassed pre-2001 levels, when they were at their height). What are they doing? They are staying put, renewing their leases and keeping their rent increases as small as possible. What does that mean? The vacancy rate is currently .89% of available units.

Friends, this means for every 1000 apartments, ONLY 10 WILL BE VACANT THIS YEAR!

Let's keep going here. The low supply means there will DEFINITELY be multiple applications for each vacant apartment out there. It also means that in the high months of June and July, you can expect landlords to be asking - and getting - premiums of $100 to $200 per month.

How can you help yourself?

1) Don't mess around - get your paperwork together. All Manhattan landlords require at least two of the following documents:

  • bank or stock statement (where you stash the cash)
  • W-2s from previous year
  • First 2 pages of Form 1040 from tax return
  • Letter from employer verifying employment, tenure, and income
  • Letter from accountant verifying income if self-employed
  • Previous landlord reference

Do yourself a favor: have all this READY TO GO. Carry it around with you. Carry a minimum $300 deposit in cash as well - it is the only way to hold the apartment.

2) Get your guarantor in gear! Here are the Hard Facts for Guarantors:

  • They will have to provide the same documentation as applicants. Landlords WILL NOT take your word for it.
  • Get their documents BEFORE you start your search. I never understand parents who agree to guarantee, but won't equip their kids with the tools. Friends, if you don't trust your kid, GET THEM OUT OF NEW YORK.
  • Be prepared for sticker shock - you no longer can find a decent 2-bedroom near NYU for under $2400, and even that is pushing it. If your kids are looking for a share for $1800, they are getting a one-bedroom and converting the living room - make sure you know it and so do they.

3) If possible, get an apartment before June 1.

By this I mean start your lease by May 20th. Because on June 1, prices are going up. You may think that's a joke, but I see apartments that are sitting on the market for two weeks get MARKED UP $75 come June 1. Why? Because the landlords can do it and someone will rent it.

It may sound counterintuitive, but if you can get an apartment by May 15, you will save yourself $50-$100 per month. That will add up, especially if you are planning to stay in the apartment for more than 12 months.

4) Brooklyn is not the boonies you thought it was.

A friend of mine who currently resides in Manhattan just called me. He is trying to get his own place and has a budget of $1500. In Manhattan that won't get you much more than a closet these days (and a closet on the fifth floor at that), so he wants to try his luck in Brooklyn. Trouble is, I don't know if he's going to like what he sees.

Here are the hard facts about Brooklyn:

  • Brooklyn is just as expensive in Manhattan. Diehard Manhattanites seem to think that just because they voluntarily exiling themselves off the island, they are automatically knocking their rent in half. I have seen people who had $2000 budgets in Manhattan come across the Brooklyn Bridge and cut their budgets in half. Newsflash guys: there are 5 million people in Brooklyn, and most of them already know what you just found out: Brooklyn is a great alternative to Manhattan.

    The first choice neighborhoods are always the same: Brooklyn Heights, Cobble Hill, Park Slope. If your budget is $1200, you are sleeping in a studio on the fifth floor - end of story. $1500 is the minimum for a studio in Brooklyn Heights.
  • Prospect Heights is just as expensive as Park Slope! I get so many requests for Prospect Heights, "but only the nice part". I assume that people are referring to the four blocks closest to Grand Army Plaza, which are filled with lovely brownstones and are walking distance to Park Slope retail. Sorry guys, no discounts here. To save a bundle, the best bargains are found east of Washington Ave, where some lovely conversions and new construction have gone up, all within six blocks of the Brooklyn Museum. The new Prospect Heights condos on Pacific Street are only going to drive this trend forward - and even moreso when Atlantic Yards is finally built.
  • Windsor Terrace does not end at Prospect Park West. In fact, that's where it BEGINS. Windsor Terrace is the strip of land bounded to the west by Greenwood Cemetary and to the east by Prospect Park. That's right, y'all, when you hit the Pavillion movie theater you've only gone halfway down the park!

    But wait, this will really blow your mind: early 20th century documents peg the bottom of Windsor Terrace not at Parkside Ave, but at Caton Ave. Robert Moses slivered off the last three blocks in the 1940s by building Ft. Hamilton Parkway, which starts as an overpass crossing Ocean Parkway just two blocks west. But those last three blocks are still part of Windsor Terrace, and they're really nice, not to mention nicely priced. Apartment rents are $50-$150 less than apartments north of the overpass. Co-op prices are some $50,000 less. However, "East Windsor Terrace", as the locals call it, is part of the same community board district as the rest of Windsor Terrace. Kensington, the neighborhood directly to the south, is part of a different community board.

    It really blows my mind when people are willing to settle along the Prospect Expressway in South Slope/Greenwood Heights, subjecting themselves to the horrible R train. But they turn up their noses at the idea of living along Ocean Parkway, which was designed by Calvert Vaux, the same guy who designed Prospect Park. Why? It's no further south than Gowanus. They come kicking and screaming down, only to fall in love. And I would too: no more crossing the freeway to see green.

    So get it right, and don't turn up your nose at the deals available near the bottom of the park.

Ok friends, that's it for today. I have a lot to say so I will be hopefully posting every day for a while - stay tuned!

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