How does the NYC rental market work?

Question

Hi guys! So I recently obtained my NY Sales Person License and am in the process of looking for a broker to sponsor my license. I know that it is customary for a new sales person to start their career of with rentals. I am also aware that the buying party usually pays for the commission on a NYC lease transaction. So my question is as an agent focusing on rentals what will I be doing? Do you get an exclusive right to list units in a building? Are the different agents for the lessor and lessie? For example if I have a client that has asked me to find them an apartment, where will I look for the apartment? Is there a REBNY mls service for rentals?

Matt Payne · Answer

Right on @Darren Sager

The rental market is complex. Here are the basics:

There are 3 types of listings:

Open listings - typically from larger management companies. These listings are open to every agent in the city and can be very competitive. Your broker can get you access via a set of keys or you may have to set up an appointment with a leasing agent. These listings are considered CYOF (collect your own fee) typically. Examples: AIMCO, Rose Rentals, The Brodsky Organization

Exclusive listings - These are where the landlord signs a listing agreement with one brokerage and/or agent. The agent has the exclusive right to list and show the apartments for a specified period of time. They also set the fee for the tenants typically. If the listing agent is a REBNY member they are required to share the listing as a cobroke (more on that later) with other agents.

Pocket listings - These are sort of hybrid listings. Think of these as open listings that only a few people know about. They typically aren't well advertised (to brokers and agents) and normally only a few agents will have access to them. These types of listings can be ethically troubling though if you're a REBNY member. If you are refusing to sign an exclusive simply because you don't want to cobroke (and split your commission) then that could be an infraction of the rules set by REBNY.

REBNY (Real Estate Board of NY) is basically an ethics board that helps to level the playing field for brokers and agents in NYC. Without a governing body of some type, the competition can get too fierce and the RE sales and rentals game becomes cut throat. REBNY makes sure that people are playing nice with each other and the everyone has a fair shake.

REBNY offers the RLS (syndicated through OLR, RealtyMX, Nestio, and others) that acts as a MLS for member brokerages. Most rental listings on the RLS are exclusive listings that would be cobrokes (commission is set by the listing broker and split between listing broker and tenant's broker). Some open listings are also posted on the RLS, with varying accuracy.

Commissions: Legally speaking, there is no standard commission in any aspect of real estate. I have had deals happen for less than one month's rent all the way up to 15% and anywhere in between, depending on terms and negotiating. I know people that charge higher than 15% and are able to convince people to pay it. It is all about what the market will bear.

OPs: Sometimes the landlord will pay all or part of the commission. These apartments are said to have OPs (owner paid). Numbers here vary as well, but I've seen a half month to a full month, plus other incentives offered on top sometimes. These typically come in slower times of year, or in an instance where the owner wants to get a higher number on the rent roll, because renters love apartments with OPs. These are the apartments that are advertised as "No Fee" typically.

When an OP apartment is cobroked, typically the listing becomes a CYOF. So the listing agent takes the OP and the tenant's agent can set there own price for their commission.

Most of your time will be spent looking for clients. Your brokerage will typically have a pretty good database of open listing and also likely the RLS. You may also have access to exclusives out the gate, or you may have to hustle and find your own if you want them.

The thing to remember with rentals in NYC is that it is a customer service business. People are spending a crazy amount of money and stress and energy on finding and renting a place here. If you can make that job easier and less stressful, then you'll be in business.

Let me know if you have any other questions!

-Matt

Darren Sager · Answer

In most cases in Manhattan and better areas of Brooklyn the incoming tenant pays the fee (usually 15% of gross rent however luxury units usually one month's rent).  There's no organized MLS so when you list with a broker most will only do an exclusive right to sell (not allowing you to list with another or have an open listing).  After that it goes into their system of sharing.  Not all companies/brokers in NYC share listings with each other.  The major players usually will and then split the total commission with the tenant's broker.

Matt Payne · Answer

@Angad G. In my experience, landlords will rent to anyone that is financially qualified (In fact, it's illegal in NY to discriminate based on age or status as a student). You shouldn't have a problem finding places for people to rent, assuming that they meet the following:

For tenants:

-40x monthly rent in annual income (combined)

-Credit above 700

If a tenant doesn't meet both of these requirements then they will probably need a guarantor. Those requirements:

For guarantors:

-80x monthly rent in annual income (some landlords accept multiple guarantors, some do not)

-Again, credit above 700

Of course there is some wiggle and negotiating room. If there is significant cash available or extra security is paid up front then a deal can get more creative. For students with little or no income though, guarantors are the most popular route I've encountered.

I would also not simply rely on your network at school to get listings. The NYC market is excruciatingly competitive for agents and you have to be the first and best to really make it. It's about customer service, hustle, and consistency with your marketing. Otherwise, eventually, all of your friends will have apartments, and then you'll be out of leads!

-Matt

Angad G. · Answer

Thank you so much for all the help guys! @Matt Payne @Darren Sager @Laura Williams

As I am currently a student at NYU I will be pretty much focusing on finding rentals for other NYU students that want move of campus. Finding clients will not be a problem, but I am worried about finding listings for apartments, especially being that most land lords dont like to rent to college age kids. If I sign up with an established brokerage, should there be enough open listings that I will be able to find places?

Joe Fairless · Answer

This might be a good question for @Darren Sager

How does the NYC rental market work?

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