New arrivals in New York City are quickly overcome by how complicated the housing market is. There are many twists and turns to it. Chief among these is the difference between fee and no-fee apartments. Any quick search on a website with rental listings will turn up apartments for rent listed as “No-Fee.” Others will make no mention of a fee at all. These are the two types of rentals available in NYC, ones with a one-month or 15% of the annual rent broker’s fee attached, and No-Fee apartments.
If you want to rent an apartment in New York City, you’ll need to decide between the two. Just don’t be too quick to assume the no-fee choice is the best one. As you’ll soon see, there are some downsides to it.
What is a No-Fee Apartment?What is a No-Fee Apartment?
To temp renters, many rental sites are now advertising “no-fee” apartments. So does this mean there’s no money in it for the broker? Not always. It’s just a case of who pays it. Most rental apartments advertised as “no-fee” are represented by a broker unless listed by the in-house marketing team in a rental building. They’re not working for free. The landlord merely has offered to pay the broker’s fee out of their pocket before you think how great that sounds, worth noting that you will bear the cost of this in the form of higher rent.
The only reason a landlord might do this is that they’re having trouble finding a tenant. They’re losing money every month; the apartment sits empty. When you consider that the average cost of a Manhattan apartment is $4,041, that can be a significant loss if it sits empty for months.
By agreeing to pay the broker’s fee, they can fill the unit much faster. However, in high-demand markets with low inventory, landlords will usually have no trouble finding another tenant quickly. That tends to put highly coveted neighborhoods in Manhattan and Brooklyn out of the no-fee game.
What is a Broker’s Fee?What is a Broker’s Fee?
In the real estate rental world, a “fee” is the cash amount you pay to the broker that helped you find an apartment for rent. Brokers make their living, and what motivates them to find you an apartment once you’ve hired them immediately. In NYC, the broker’s fee can be up to 15% of the full-year lease. It might seem like an easy gig for the broker. All they’re doing is collecting a nice fee for finding a rental apartment you could have located on your own. Well, not exactly.
A real estate agent can devote themselves full-time to the task of finding a rental apartment for you. They’ll have access to exclusive listings, landlord relationships, have contacts to apartment rentals, condos, and co-ops that haven’t been listed yet, and be able to do all the legwork and hard negotiating. If you don’t have time to search independently, they make for the most natural choice.
Are Luxury No Fee Apartments a Good Deal?Are Luxury No Fee Apartments a Good Deal?
Whether they’re moving to New York for the first time or moving from an apartment somewhere else in the city, no-fee apartments often catch the attention of renters looking for a new place. While it’s easy to understand why this type of apartment initially seems attractive, it’s essential to know why they’re not necessarily the best deal. Since we want you to be able to get the absolute best apartment for your budget, we’ve put together the following information about fee New York City apartments for rent. Also, find several other questions that renters often have about this process.
Why are NYC Apartments for Rent so Expensive?Why are NYC Apartments for Rent so Expensive?
Deciding to move to New York City can be the start of an inspiring experience. While NYC has a lot to offer to the people who make it their home, it’s essential to understand the realities of living in the most populated city in America.
For many people, the decision to move to NYC comes as a result of a job offer. One reason that taking a job in this city can seem like such a great opportunity is that salaries are often higher than in other US parts.
Although that may initially make you feel like you’re going to have a lot of extra money in your bank account, your outlook will likely change once you start digging into the cost of New York City Apartments for rent.
Reasons Why Rentals Are So ExpensiveReasons Why Rentals Are So Expensive
When you start seeing the high prices for apartments considered small in other parts of the country, one of the first thoughts that may come to mind is why exactly NYC apartments are so expensive? As with most questions related to financial matters, there’s not just one factor at play. Instead, the high prices of New York City apartments for rent are the result of several factors. Those factors include:
Over nine million people live in NYC. Since everyone needs a place to live, there’s not a surplus of available apartments. Add to that the fact that zoning rules prohibit much of the city from becoming denser, and it’s easy to see why the prices of the limited supply of apartments get driven up.
The Impact of Rent ControlThe Impact of Rent Control
When you hear about an extremely cheap apartment in New York City, chances are it’s either rent-controlled or a scam. Because people in rent-controlled apartments often stay there until they pass away, the price of apartments that are available for rent gets driven much higher than the median rent across all of New York. While the impact of rent-regulated New York apartments isn’t as big of a factor, they still factor into this equation.
High Property TaxesHigh Property Taxes
Other than Detroit, where property values have plummeted, New York has the highest property taxes in all of the US. While renters don’t directly pay taxes on where they live, this high tax rate does get passed to them in the form of higher rents.
Favorable Tenant LawsFavorable Tenant Laws
Because New York’s laws make it very difficult to evict tenants, landlords are often very strict about credit requirements. It’s also common for landlords to charge the state’s legal maximum of a full month’s rent as a deposit.
Despite New York’s high rents, apartments that hit the market generally get snapped up very fast. Since the city has such a competitive rental market, even renters with a healthy budget can feel overwhelmed. If you’re currently in this position, find out how Elika renter’s representation can help you start your new life in NYC in a great apartment.
The Reality of No Fee Luxury ApartmentsThe Reality of No Fee Luxury Apartments
Although there are a few exceptions, no-fee apartments are generally more of a marketing tactic than a reality. It’s common for apartments advertised as no-fee apartments to be represented by a broker. In this type of situation, the broker isn’t working for free. Instead, the building’s owner is paying their fee. While that may sound like a good thing, tenants often end up bearing the cost in the form of higher rent payments.
When comparing fee and no-fee New York City apartments within the same neighborhood, you will often find that no-fee properties are more expensive than Condos with a broker’s fee. More often than not, the lines between a broker fee and no fee are not as far apart, and at times there is no difference.
Since there are situations where a no-fee apartment may not turn out to be the right fit for what you’re looking for, you shouldn’t automatically cross all of them off your list. At the same time, you shouldn’t limit your search to these types of apartments. Instead, it would help if you worked with a reputable tenant representative who will do all this leg work for you and help you get into the best possible apartment for rent.
Paperwork and GuarantorsPaperwork and Guarantors
If this will be your first time renting an apartment in New York, you’ll likely be surprised by how much paperwork is required. While credit checks are a standard part of renting in any part of the country, most landlords will request quite a bit of additional information. Required paperwork can include a letter of employment, pay stubs, tax return, landlord reference, and bank statements. Ensuring you get everything together is another example of how tenant representation can help make your life much more comfortable.
The last question people have is whether or not they’ll need a guarantor. It all depends on someone’s credit score, job, and any other relevant information. Just keep in mind that while earning 40-50 times rent is standard for a tenant, the guarantor will likely need to make 80-100 times that amount.
Perhaps Getting a Rental Agent is a Good IdeaPerhaps Getting a Rental Agent is a Good Idea
If all this information has your head spinning, the good news is you’re far from being the first person to feel that way. And the even better story is if you wish there were a professional who could guide you through this entire process; that’s precise, what you can get through tenant representation.
Now that we’ve cleared up the issue of no-fee New York City apartments for rent, the most common question renters have is how much they can expect to pay a broker’s fee. For a standard lease of six months or longer, 15% of the first annual rent is what you can expect.
Cons of Choosing a Luxury No-Fee Apartment for RentCons of Choosing a Luxury No-Fee Apartment for Rent
Getting a rental apartment with no broker’s fee attached is a great deal. That’s the clear advantage of a no-fee apartment. But as with everything, there will be a catch. There are usually good reasons why a broker is willing to pay the broker’s fee. And contacting the landlord directly; presents a few difficulties and can lead to some disadvantages.
The rent may be higher.The rent may be higher.
No-fee rental apartments typically have higher rents than properties with fees. The landlord does this to cover the cost of the broker’s fee or direct marketing expenses.
It might be in bad shape.It might be in bad shape.
No-fee rental apartments are often in poor condition. There will likely be some wear and tear from previous tenants. Having no fee attached is how the landlord hopes to attract tenants despite the poor health. Exceptions to this are Related and Glenwood buildings though still not as good as new condos.
You won’t have access to the best apartments.You won’t have access to the best apartments.
In NYC, the best apartments are listed by brokers because they are in Condo and co-op buildings. Unless you’ve got a credit score of over 700, have at least two years of tax returns, and little to no debt, you’re better off going with a broker. They’ll be able to negotiate better on your behalf.
Do all the legwork yourself.Do all the legwork yourself.
Without a broker to do it for you, you’ll have to spend time going out to each apartment you find and inspect it yourself. Most people in New York don’t have time for this. Especially when you’re a grad student who hasn’t yet arrived in the city, you’ll also need to negotiate for the lease and may end up with less than appealing terms. A broker can devote themselves full-time to the search and know how to negotiate to get you the most favorable lease.
Final ThoughtsFinal Thoughts
Going with the no-fee option could end up saving you some money, but it could also mean spending more. It’s certainly a doable option; there are plenty of websites available to help you find an apartment on your own. Craigslist would be ill-advised as there are scams to watch out for. Although far from perfect, the sites mentioned below are the best options. Just know that you’ll need to do all the hard work yourself, and you could end up with a less than a stellar apartment. Also, pro-tip, avoid like the plague any listings that don’t include photos.
You’ll find a full list below of no-fee apartment websites. Visit NYBits.com for a list of management companies. Contact the management companies directly to see what no-fee apartments they have. You can always do some searching on your own, then contact a rental agent to see what they can offer you. Chances are they’ll find you a better apartment with a lower rent. Remember, as with everything else, and you get what you pay for in NYC real estate.