OK, so this is a quick piece on a tactic you can use if you’re a rental agent, just getting your feet wet in real estate and perhaps frustrated with not having great apartments, not being able to close, or something similar.
So, our head of events moonlights as a real estate agent, completely crushing it on rentals in Brooklyn. As a wild idea, I thought of something that could yield tremendous benefits.
(Sidebar: I’m not a broker, so who knows… Maybe this is super common? I just haven’t seen or heard anyone do it.)
Of course, the fastest way to get into real estate is to get a license. Most start with rentals (probably the most replaceable area of the industry), simply because there’s little protecting the agents and there’s nothing you can’t do yourself. Yet, for the hustlers, it’s an awesome way to get started in the biz.
So, we were having a conversation about how to get listings, what would make me want to give an apartment to a broker, and so on.
“Hey,” I said. “I have an idea.”
“What’s that?” she asked.
She had recently helped me secure an apartment at a new building called American Copper Buildings, a real pain in the butt that I just couldn’t be bothered with.
“I know how you can get listings that no one else has access to but you.”
“Check this out,” I said. “Condo buildings have the best amenities—they’re condos. After two years, I bet you there are some who are tired of the bachelor lifestyle, have a girlfriend, and are stuck there with a 30-year mortgage.”
My logic being that after a few years of living in that building in the city, someone would be up for moving should the opportunity to leave come along. Prices on apartments are usually set on a per-square-foot basis (my apartment rents for $6 a foot), set to fetch a valuation that justifies the insane N.Y.C. cost-per-foot numbers.
Why Rents Are High (It’s All About the Benjamins…)
Here’s an example in our underwriting on another development, so you can see what I mean. Notice the “Market Rent PSF” and then the subsequent valuation on the right side.
For that reason, even with concessions and discounts, you’re not really gonna get much of a deal in a luxury building. HOWEVER, for a homeowner who may not want to sell but is interested in moving elsewhere, the calculation is TOTALLY different.
Then it’s merely a matter of breaking even, plus a few bucks. Now that calculation can work to your advantage. An apartment with similar amenities could rent for $5,000 a month. Someone’s payments on that property could be $3,000.
Just for the sake of argument, here’s an example of a luxury condo. Take a look at the mortgage payment versus the rental potential. Again, this is for illustrative purposes only. Yes, I know Zestimates aren’t 100 percent accurate, and yes, I know it could fetch more. Just stay with me here.
Peep the estimated mortgage payment. And peep the rent.
OK, so our offices are in the Financial District in Lower Manhattan.
“Just go in any of the condo buildings in the area,” I told her. “Throw up a note that you are interested in renting any of the apartments there.”
I was curious to see if the strategy would work.
So, What Happened?
Sure enough, in one building alone, she got 13 condo owners hitting her up about wanting to rent—and at prices that weren’t calculated based on meeting PSF thresholds, preferred equity, DSCR, and things of that nature.
It literally just happened, so the jury’s still out on the full empirical scope. That said, there’s enough evidence that this could work.
So, just wanted to pass it along. Happy dealmaking.
Let’s talk below!