Today's Renter, Tomorrow's Real Estate Treasure

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Diary of a real estate flipper Friday, April 28, 2006 By Alison Rogers Inman News

I have no clients. OK, that's not true, I have one listing to sell, but I have no other clients. There are a number of ways to attack this problem, and I'm trying them all. What I spend some of my time doing is attempting a classic Manhattan strategy: to start with renters. Renters, the theory goes, grow up to be buyers. The best renters, of course, are budding doctors and lawyers; find a law student a rental today, and in three years, the theory goes, you harvest a million-dollar condo sale. The only problem with this theory is that it doesn't work. Oh sure, a happy renter may turn into a happy buyer, down the road, but it's close to impossible, in this market, to create a happy renter. It isn't for lack of product: three of every four households in Manhattan rent. The vacancy rate, however, is a swooningly low 4 percent. And the co-broking system, which works pretty well when you're selling and the commission pie is big, suddenly founders when there's only a tartlet to share. First, let's look in the real estate database many NYC brokers use. I see 100 apartments priced under $2,000 a month in the downtown area. If I need to find a client a starter apartment, a 1-in-100 shot ought to be enough. But unlike sales listings, rental listings come without floorplans and usually without photos. The database is a furniture store where everything is shrouded; even in a world of cell phone cameras, I can't tell what the hell the apartments are going to look like. Some of the listings do come with photos of the exteriors of their buildings, but I think that's sort of like telling me I'll like the chicken dinner by showing me the feathers. I bumble through the listings, discarding the old (Rosalind Gartner, has that unit really been on the market for 147 weeks?) and the too-obviously small (if they say it's 300 square feet, what is it really?) Then I pick a handful that sound nice and start making my phone calls. "Hi, I'm an agent calling for a client" is not what these people want to hear. Many of them tell me flat out they won't co-broke, figuring that I have better things to do than to tattle on them individually to the real estate board. A search of Craigslist is no better; I'd say at least half of the value-priced apartments, if they ever existed in the first place, disappear when brokers hear I'm a pro. One possibility is to send my poor little client directly to a rental agency, where the wolves will feast on her themselves. This may get her access to apartments she couldn't see without me, but it may not: For the client, it's the luck of the draw, and it does nothing for client relations for me. The other option is to show the client co-brokered apartments, but then the fee goes up. Most listing brokers will charge a renter 12 percent of a year's rent: at $2,000, that's $2,880, which is a pretty significant chunk of change. To bring me in, they'll increase the fee to 15 percent to make room for the co-broke. Trying desperately to justify my value, I at least go the personal-shopper route to weed out the dreck. And there is dreck: a "loft" turns out to be a studio, 17 feet square, with the kitchen in a corner (they could have written that in the listing, but who would come?) and a "two-bedroom" turns out to be a Habitrail with slightly higher ceilings and worse closets. My new cell phone is a godsend here, because I can at least aim the camera at a living room and send an image to a client in real time. But even if I find something decent, I have to go back to my client, who remember I am trying to cultivate as a source of future income, and explain that I have just found her a great apartment that she probably could have pulled off of Craigslist, but because of my expertise, and the day I saved her from looking at junk, she gets to pay me an additional $720. This is a nice person with $100,000 worth of loans on her back, and instead of debt-servicing them for a month or buying a big new TV, she gets to pay me $100 an hour for saving her the trouble of looking at six lousy apartments. Even car salesmen, as maligned as they are, do not always make the consumer's first point of contact with their industry the most expensive and worst experience the consumer is going to have. Only real estate agents do that. No wonder these people think we're schmucks.