The New York City rental market is like no other in the country based not only on its complexity and competitiveness, but also on its sheer volume. There are more than 2 million rental units in the five boroughs, and rentals comprise 63 percent of the city's total housing stock, compared to a nationwide average of 37 percent. Not only that, but the typical vacancy rate hovers around the 3 percent mark, meaning competition is fierce at all times.
With those kinds of numbers, it's no surprise that our rental structure is a bit different. In most housing markets, rental homes are either offered directly from the owner or a management company, and there's rarely a broker involved. Even if the owner does choose to use a broker to secure qualified tenants, most often — save for New York, Boston and Chicago — those fees are paid on the owner side. In our fair city, however, renters bear the burden of either paying a broker fee — typically 12 to 15 percent of the unit's total annual rent — or searching for a no-fee listing.
What is a no-fee apartment? As the term implies, these rentals are offered with no additional costs on top of the usual rent, security deposit and application fee. These no-fee apartments are most often listed directly by building or unit owners or by large management companies that may own and/or operate multiple buildings around the city. While searching for a no-fee home might seem like a no-brainer, again, the complexity of the New York City market can make it a more difficult process than it appears. No-fee homes can be in high-demand and snatched up quickly. They often come at a higher monthly price tag than a home shown by a fee-based broker. Also, the no-fee world is rife with scam artists ready to lure you in with too-good-to-be-true offers.
Frankly, there can be pros and cons in both broker and no-fee offerings, and ultimately, it's up to you to decide which route makes sense for your timeline and finances. Below, we break down a few of the ups and downs of fee and no-fee renting in New York City.
Save Time & Effort: In theory, using a broker can make the process of finding a rental home far easier than tackling the no-fee world alone. During your search, you may work with more than one broker, but each one will serve as a single point of contact for showing the unit, vetting your application and processing the lease paperwork — a process that might have you bouncing between three or four contacts without a broker. Also, brokers can lend invaluable expertise about neighborhoods, building amenities and market conditions, and many have access to listings before they hit the open market.
You Gain an Advocate: Adding a reputable broker to your rental home search adds an extra layer of protection against scams and bait-and-switch tactics. That's not to say there aren't unscrupulous, high-pressure brokers out there. But, for the most part, licensed brokers know the apartments and buildings they're showing, and they're staking their reputation (and future business) on doing their jobs well. Look for brokers associated with trustworthy firms, search online for solid reviews, and double-check licensing status on the New York State website.
Concierge Service: For those who want a practically effortless rental experience, there is an elite group of concierge-level rental brokers who will do all of the heavy lifting for you. These high-touch brokers will organize your paperwork, vet appropriate properties, send you video walk-throughs, submit your application, and even handle movers, furniture and utilities, so that all you have to do is sign on the dotted line. Obviously, this turnkey level of service comes at an even more substantial cost than the typical 15 percent fee.
Cost: Obviously, the lump sum upfront cost is the major downside to using a broker, but breaking that fee down over your expected tenure might make it a bit more palatable. Say you're renting a $3,200 apartment where you plan to stay for four years (which is the average New York renter lease term). Your 15 percent broker fee of $5,760 would equate to $120 a month. Is that enough to scare you away from an apartment you love?
Due at Lease Signing: In addition to their hefty amount, broker's fees are due at lease signing, meaning their timing couldn't be worse. You're probably also dealing with first month's rent, a deposit in the amount of one month's rent, plus costs for movers, utility startup and so on. Those planning to move into a $3,200 rental should expect to shell out between $12,160 and $15,360 at lease signing.
Nonrefundable: Once your lease is signed and countersigned, the broker's role has concluded, and they are due their agreed-upon fee. If you quickly move out, or choose to never move in, due to problems with the apartment or building, you should be able to recoup rent and security deposit. However, the broker's fee is nonrefundable.
Save Money: The appeal in a no-fee apartment is obviously the significant upfront cost savings.
Flexibility: Without the burden of a broker's fee, you'll also have the flexibility and peace of mind to move more often if you need to. This is ideal for those who relocate often for work or who are expecting to expand their families.
You Are Your Own Advocate: By working directly with the landlord or management company, you have face-to-face access to the decision-makers rather than trusting a broker to advocate on your behalf.
Managed Building Rules & Costs: No-fee apartments are often found in large managed complexes which are typically more expensive and frequently come with a long list of tenant regulations. Renting with larger dogs, for example, can be challenging in these type of buildings. Additionally, these larger complexes typically offer more amenities and services that drive up the monthly rent, making the cost of a similar home in a broker-fee building seem like a bargain.
Scam Listings: Because no-fee listings offer exceptional allure in our pricey market, they are also an ideal form of bait for scam artists. Often, no-fee listings are used to lure renters into unknowingly seeing fee-based apartments, or worse, they serve as an enticement to cheat unsuspecting renters out of cash deposits. Do your research, read everything, and never hand over cash (or checks) without thoroughly vetting each step of the process and the people involved. Too good to be true almost always is.
Limited Inventory: No-fee listings comprise far less than half of the entire New York City rental market. By limiting your search to no-fee listings only, you're knocking out a substantial number of broker-represented apartments that just might be less expensive in the long run.
The moral of the story is: Do your research. Thoroughly assess your apartment-hunting finances and deadlines. Make sure you're dealing with reputable people and properties, and keep an open mind when comparing the actual cost of broker fee versus no-fee homes.