New Superstars of N.Y. Real Estate: The Rental Agent
By Tom Acitelli 10/30/07 9:49pm
A successful rental agent in New York does about five deals a month. Most of these agents get 15 percent of an apartment’s annual rent as a commission and they give at least half that to their brokerage. So if an agent does five deals monthly where each apartment’s rent is at least $2,000, then he or she makes $9,000 a month before taxes.
That’s $108,000 annually—not staggeringly high by Gotham standards, but strong given the relative ease with which most agents can close deals in this era of the $2,000 studio and the $5,000 two-bedroom.
“The average commission is just under $4,000 in our office,” Mark David Fromm, president and chief executive of Manhattan brokerage Mark David Company, said last week. “I’d say it’s up 16 percent from two years ago.”
Never have so few earned so much for working so little. It’s not that rental agents are lazy (the successful ones, far from it) or unscrupulous; it’s that they now operate where two slightly symbiotic forces drive their commissions higher.
Rents have gotten really high. A report out last week by brokerage The Real Estate Group New York put the average one-bedroom rent at nearly $3,000 for a nondoorman, nonluxury building. The report, which tracks Manhattan below 100th Street, puts the average rent for a studio at $2,151—again, in a no-frills building without a doorman.
The majority of rents in the majority of neighborhoods are higher than at the start of the year and much higher in many cases than one or two years ago.
Demand remains great, too. The Manhattan vacancy rate, according to brokerage Marcus Millichap, should finish the year below 2 percent. Vacancy rates are similarly low in Brooklyn, and many brownstone neighborhoods like Park Slope and Cobble Hill mimic Manhattan in rents. New York University’s Furman Center for Urban Policy Real Estate placed the Brooklyn apartment vacancy rate at 2.8 percent based on 2005 data.
Picture it: A rental agent sets out on a typical fall afternoon with prospective tenants in tow. The prospects are wide-eyed with fear and loathing of the process they’ve been forced to undertake. They’ve read stories about New York rents and low vacancy rates; heard stories about New York apartment searches gone horribly awry; experienced themselves stories about the perfect apartment that got away. They want the product the agent’s leasing. They need it because the new job starts in a week or the first kid’s on the way. And they’re willing to pay. They have to—the agent literally holds the key.
It’s an odd star turn for a lot of agents. Rental agency has always run a shoulder-shrugging second to sales brokering. That’s the glory shot in real estate, the fast track to wealth and acclaim and your name in the papers alongside A-list clients and developer kings.
Sales brokers usually get 3 percent of an apartment or townhouse’s selling price (and give half of that, generally, to their brokerage). Sell a $1 million apartment, get $15,000. That’s one deal, on a relatively cheap apartment, and it’s more than many successful rental agents would make in a month.
But the number of New York homes sales stays nearly identical annually, especially in Manhattan. Every year, 8,000 to 10,000 homes trade owners in the borough. That means—assuming each deal involves a broker for the buyer and one for the seller—that less than 20,000 brokers earn a commission every year. The number’s actually far less, because many brokers do several deals annually.
And, as sales slow, the competition becomes fiercer yearly, and the possibility of riches for newcomers ever more distant.
Enter rental agency in a time of record rents and high demand. And, it should be noted, in a time when most of New York’s housing remains rental (about three-fourths of Manhattanites are renters), despite the condo-building boom this decade.
Is it easy being a rental superstar, the sort who closes at least five deals a month and pulls in six figures annually? Yes and no.
“I think there’s always going to be a group of people who believe the real estate business is one in which they can make a quick dollar,” said Daniel Baum, COO of The Real Estate Group New York, which handles rentals and sales in Manhattan. “And those people tend to turn around quickly because this business can be exceptionally difficult.”
Rental agency is a volume business. Michael Shvo, the 36-year-old founder and president of Shvo, a top residential marketing firm, once explained to this reporter how he got his start in real estate. He would show as many as 40 apartments daily to clients, all in the hopes that a few would sign leases and he would get his commissions.
Mr. Shvo was doing that nearly 10 years ago. Success may still be a slow slog for rental agents, one full of wide smiles toward anxious clients and long hours at the market’s mercy, but once attained, the pay’s better than ever.