When Devin Someck, a director of Living New York, began receiving unsolicited offers to rent Unit 4B at 204 Montrose in Williamsburg, he and the seller decided to test the market.
They rented it out for more than it had previously: $3,500 a month. The unit attracted several offers on the first day of screenings and ended up signing a lease at $4,050 per month, bringing the owner’s cash yield to almost 9%.
As New York’s housing market cools, brokers say pivots are common among hopeful sellers who choose to pause sales of their homes and instead rent them out to take advantage of the stronger market.
“You put your money to work in a really good way,” Someck said.
Sellers and their brokers had to get more creative as rising interest rates, high inflation and a lack of inventory caused buyers to flee and the market to deflate.
Contract signings were down 30% year-over-year last month for Manhattan co-ops and 29% for Manhattan condos last month, according to data reported by appraisal firm Miller Samuel. for Douglas Elliman. In Brooklyn, contract signings for condos, co-ops and single-family homes were all down.
“The whole market has been so spoiled for so many years,” said David Kazemi of BOND New York, who recently signed a $15,000 lease — rather than sell the unit — in Brooklyn. “It’s just a hard pill to swallow.”
Meanwhile, tenants have been rushing around town looking for anything and everything. Those whose Covid discounts are expiring are looking for something cheaper, joining the wave of graduate students and those returning to the city after fleeing in the wake of the pandemic.
“It’s a pressure cooker, basically,” Someck said.
Ashton Palmer of Corcoran had three units – at 104 East 37th Street, 737 Park Avenue and 40 West 77th Street – all originally for sale, for rent.
“Instead of really letting their ad stay in the market, it’s been easier to get them to try and sign up for the rental because they understand what they can get out of it,” Palmer said.
However, not all sellers wish to become owners.
“The day you decide to rent it, it’s now an investment for you, and it’s part of your overall financial portfolio,” said William Krooss-Tadas of Keller Williams in New York. “This decision has consequences, risks and rewards.”
Krooss-Tadas has Apartment 1I at 187 Pinehurst Ave, which is listed for rent for $4,000 — an unprecedented amount for the building — and listed for sale at $810,000. He saw vendors doing the same in other parts of town.
Janna Raskopf of Douglas Elliman noted that understanding sublease policies for co-ops, maintenance, and legal obligations are all things sellers may not be prepared for if they choose to rent rather than sell.
“It’s tempting, of course, when the rental market is so hot to think it’s just quick cash, but there are things that lie behind being a landlord on top of signing. a lease and hand over the keys for 12 months,” Raskopf said.