Knowledge for Renters
select your RENTAL AGENT
Your rental agent will be your trusted adviser. The rental market is face paced. Pricing and inventory changes every day so your agent needs to be fast paced too. Working with a rental agent does have a broker fee. A lot of people are out there on their own without a rental agent and find themselves lost in the abyss of the New York City rental market which is unique and different than any other market in the United States. Sometimes getting a ‘no fee’ apartment may actually cost the renter more in the long run. Look at the numbers and think about it before making any decisions one way or the other. Economics 101 says that the highly competitive open market of rentals in New York City usually don’t need incentives like ‘no fee’ to move them off of the market. Sometimes these apartments may not be able to compete in the open market because the landlord doesn’t want to lower the rent. A ‘no fee’ apartment may look more appealing and cost efficient at first, but paying a higher rent for a year, two or three may actually cost you more money in the long run than working with a rental agent, paying a broker fee, and getting into a more desirable apartment, at a lower rental price. It’s something to think about. Get out the pencil and paper and spend a few minutes doing the math. Those few minutes could save you a lot of money and hassle.
WHEN TO BUY OR RENT
Sometimes its obvious if you should buy or rent and sometimes it’s not. Those who aren’t sure about what to do, have a look at this New York Times interactive tool that will help you understand the financial pluses and minuses to buying versus renting with your particular financial goals in mind. Have a look.
budget & financials
Get Financially Qualified - Starting to look at rentals before fully understanding your overall financial picture is a bit like putting the cart before the horse. It’s really critical to fully understand your finances before you start your search. Knowing how much your budget allows for will help you and your real estate agent focus realistically on what you can rent. Understanding your finances will also put you in control of your finances and ensure you don’t end up paying all your income just towards your rent. Having money left over each month for cost of living expenses, as well as retirement savings, fun treats like going to the theater or dining out every now and then, and even vacations, is so critical to your financial, physical, and emotional well being. Look at the big picture and be realistic.
Thankfully there’s an easy equation that helps you quickly evaluate your budget and landlords will often use this as a rule of thumb for initially qualifying a renter.
THE EQUATION: You must earn at least 40 times the monthly rent.
So for example, if the rent is $2000/month, then your annual income should be $80,000. (see chart below)
[math: 2000 x 40 = 80,000]
Landlords occasionally will use 50 times the monthly rent to qualify, but most of the time 40 times the monthly rent is used. This is the landlord’s prerogative on how to qualify and is ultimately up to them to determine the number to qualify.
If you need a guarantor, because you’re income is too low to qualify, then some landlords will allow for another individual to be attached to the transaction as a guarantor. The guarantor must earn at least 80 times the monthly rent or in rare cases 100 times the monthly rent.
So for example, if the rent is $2000/month, then your guarnator’s annual income should be $160,000. (see chart below)
[math: 2000 x 80 = 160,000]
Lastly keep in mind that there are application fees and will vary based on if the apartment is in a rental building, a co-op, or a condo. (see chart below)