Suppose you were to shake me awake one night at 3:00 AM * and shout, “Gid! How do you feel about doing rentals?” Of course with no time to prepare my answer, I’d probably blurt out that I don’t care for them (and perhaps some other colorful words).
“But why then do you do so many, Mr. Real Estate?”, you might next ask, and the answer is, it’s kind of like ol’ Sir Edmund Hillary discussing the reason for climbing Mt. Everest: because they are there. You’re a broker, you have clients, they own properties that need tenants, what are you going to do, farm it out to an assistant?
Nope, it’s one of those “small” jobs you have to do yourself. Because letting a bad tenant into a client’s property is a disaster, they will never forgive you. And why should they? You are an expert, loads of experience, equipped with all the tools needed to check people out before they move in. There’s no excuse for blowing it.
Three things: credit report, employer verification, previous landlord. That’s it, that’s all you need. Even just two of those is usually good enough, but you have to actually do the work. Get that credit report, call the employer, talk to that last landlord! (oh ,and go ahead and google the person, too).
Doesn’t sound all that bad, so why do brokers hate this aspect of real estate? It’s the crappy pay. Pretty much the same amount of work as a sale, for 1/16th the money.
Let’s compare paychecks from a rental deal vs. a sale deal, shall we? This gets ugly…
Rents for $7,000/month, total lease amount = $84,000. Renting broker’s share is 3.75%, so that’s $3,150. You split that with your office and your “split” is 60/40, let’s say. So your big payday is 60% of $3,150 or $1,890, yippee!!
But let’s say God smiles down on you that day and your $7,000/month rental clients decide to buy something instead. They end up spending $2,000,000, how does that work out?
Sells for $2,000,000, selling broker’s share is 2.5%, that’s $50,000. After you split with office, your take is $30,000.
Yep, almost 16 times the pay for selling versus renting, get the picture?
* I promise you will never have the opportunity to do this.
What I mean to say is, how to list a $16.25M property, and it’s tricky. First of all, to get paid, you’ll almost certainly need to be the second listing broker (or maybe the fifth?) because these big properties come with “baggage”, the worst of which is that they attract big price estimates from brokers and the end result is, they sit for a long, l-o-o-o-n-g time.
It’s different with normal properties. Let’s say you have an ordinary, garden-variety $3,000,000 Greenwich starter-home you’d like to sell. You call in a few different brokers and you get a fairly uniform response, with selling-price estimates no more than $100,000 apart. Mr. & Mrs. Homeowner are free to reject the advice and price it stupidly high, but the broker’s likely to argue with them about it.
With the big stuff, all that changes. Brokers compete fiercely for high-profile properties because they look great in advertisements, they possibly bring you other big customers, and, of course, the commission ain’t bad (unless you foolishly allow your share to get bargained down to nothing!). The owner often “suggests” the asking price, based on…nothing, and the brokers say, “Oh yes, let’s give it a try!”
The owners of the big ones fit two categories: they are hugely successful in some particular field, but let you know immediately that they are also experts in real estate. Or they are heirs who usually live out of town but also, amazingly know much more about real estate than you do!
All of the above can cause a $16,000,000 property to be priced at, oh, $32,000,000, let’s say. This sort of pricing never, ever works, so the property sits un-sold for the first year. Wonderful (expensive) advertising is created for the property, broker open houses are held, every once in a while a showing occurs, but, alas, no offers.
At the end of the year, the owners shake their heads sadly and give their broker the bad news: “We’re giving the listing to someone else”.
Now the price of the (still $16M!) house gets slashed to $28M, and, sadly, another year goes by, maybe another broker goes “bye”, too! Eventually, the price comes down, ever so slowly, inch by painful inch, and one day, it starts to look like a gosh-darned bargain and it sells! If you’re the lucky broker still hanging on to this little merry-go-round, you get the payday, hurrah! The other brokers who fell or got pushed off? No payday. It’s a tough business, friends!
Not everyone has this option, of course. If, for instance, you need the proceeds from the sale of one home to finance your next, you cannot go the rental route. On the other hand, builders have used the rental “escape-hatch” for years and years, typically when they’ve over-priced their new mansion and can’t face that reality (or can’t convince their investors to face it).
Even during the extreme slow-down/crash of 2009-2011, Greenwich rental rates hung in there, saving many a builder butt. You say no one wants your $7,000,000 spec house (which is actually worth $5.3M)? No problem, someone will gladly pay you $30,000 per month to rent it! $360,000 per year kinda takes the sting out of holding it, don’t it, Bunky?
Here are two more examples of recent (Riverside) rentals of brand new houses. These rental amounts are amazing…
But back to real estate… What’s it going to take to get you people to accept the backcountry again? Does a half-price sale sound appealing? Because that’s essentially what is going on. No, you won’t be able to walk to the damned train station (you big baby) but in exchange you’ll get sprawling acres of lawn/woods/trees, swimming pools, tennis courts, guest houses, the ability to NOT be able to observe your neighbor’s daily comings and goings (hooray!), and a genuine feeling of living in the country, remember that feeling? It’s nice.
Speaking of Riversville Road bargains, this baby started out way back when at $7,590,000, now down to $4,995,000. 5 acres, beautiful house, lawns, pools, tennis courts, western-facing sunsets, what a package! Click on the address for the full picture.Oops, looks like WordPress has added nuclear fall-out to my homepage again! oh, wait a sec, that’s supposed to be snow, is that it? Charming!
Friends, you know we dwell on the positive here at Bored And Razed, but the more sensitive among you possibly detected signs that Gideon possessed a secret sorrow. That sorrow has now disappeared because luxury sportswear company KJUS * has come to Greenwich.
Greenwich, as you know, is the land of opportunity. If you wake up one day and say, “I want the opportunity to spend $7,000 on a sports coat, you have only to breeze down to 359 Greenwich Avenue, step into Richard’s and say, “Gimmie that Kiton blue cashmere, silk, and linen in a 42-L” and bingo, it’s yours.
But suppose instead you wanted the opportunity to buy a $4,000 ski parka, what then? Well, until last week, here in Greenwich, you were outta luck, Charley. Sure, you could slip over to Outdoor Traders, 55 Arch Street, and pick up a perfectly nice Bogner $1,100 ski coat, but if you think your friends at Vail won’t be sniggering behind your back, you’re fooling yourself. The message can never be “I’m doing well”, it must always be “I’m rolling in it!”
* Cognoscente know that the “K” and the “J” are silent, so it’s pronounced “Oose”, rhymes with “goose”.
For argument’s sake, lets agree that the season known as “Fall” got its name from the fact that leaves fall to the ground around this time of year, shall we? Not too much of a stretch, is it? Good.
But what about all these non-cooperative trees that refuse to play along? Oaks and beeches are the main culprits, but I’ve spotted some other renegades around town. Here it is, Thanksgiving, for heaven’s sake, and loads and loads of leaves are hanging in there, refusing to budge.
“Why, Gid, tell us why”, I hear a few of you plead.
Here then is the answer. It comes from Michael Snyder, of Northern Woodlands Magazine, who admits that, pretty much no one knows the answer. Guesses range from trees holding on to leaves so they can drop ’em in the Spring to self-fertilize (please), retaining leaves to provide “frost protection” for emerging buds (yeah, right), and finally (get this) “to camouflage emerging buds from marauding deer”.
Pure hokum, obviously. Clearly, Snyder is stumped. But perhaps some of you thoughtful readers can chime in on the subject?