With new rental buildings hitting the market and the press, renters will have even more inventory from which to choose in the coming spring and summer months. Buildings like 808 Columbus and Chelsea’s Ohm offer condo-quality finishes for rental projects are known for offering fantastic concessions in their opening months, as they rush to increase their occupancy as quickly as possible and get cash flowing. Often times, concessions include several months of free rent plus payment of the broker fee, making their apartments the most competitive in the market in terms of price for quality. What can be better than that?
You must remember that concessions are just that … incentives. Translated, this means that when your lease renews, those free months’ worth of rent that made the apartment affordable one year can add up to a net effective rent increase of 15% or more. Particularly if the landlord is willing to amortize the free months over the course of the year to lower your net effective rent, you will be feeling less of a pinch on your wallet for a full 12 months before the reality of the actual rental price kicks in once the concession buzz wears off.
As obvious as this may sound, make sure you can actually afford to live in the apartment at the actual rental price, unless you’re willing to move when the lease renewal rolls around. (Don’t forget to incorporate associated moving costs in your overall calculations.) Further, if you are lucky enough to have those juicy concessions amortized and are paying the net effective rent price, try to negotiate the rent increase to be based off of this amount rather than the official rent.
{ 3 comments… read them below or add one }
I call B.S. on this. The fact is that landlords have every incentive in the world to keep good existing tenants, even if it means lowering the rent or throwing in more free rent when the lease is up for renewal. Because chances are the landlord will have to offer these concessions to get the place rented by someone else in addition to paying for painting and realtor/listing fees. Landlords don’t set the rent, the market does!
Actually, I couldn’t agree with you more – the market DOES set the rent … so I’m trying to figure out which part you believe is BS – that you should try to make sure you can afford to live in the place even without concessions?
It only seems prudent, really. I’m not saying the prices automatically will go up (because the market dictates that, as you say) rather to understand the possiblity of the market shifting over the course of 1-2 years and making sure you account for that and won’t be forced to move. By all means, take advantage of the concessions — just cover your tush.
http://ny.curbed.com/archives/2010/03/22/what_renters_market_truffles_tribeca_breaks_the_piggy_bank.php#more
Here’s a great find by Curbed highlighting precisely this kind of situation. The market testing may or may not last, but going in with your eyes wide open can only empower you.