When a garden apartment> became available in Jackson La Land s Manhattan brownstone last year, he was anxious to grab it just not at the $3,000 a month rent his landlord was asking. Using the soft housing market to his advantage, La Land, 31, made an offer: He would pay a year s worth of rent in advance if the landlord cut the monthly payment to $2,500. After some back and forth negotiating, the landlord finally agreed, saving La Land $6,000 in rent for the year. The downside? Now that the market is on the upswing, once my lease is up I ll have to pay more to keep the apartment, La Land says.
It indeed, has been renter s market but perhaps not for much longer. In 2009, rent reductions averaged 5.8% nationwide, according to real estate investment services firm Marcus & Millichap. In some markets, reductions even hit double-digits. Now, with the economy stabilizing, the rent declines are likely to end for most markets, says Jonathan Miller, president of Miller Samuel, a residential real estate appraisal firm in New York. You re probably looking at stabilizing rents for the short term, he says.
There are a number of factors at work, here. First, the apartment sector didn t experience the kind of overbuilding the housing sector did during the boom, so there s less overhang of supply to absorb. The demographics also favor the rental market. The number of 20- to 34-year-olds in the U.S. an age group that predominantly rents is expected to increase by five million over the next 10 years, according to Census forecasts.
The people who ve been hit by the recession and had to double up with roommates or move in with family will soon be ready to rent. When the labor market improves, that pent-up demand gets released fairly quickly, says Hessam Nadji, managing director for research at Marcus & Millichap. The firm expects the first quarter to show a strengthening of rent demand and apartment vacancies heading back down to about 6% between 2011 and 2013; they re now at 8.8%.
Even with new foreclosures flooding the market, some metro areas may even see an apartment shortage. Cities with the lowest expected vacancy rates this year including New York, New Haven, Conn., Minneapolis and San Diego will see a shortage of rental units in a few years, says Nadji.
With rents stabilizing, can renters still snag bargains and renegotiate their leases?
Whether it s free parking or new carpet or a lower security deposit, deal-making is certainly still going on. Tracey Benson, a president of the National Association of Independent Landlords, a professional group with over 100,000 member landlords, says one of her members in Los Angeles recently landed a renter by giving them a $1,000 reduction in rent and three months free.
Here are some tips on how to get the best deal on rent.
* Collect information specific to your area to find out how many units are vacant and what apartments similar to yours are going for.
* Figure out what your must-haves vs. nice-to-haves are and share that list with prospective landlords so that they can help you to find the right apartment at the right price, says Peggy Abkemeier, president of Rent.com, a home rental site. There s always a chance that the landlord may have other units available if the one you re looking at isn t a good fit, especially if the building or neighborhood it s in has a lot of vacant apartments.
* Offering to sign for a longer lease term, like 15-18 months instead of 12 months, is also a good tactic. This way, the landlord has your tenancy secured, and there are fewer costs associated with trying to fill your vacancy, Abkemeier says.
* If you want to renegotiate your lease, first, do it before the lease expires. If you find that comparable apartments are going for less than what you pay, present your case to your landlord.
Some desperate landlords are turning to some less-than-honest ploys to get renters through the doors. Here s what to watch out for:
* Be aware of misleading information in landlords advertisements, says Benson. An ad might say a year lease comes with a month s free rent coming out to $1,830 a month. But you really have to pay $2,000 a month and then get the 12th month free.
* Some landlords are doing shorter leases, say, for three months only to raise the rate at the first opportunity. They get the person in for three months at a cheap price, waiting for the market to improve a little and then hike the rent, Benson says. Be sure to ask any prospective landlord all the terms of the lease before you sign.