There are a lot of apartments currently available for rent in NYC—and thousands of new apartments are being added this year—so if you're on the hunt for a new place, there's a good chance you'll find one that checks all your boxes in the neighborhood you want. An added bonus of searching for an apartment right now? Landlords are offering deals, including two-year leases.
Concessions—like longer lease terms, which often come with one or two free months—are a way for landlords to get you to sign a lease without having to lower the rent. This is a continuing trend in NYC. For example, transactions that came with some kind of concession increased to 44 percent from 36 percent in Manhattan, according to Douglas Elliman's December rental report.
“We are seeing that landlords are willing to lock in a rate, and I don’t see this market changing,” says Karen Stone, a broker at Halstead. “We’ve had this low, very soft rental market for the last three years, and now that there’s more and more inventory, having someone to pay the rent for two years will help landlords get out of this.”
Tiga McLoyd, a broker at Citi Habitats, is also seeing more landlords offering two-year leases now, and says that this represents a change in how landlords are thinking.
In the past landlords didn't want to be precluded from raising the rent, or locked into a two-year lease with tenants who may turn out to be problematic. But landlords are warming to multi-year leases now because they don't want to take a chance on having to fill the apartment over and over in a soft market. They are thinking if the tenant's credit is ok, it is worth signing the two-year lease, McLoyd says.
Rory Bolger, a Citi Habitats broker in Brooklyn, is seeing offers of three months free on two-year leases, “which is something you see when the market is more competitive, a little more saturated, particularly with new development.”
Much of that new development is in the luxury market, which is the segment where you're most likely going to nab deals like free months and longer leases.
While a longer lease (and getting free months) sounds like a good deal, there are some important considerations to be aware of, so read on.
Pros of a signing two-year lease
The main perk that comes with signing a two-year lease is avoiding the inevitable rent increase, which can usually range from 1 percent to 1.5 percent.
“A landlord is typically only going to offer better concessions or a better deal on a new lease, since the objective is to fill units up quickly and efficiently,” Bolger says. Landlords, he said, are offering good deals on net effective rents now, so a longer lease locks you into lower net effective rent for a longer time frame.
(If you’re unfamiliar, “net effective rent” is what you would pay each month if the amount you save from your "free month(s)" was spread throughout the term of your lease. But be warned: that’s not how it usually works. Instead, you get your free month(s)—your lease tells you when—and what you actually pay each month, is a higher “gross rent.”)
Another plus of signing a two-year lease is not having to worry about the hassle—and cost—of moving. Plus, signing a two-year lease is a good idea if you truly love your apartment.
Cons of a signing two-year lease
The largest disadvantage to signing a two-year lease in New York City is, well, the commitment. Sure, you fell in love with the apartment because you love its exposed brick, afternoon light, or closets, but things happen. Maybe you discovered your neighbors are noisy, your commute is longer than you initially thought, or you think you might want to move somewhere else for a job.
“There’s definitely more risk as you’re obligated to two years, and that’s where tenants can get concerned,” Bolger says. “And if you lose their job or get transferred, how can you get out of the lease?”
While you are legally bound to that apartment for two years, you can ask your landlord or management company about options for breaking your lease. But you need to know that doing so could be costly (to the tune of a few month’s rent—or more) or include you having to find a qualified replacement tenant.
Want a two-year lease? Ask
If you've weighed your options and think a two-year lease is the route for you, but your future landlord is not offering it as a current concession, ask, says Halstead's Stone.
While she's seeing concessions mostly on 15- or 18-month leases, so landlords will have that renter into the spring or summer months, with the amount of inventory out there, you may have some leverage and landlords may make you a deal.
"I would do anything I could to get a tenant in place this time of year," she says.
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