Jill Vegas, New York City Home Staging
Rent Now, Buy Later
By VIVIAN MARINO
Published: December 5, 2008
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At the same time, real estate brokers have been revamping their approaches to marketing hard-to-move property to include renting with an option to buy (a k a lease purchase or lease option).
Fliers and promotional material inviting people to “test drive” homes and neighborhoods can be found on buildings in Manhattan, including Sutton Manor on East 53rd Street, 99 John Street, the Revere on East 54th Street and Morgan Court on Madison Avenue. In Brooklyn, the BridgeView Tower and the Decora are among those with this option, in addition to Northside Piers. Both sale prices and rents are often included in the listings.
The rent-to-own concept represents “a change in mind-set” during these tough economic times, said Jonathan J. Miller, a founder and the president of the Miller Samuel real estate appraisal firm. “The longer this drags out, the more acceptable this option becomes; this is just evolving,” he said.
The last time lease-purchase options were seen with any frequency in the New York area was in the late ’80s and early ’90s — a time when market conditions may have been even more dire than they are now, according to veteran real estate professionals, and certainly a time when interest rates were a lot higher.
“That period of time was a very severe downturn,” Mr. Miller said. “The market had about seven years of surplus inventory to be absorbed. In the period we’re in now, we have 7.9 months of inventory. We’re clearly going into a weak economic period but going into it with relative strength.”
Klara Madlin, the owner of Klara Madlin Real Estate in Manhattan, offered similar observations, and recalled handling a few lease-purchase deals in those dicey decades.
How many of these lessees ultimately bought their apartments back then? “I would say maybe 5 percent — not a lot,” Ms. Madlin said, noting that hard numbers are difficult to come by. Conversion rates were low, she said, “because the people generally who were renting to buy couldn’t really afford to buy.”
“I think it might be different this time around,” she said.
Renting to own can be attractive for both sides of a real estate transaction. It brings cash flow to properties that otherwise might be stagnant. And buyers lacking adequate down payments (perhaps because of stock losses), struggling with poor credit, or even recovering from a recent foreclosure, can build up savings and rebuild creditworthiness in order to get a mortgage.
For Simon Hall, a 40-year-old technology specialist from Britain, it is a means of establishing a credit history in this country and paving the path to eventual homeownership for himself and his American girlfriend, Vishma Victor, 28.
