"No Fee" Rentals vs. "Broker" Rentals

Urban Hostess will tackle the famed No fee vs. Brokered Rental debate!

In your search for an apartment you will most likely hear the advice to find a "No Fee" apartment. You will also witness a number of listings advertised as "No Fee". The problem is that No Fee rarely actually means no fee. The "No Fee" listing is usually a Real Estate Broker advertising the apartment in hopes of luring a client. But the truth is that the broker does not work for free, the landlord of the building is in fact paying him the commission. But to offset the cost of the commission paid to the Real Estate Broker, the landlord increases the rent for the new tenant.

For example; if the apartment's market rental value is $2,000 the landlord increases the rent to $2,200.

The truth is that only 5% of the apartments available to you on the rental market are TRUE "No Fee" apartments. Needless to explain, finding the perfect no-fee apartment is like finding a needle in a haystack. It takes incredible effort and time, there is a reason brokers exist. If you are looking to spend $2,500 a month, include the fee in that price and look for apartment with up to $2,300 in monthly rent. People are convinced that they are getting a good deal when they see an apartment advertised without a fee, they are actually paying more. If you rent something that should be $1,300 per month with a broker's fee as opposed to renting an apartment for $1,500 with out a broker's fee you are essentially spending the same amount over the year. $1300 a month + Brokers Fee ($2,340) = Annual Expense of $17,940

$1500 a month + No Brokers Fee = Annual Expense of $18,000

Paying a broker fee actually becomes beneficial in subsequent years of occupancy. If you don't pay an official broker's fee, and essentially pay it in your rent, the landlord is not going to decrease your rent in the second year. So in essence every year that you stay in the apartment you are paying the brokers commission as opposed to paying a broker's fee just once.

2nd Year
$1,300 x 24 + $2,340 = $33,540
$1,500 x 24 = $36,000
Difference: $2,460

3rd Year
$1300 x 36 + $2,340 = $49,140
$1,500 x 36 = $54,000
Difference: $4,860

Bottom Line: Don't be deterred by the Broker's Fee, just educate yourself in order to make the smartest decision!