What the other half leases
Luxury rentals are available in markets across the country — for those who can afford them.
Photo courtesy of Chad Rogers
A 3,500-square-foot apartment on the Upper East Side of New York City is listed for $37,000. There must be some mistake, right? Like a few missing zeros?
It's not a typo: $37,000 it is what it takes to rent the amazing luxury property. For one month.
That's a high-end rental, for sure, but it's nowhere near the top in the Big Apple.
The high end for high-end rentals, at least right now, is just over $200,000. The Woolworth Mansion Off Fifth Avenue was on the market for $210,000 per month, though it recently has dropped to $165,000 a month. It's also listed for sale at $90 million.
Only in New York? Not necessarily. Across the country, some markets boast rentals that list for more than $10,000 or even $100,000 a month — for those who can afford it.
In Malibu, Calif., a home called La Villa Contenta is listed for $250,000 a month. It has 13 bedrooms and 14 bathrooms in more than 16,000 square feet. Oh, and you may have seen this property already: It was in the HBO show "True Blood" and in the movies "I Love You Man" and "Funny People."
Real-estate agent Chad Rogers, formerly of Bravo's "Million Dollar Listing," represents celebrities, athletes and business executives who take on summer rentals in Malibu, aka the Bu. He says a lot of people live in Los Angeles but want to spend a month or two at the beach during the summer. Other tenants, though, stay year-round.
"A great deal of homes that lease out on an annual basis are by people who are looking to purchase but haven't found their dream home," Rogers says.
Whether they stay for a few months or all year, they're probably saving money, because the average high-end rental in Malibu is about $40,000 a month, whereas the same property could cost more than $6 million to purchase. La Villa Contenta is listed for $28.5 million.
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"They feel that the cost of the rental for a few months a year is still far less than having a mortgage, real-estate taxes and the monthly expense of maintaining a home at the beach," Rogers says.
Renters of these high-end properties in Malibu have plenty of homes from which to choose: At the end of June, there were 192 rentals priced above $10,000 a month on the market, Rogers says.
Where the rich rent
Quite a few other U.S. markets support luxury properties. Some, like the Hamptons in New York, are purely seasonal, while markets such as Boston; Washington, D.C.; and even Palm Beach, Fla., see more year-round tenants.
In a city like Chicago, luxury rentals aren't nearly as common, but real-estate agent Joan Fox says she has seen a few. Typically, a high-end home that's not selling will be put up for rent while the seller waits for the market to improve.
"Often, they will be for sale and for rent," Fox says. "The owner is hoping to put them back on for sale the following year."
The same goes for cities such as Seattle or Indianapolis, where rentals for more than $10,000 are few and far between.
A lakefront home in Indianapolis is listed for lease at $12,500 per month, while it's for sale for $2.75 million. Real-estate agent Brad Baxter says most interest in leasing the property comes from executives who are relocating but aren't ready to commit to buying. Others may have high-income positions but not enough credit history to get a loan.
In Palm Beach, the big season for rentals is Nov. 1 to April 30, but a few tenants stay year-round. In early July, more than 100 high-end properties were available for rent, according to Realtor.com.
"Most people don't want to be here in the summer," says Cristina Condon, a real-estate agent for Sotheby's International Realty in Palm Beach.
Some renters are feeling out the area to see if they want to buy, Condon says. For many, a purchased property would be their third or fourth home.
"They've never stayed here, so they don't know whether to go to the north end or in town or the south end, or whether they want an apartment or a house," she says.
Most of these renters are in their late 30s to early 60s. Most stay anywhere from a month to six months.
Taking their time
Back in New York, which is much more of a year-round market, Sotheby's agent Nikki Field says some tenants of what she calls "trophy properties" have recently sold homes and have not yet found the right home to buy.
"You may have someone who has not yet identified their next purchase and is waiting for the market to go down and feels that it's smarter to be in a rental and wait for the market to correct and buy at a later date," she says.
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The other common scenario is tenants who rent while they renovate a recently purchased property.
"A lot of people took advantage of the corrective market in Manhattan," Field says. "But the people buying up often step in and do a complete renovation."
Many luxury properties in Manhattan are family homes, and a large family home takes at least a year to renovate. Families will rent something nearby while they wait so the children can stay in the same neighborhood.
"It's more of a modest upheaval for the family," Field says.
Margaret Bay, a real-estate agent with Brown Harris Stevens in New York, lists properties in the Waldorf Towers. About 25% of the apartments there are tenant-occupied; the rest are rented as luxury hotel suites. The towers are part of the Waldorf=Astoria, owned by Hilton Worldwide.
Bay's most expensive property available for rent in the towers is the Cole Porter apartment, at $150,000 per month. Porter lived there for about 30 years, Frank Sinatra for 10.
These apartments are comparable to high-end Fifth Avenue apartments that would cost $20 million or more to purchase, Bay says. She says some towers tenants have lived there for as long as 45 years.
Some people just prefer hotel living or think they can get a better return on their money if they invest it elsewhere, rather than getting it tied up in a home purchase, because many of these high-end homes are purchased with cash.
Agents for these high-end properties say they see more rentals of this caliber each year. Although you might expect that someone with that kind of money would have no trouble finding a place, the luxury-rental market is competitive in most markets, particularly those with few high-end properties.
Field says people are especially willing to pay high rents for homes with unique or standout features. For example, she says she listed a home with five bedrooms that got six full-price offers.
"There's a very limited selection and a lot of people out there looking," says Beth Dickerson, an agent with Gibson Sotheby's International Realty in Boston. "If there's a high-end property that doesn't sell, it always rents for a high price."