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Boston's Rental Market, From a Long-Time Insider

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Here's the latest installment of Bates By the Numbers, a weekly feature by Boston real estate agent David Bates that drills down into the Hub's housing market to uncover those trends you would not otherwise see. Check out his ebook, Context: Nine Key Condo Markets, 2.0.

Mark Pearlstein's strategy that built one of the most dominant rental companies in Greater Boston was born out of the most painful and frustrating aspect of the rental business: the times he told customers they were all set on the apartment only to find out later that the landlord had taken an application from another rental company.

So, when Metro Realty opened their Brookline office in 1984, Mark thought, "If we ever do something that would make the landlord or property owner call us and us only, then that would be a phenomenal business."

From then on, instead of being completely focused on the potential commission being generated by a fee-paying tenant, as most agents are, Mark worked on building relationships with landlords and management companies. Whether they had listings to give him or not, he took them out for drinks and gave them cookies and pastries. All the while, he worked on convincing them he would do a good job. He even told the landlords that if a tenant he put in an apartment didn't pay the rent, he would personally pay the rent. Of course, the instances when he rented nine apartments in a single day also didn't hurt his argument that Metro was a great choice.

As time went on, the relationship strategy gained traction and Metro started getting exclusive listings, ones where they were the only company that had the apartment listing. At times, Mark took money out of his own pocket to maintain relationships with landlords and tenants, including when an application was already in, but a landlord insisted on an additional $50 a month in rent above the listed price because the market was hot. As well, when apartments weren't ready in time, he's paid for hotel rooms. "I've never cared about a one-time commission," he said. "I've always wanted somebody's repeat business. I want the listing 10 years from now, 20 years from now… That's the mentality."

When the market changed in the early '90s and there was a lot of vacancy, Mark was forced to ask his loyal landlords to pay the rental fee. He says it was "absolutely" among the hardest things he ever did. One landlord who didn't like the requirement chased him down Atherton Street in Brookline wielding a meat-cleaver over their head. Still, the soft market allowed Metro to earn the trust of new landlords and gain more exclusives.

Thirty years and an estimated 25,000 Metro rentals later, Mark says Metro Realty has 2,500 exclusive apartment rentals. In all likelihood, that's by far the most of any rental brokerage in the Hub. The many exclusives allow Metro to throw out about 90 percent of the listings that come over the fax, listings where management companies could tell them the next day that they took someone else's application.

How is the Boston apartment market different from other markets?
I think that people are very confused with the Boston apartment market. I don't think they understand it. I think they are intimidated by it. It's very confusing. The confusion here is that in most other cities you can drive down the street and see for-rent signs everywhere, and you call and make an appointment and go see the property. Whereas, here, you don't see that and you really have to hire the services of an agent if you want to find that apartment that you are looking for, the apartment of your dreams.

What do you think of today's market?
The market scares me a little bit today. Rents are at an all-time high, as are sales prices. And I'm starting to see greed by all the property owners who are really trying to push the rents even higher.

What's happened in the last two rental seasons is that we have had tremendous springs that have lasted from basically February to July 10, and then the market has completely died. …I have a feeling that's going to happen again this year… The market's changing. It used to always be a Sept. 1 market. Today, May, June, July 1 occupancy is almost as strong, if not stronger.

Do you feel guilty when an apartment you have an exclusive on is vacant?
Absolutely… A lot of the bigger management companies that we deal with today are O.K. with vacancy. They have that in the pro-forma and I am completely opposed to that and I argue with them all the time… I'm a perfectionist in this industry [and think they should have zero vacancy].

Are there rental deals in Boston?
We actually have—believe it or not—plenty of 'deals' because a lot of our landlords are not looking for the top dollar. They would rather have a tenant that's got a stable job, good credit, great references. They are willing to sacrifice the 100, 200, 300 bucks a month.
· Our Bates By the Numbers archive [Curbed Boston]