Once-hot rental market for luxe Malibu homes cools
Being super-rich just isn’t what it used to be.
As the summer leasing scene in Malibu wraps up, real estate experts report that for homeowners the rental season smelled worse than a red tide at morning.
“It was a disastrous leasing season,” said Michael Gardner, an agent with Prudential Malibu Realty. “The renters needed to save money, and the lessors needed to make money.”
Of course, a bad deal for a homeowner means a good deal for someone looking for temporary refuge by the beach. Renting a place in Malibu could cost as little as $150 a night, according to industry statistics — priced more like a Branson, Mo., by the sea than the playground of the stars.
For that price a renter could luxuriate in a creek-side studio cottage “minutes from Malibu beach,” according to HomeAway.com. The online rental service’s top price is $5,000 a night for a seven-bedroom, six-bath manse on Broad Beach.
Unlike many other workaday markets where transactions are increasing, the once-hot Malibu rental picture has cooled considerably since five years ago, the Multiple Listing Service shows. Half as many lease deals have been reported this year as during the same period in 2008, and rental closings were down 25% from last year.
At play, area real estate agents say, are financial belt-tightening and a more active for-sale market spurred by a sense that the market has seen bottom. The result was less competition for rental houses and more deal-making for shorter-term rentals.
“Five years ago, everyone wanted three months,” said Gardner, who keeps tabs on the local housing market at TheMalibuRealEstateBlog.com. This year, renters haggled for one-month stays.
That doesn’t go over well in gated Malibu Colony, the sandy refuge of big bank accounts. Some beach-house seekers even went so far as to ask for two- or three-day rentals, Hilton & Hyland agent Chad Rogers said.
“Owners of $10-million-to-$20-million homes want to do one or two leases at the most and then not think about it,” Rogers said. “The majority in the Colony don’t want to rent for less than a month.”
Rogers said he completed lease deals this year at $80,000, nearly $90,000 and $125,000 a month, but not every home among his listings found a tenant.
Homeowner Phil Roman, whose main residence is in Los Angeles, has leased out his beach house on occasion during his 20 years in the exclusive enclave.
“If you are living in town, why not lease your home and make some money?” said Roman, who spent about $3 million upgrading the nearly 3,000-square-foot house along the sand before pricing it at $125,000 a month this summer. The traditional-style two-story on a double lot received two one-month offers but not the three-month term the businessman wanted.
Now he is hoping for an even longer term.
“If I could get $70,000 a month for a year,” Roman said, “I’d take it.”
The decline in completed leases may have left some Malibu houses sitting unclaimed, but the challenge in agent Stephen Shapiro’s niche was finding enough suitable properties for his ultra-rich clients.
“There were far fewer high-end houses available in the $100,000-plus range,” said Shapiro, co-founder of Westside Estate Agency.
In one of the most expensive leases this year, a Shapiro client paid $300,000 — $150,000 a month for two months — for a double-lot oceanfront compound in Malibu Colony with a sun deck by the sand, a six-bedroom main house and a two-room guest cottage.
That’s pricey, but not as luxe as the Multiple Listing Service’s record Malibu deal: $200,000 a month, set in 2009, which translates into nearly $214,000 when adjusted for inflation.
Landlords include Hollywood A-listers, sports legends and other uber-wealthy notables for whom a place along the sand is a second, third or fourth home. Joining the fray as potential landlords this summer were Miami Heat President Pat Riley and actors Leonardo DiCaprio and Pierce Brosnan.
Riley’s nearly 1,400-square-foot house in a gated community was priced at $35,000 a month in May and was most recently listed at $18,500.
DiCaprio’s beachfront compound was listed in May at $150,000 a month for less than six months or $75,000 for a longer term.
Brosnan’s 13,000-square-foot beach estate hit the market at $250,000 a month in June, but was withdrawn from the MLS before a lease was reported.
The micro-market, with its sliver of coastal playground off L.A.’s Westside, mainly attracts tenants from within a 20-mile radius of Malibu and includes people in the entertainment industry, lawyers and business magnates, agents say. A few come from the East Coast and the United Kingdom .
“This is no Saint-Tropez,” said Shapiro, referring to the tony Mediterranean resort town in France. “This town closes at 9:30 p.m. in the summer. You get people who want that lifestyle, and that’s not the Europeans.”
Some are share-the-wealth renters who throw large parties and invite everyone they know to enjoy fireworks shows. Others crave privacy and want to cocoon in lavishly appointed seaside mansions shutting out the world.
Those who fall for Malibu may buy rather than continue to rent. Residential sales there since the beginning of the year have jumped 63% compared with sales for the same period five years ago, according to real estate research firm DataQuick. Sales increased 15% from the same time frame last year.
Statistics only tell part of the rental story, however. Several Malibu houses are leased out summer after summer to repeat customers and never appear on the Multiple Listing Service. Others remain on the market after summer renters have been secured in search of longer-term tenants.
And more potential landlords may be turning to online vacation rental sites, realty agents say, to increase the odds of finding a tenant.
Paid rental listings worldwide at HomeAway have risen about 48% from 2009 to the end of last year, said Vice President Jon Gray, who oversees the business operations for HomeAway and two other U.S. vacation rental sites. Internet listings provide another avenue for homeowners trying to get the most out of their investment.
“People list a second home looking to rent it for a pretty long period of time overall — 20 or 30 weeks,” Gray said. “Our average property rents out 19 weeks a year and generates $28,000 in rental income for the owner.”
Such online sites handle mega-buck rentals, too. Brandon Ezra, who started the vacation rentals site JetLiving.com in Malibu, once had a local property lease at $100,000 a month.
It makes financial sense, he said, for those who may use their second homes only a couple of weeks a year to lease out their places. As homeowners in Malibu and other coastal locales know, rust is a constant foe.
“It’s not cheap,” Ezra said, “to maintain these houses.”