Should we proceed??

haha.

Buy now or be priced out forever!

Tell us the square footage and the contract price. PPSQ doesn't have that much meaning.

680sqft for $627K. Cheaper than the exact apt in the same line on a lower floor.

It's a nice neighborhood and very convenient to Grand Central, Penn Station and the 6 line. I would think that Murray Hill would be a good neighborhood to buy a one bedroom apartment because it's an area which attracts many young people.

Ouch. Expensive for such a tiny space.

You're asking the golden question that every one of us who is seriously looking to buy right now is considering. Other things to consider are: views? high floor? amenities? washer/dryer in unit? south facing? recently renovated? cc and taxes?

These are all things that I believe are playing a more important factor in the value of an apartment, as they should, and seem to have been lost a bit during the boom...

Also, how long do you plan to live there?

All the exact things my wife and I are thinking about as we look.

Good luck!

How do your out-of-pockets compare to rents:

http://www.tfcornerstone.com/unit/26651/Plaza-East.php

WAIT!

If there's a washer and dryer in the unit, then the price is totally worth it.

I'd call it more an average deal rather than a great deal.
Murray Hill has always been a little cheaper than other "downtown" neighborhoods for some reason, and a quick search I did;
We found 28 Condos for between $500,000.00 and $800,000.00 with at least 1 bedroom
Median price: $700,000 Median size: 763 ft² Median price per ft²: $937
Information on Murray Hill

Is the ASKING price average, not the closings price average. You are 5% below the asking price average.

Though I am a big price per square foot believer, it is still a base.Though factors NYC10007 outlined have to be considered as well

CC/taxes are less than $1K. Rare for a doorman building. It's on a high floor, but doesn't face South. Faces East, which I suppose is better than North. Also, this is an investment so we'd be banking on rentability and resale value in 5+ years. We won't be living there.

NYCMatt, do you have any idea what you're talking about? Check out Chelsea if you want tiny and expensive!

Alas, no WD in unit.

First -- you apparently are deciding de facto not to be a "bear" as many are here who think the market will fall a significant amount more in short to medium term. Fine, you don't have to take such a market view (but..at least compare what the rental outlays for the place would be, and also you should mention the monthlies).

There are plenty of people on here who know the market far better than I , but for MurrayHill that doesn't sound like a great bargain. I wouldn;t touch it unless it is priced significantly below what it would have sold for at the peak. You say "great deal" for the area...but are you looking at post-crash contract signings and closings to determine that? And I don't think 50$ per square foot differential in this declining, illiquid, sticky market is by any means per se "great deal" difference, unless you were talking perfect comps.

"Though I am a big price per square foot believer, it is still a base."

JUST a base, that is.

There are plenty of 680 foot apartments that, thanks to efficient layout, position within the building, and great window placement, "feel" like they're much bigger.

Then there are many other 680 square foot apartments that blow 100 square foot of space in a long, dark hallway back to the bedroom.

yes I forgot that word in my post, I think the context of m sentence inferred though.

You are really asking the bear den this question?

Better than stepping in bull...shit

yikes I need to proof read before I hit reply;

yes I forgot that word in my post, I think the context of mY sentence inferred IT though.

the market averages in MH seems to get clouded by all the availability to the East. Condos East of 2nd ave have lower PPSQ costs, b/c who really wants to live there? Paying $2700/month for that Plaza rental is a joke.

Being West of 3rd is a huge advantage, I would think, to most MH condos.

If you like it and you are going to be happy there, feel like its a reasonable value and you can afford it--buy it!

"If you like it and you are going to be happy there, feel like its a reasonable value and you can afford it--buy it!"

Just make sure you have at least 18 months' worth of total living expenses in the bank.

Just sayin'. Lots of people losing their jobs AND their homes in this city.

i sold my 800+ sq ft apt for 400k in may 09. It needed to be totally renovated and the street was so/so. Factor that in and i think it's still a little high. But if you love it go for it, but i think you might be able to find a better deal.

probably can do getter price wise, especially if you won't be living there and have less of an emotional attachment.

If you're financing, you'll probably be underwater by at least $100,000 in 3 years. If you're paying cash, you'll probably enjoy an annual return of around -8%. Go for it!

And a cap rate of around 2.5%. Nice!

Thanks to the half of you that actually have useful comments!

FYI, we've calculated annual returns of about 2.7% which is about twice what our cash would be doing in the bank. It's an all cash offer. However, buying in Lincoln Center or another more attractive 'hood is still something we're considering.

Re: FYI, we've calculated annual returns of about 2.7%

But if you lose 20-25% of your principle due to the likelihood that your asset is depreciating, combined with transaction costs, how exactly did you make ANY money?

"FYI, we've calculated annual returns of about 2.7% which is about twice what our cash would be doing in the bank. It's an all cash offer."

Is this a spoof?.......

Neklok, a) that's a fanciful return rate; b) it doesn't keep up with inflation in the long-term; and c) it's not risk adjusted.

So even if it were a nominal return that you could get - which it's not - it's still negative in real terms.

how can you possibly claim to know that our asset would depreciate in the next 5 years? the thing about recessions is that they don't last. sure, the market could continue to decline but eventually it will turn around.

we're not idiots and we have crunched the numbers and yes, our return on investment would be 2.7% if we get rent of $2600/month for the place.

re: how can you possibly claim to know that our asset would depreciate in the next 5 years?

How can you be sure it wont, given the current macro conditions relative to NYC real estate?

It's Manhattan, probably the safest city in the USA, if not the world, to invest in. I suppose we might think differently if we had lost big in the past 2 years...but we haven't. We're thinking long term. When was the last crash? And how did investors who bought when the market was low in the 80s do when they sold off in the 90s or early 2000s?

There seems little reason for me to believe that getting a doorman condo in a good location in a bldg with solid financials is going to be a boneheaded move. The place does not need renovations, has a great floorplan, and is in an area that appeals to young professionals.

Yes, jimstreeteasy, it's verified, it is a spoof

So who is the spoofer?.......

Nominees?

stevejhx talking to himself....desperate for another thread to write "buy now......."

Well Neklok,
Then knowing all that what makes you ask the opinion of those who have less idea than you do! I would say go for it, otherwise if you miss on that deal, you will be in a constant search for something similar which who knows whether it will come your way or not...

this is probably a set-up by the NY Times for their next expose into the real estate world...if neklok was truly asking for advice, it would not be defending itself on every post...and if someone has $625k+ in cash, why the hell are they buying a small one bed in MH? And you are better off buying a NYS muni @ 5% which will give you $2.6 month in tax free interest which you could use towards rent and still have a liquid asset that can be sold on an open market...waste of time

Nah, it's a legit situation we're in. Why is it so hard to believe??

I'm not trying to waste anybody's time. If you've been burned by the state of things, I feel for you. I'm simply trying to gauge our investment and get outsider's opinions. Those returns are 100% legit (although they do depend on finding a renter in winter, which isn't always easy).

Brokers will always say now is the time to buy, but I'm not a broker. I do know that 2006 was a terrible time to buy in certain neighborhoods and buying now looks a helluva lot better than buying back then.

I wouldn't buy without seeing what Al Sharpton says about the market prognosis.

Not me talking to myself - sorry. Just enjoying a little break as I wind my way through an impossibly boring transcript.

"It's Manhattan, probably the safest city in the USA, if not the world, to invest in."

HAHAHAHAHA!

"I do know that 2006 was a terrible time to buy in certain neighborhoods and buying now looks a helluva lot better than buying back then."

That's what they said about 2004.

Thanks denislav12, Mjh1962, stevejhx, glamma, Mjh1962, NYC10007, and lobster for yr comments.

by the way what does the layout look like? Is it a straight living room? The trend is that those young professionals who rent apartments in MH, are likely to group together and convert the living room in to a bedroom and a living room so two people can share the place. I fthis is the case, the apartment becomes more appealing and it is easier to have it rented out.
Also, do not forget that the management of Plaza East offers many concessions to the renters such as: 1free moths rent and pay brokers fee, which brings the net effective rent down to about $2400 per month.
So ,I am not saying that you have to consider collecting $2400 per month, I am only saying that if the circumstances require you to make an adjustment you have to be ready for it...

Re Nelok's comment "we're not idiots and we have crunched the numbers and yes, our return on investment would be 2.7% if we get rent of $2600/month for the place."

Have you deducted your common charges and taxes from the rent to get your real return ?

Didnt even petrfitz, a professional landlord, recently admit that now is a crap time to be buying rental units in Manhattan?

So you are a total novice, you're moving contrary to the actual professionals in the field, and your only rationale seems to be this: (2500-1000)*12/627000?

urbandigs once said "sales will happen all the way down". Sometimes it's fascinating to find out why.

what's petrfitz rationale? if a down market is a bad time to invest, when is the good time? total novice over here, totally admit that. that's why i'm feeling out the SE crowd!

I agree, I think 2600 per month is expecting much,$40 per sq ft in murray hill is much more like it.

I wouldn't even call this a great deal but I'd call it a good deal in murray hill.

http://streeteasy.com/nyc/sale/412263-condo-80-park-avenue-midtown-south-new-york

Park ave. and 39th street. It's a slightly bigger apartment and great outdoor space.
842 square feet interior and 425 square feet of setback terrace.
Maint/tx $1700 per month (It is after all park avenue)
Sold for 885K in October.

Should easily fetch $3500 per month, will always rent faster than other apartments and sell faster if need be.

Have you looked at what the rent was in say 2000...and what the sales price in 2000..vs today. That might give you an idea of how far into this bubble we still are.

All that said, there are units with a worse yield on the market, if that was the only criteria...but to me near 1000 psf in MH seems very bubbly. If you're buying cash, purely as an investment, why not wait for distressed sales or auctions....

Presumably neklok has to live somewhere and would rather live in this apartment than where he lives now.

curious to know what the name of that condo is?
THnak you

denislav

That wouldn't be fair as it could create a competitor for neklok's bid if someone else thought this was a "great deal."

Though i'm pretty sure I know which one as it echoes the sales pitch in the original post....

XXXXis a great building, very well managed ..... XXXXXXX A purchase in the building is definitely a sound investment .....XXXX

Lofty: OP impled that this is an investment property purchase.

APT_BOY
5% tax free munis??? what world are you living in

Remember that small 1-BRs can be difficult to resell. They're neither fish nor fowl--not big enough for a young couple planning a family yet not desirable for pied-a-terre seekers if priced too high.

Actually I vaguely recall Citibank pitching some NY tax free fund at around 4.5%.
Can't remember the name other than it made me think of Philadelphia. So I would guess it was either something called Liberty or Franklin. LOL

But 3% seems to be the norm today.

"Remember that small 1-BRs can be difficult to resell. They're neither fish nor fowl--not big enough for a young couple planning a family yet not desirable for pied-a-terre seekers if priced too high."

Also, in this new age of employment uncertainty, they're unattractive to singles who might want the flexibility to bring in a roommate to help pay the bills should the need arise.

"and c) it's not risk adjusted."

Isn't this pretty much the beginning and end of the argument? I mean, who buys a highly illiquid real asset with famously high transaction costs coming and going and non-mortgage monthlies set by someone else (i.e., common charges by mgmt company and taxes by the city) on a theory that the 2.7% return for a 5 year hold is double that of cash, which by the way is risk free, instantly liquid and reprices if inflation/interest rates rise during that period (i.e., effectively zero duration). If the rent vs. buy math is favorable for buying, then at least the OP has the beginning of a discussion, but no one extends from cash to this kind of a risk profile to pick up 130bps in yield for 5 years.

More general response to OP - These kinds of advice threads are started from time to time. Without reading anything more than the question, I know that the right response is, "Thanks for consulting us, but if you have to ask the SE boards the answer is obviously no."

RorB...why don't you stick to selling people defective outlets and leave the finance to someone else. So, now when I show you a link with 1709 NYS muni bonds avail, many with yields of 5% or greater, will you say you are sorry? waste of time

http://newyork.municipalbonds.com/

Albany N Y Pkg Auth Pkg Rev Ref-sys-ser A
CUSIP: 012458DH5 2024-Jul 4.250% 91.127 5.120%

New York St Dorm Auth Revs Insd-canisius College
CUSIP: 64983TCN1 2023-Jul 4.500% 94.375 5.079%

Metropolitan Transn Auth N Y Transn-ser F
CUSIP: 59259RB60 2035-Nov 5.000% 98.500 5.105%

Port Auth N Y & N J Cons-124th Ser
CUSIP: 733581K50 2031-Aug 5.000% 98.157 5.142%

RorB...and if you are worried about the duration, then buy a NYS triple tax free muni fund which has a distribution yield of 4.08% with daily liquidity and no transaction costs...I am waiting for my apology

https://personal.vanguard.com/us/funds/snapshot?FundId=0576&FundIntExt=INT#hist=tab%3A4

Apt_Boy - the shortest maturity on your list is 2023. So this has exactly what relevance to the discussion of yields on cash vs. the potential return on a 5 year real estate investment?

BTW, a few Port Authority bonds are taxable and many of the others are subject to AMT, so the pre-tax yield should be on the high end among munis.

Buying a fund with 7.8 year average maturity is still a lot of duration as an alternative investment to cash. Daily liquidity and no transaction costs are great things, but a different issue.

Based on the facts that you've given, sounds like a terrible deal. Over 600k (don't forget closing costs) for a unit that is arguably $2600 to rent. And I own, so you can't accuse me of a rental bias.

sidelinesitter - what does the maturity have to do with anything??? It is a liquid asset in which you can sell TODAY or 5 years from today if you need the cash at a market rate...can you do that with a MH condo?

and that is why you can go with a muni fund with DAILY liquidity without sacrificing much yield...and the one above IS triple tax free and NOT subject to AMT

just the mortgage payment (assume $500K, 30 year fixed, 4.5%) is pretty much the assumed rent. Maybe the tax deduction covers the cc and taxes, plus or minus, but you'd have to be a big believer in price appreciation to want to put out the down payment for next to no yield for 5 years.

The Coming Collapse of the Municipal Bond Market: http://www.municipalbonds.com/wp-content/uploads/2009/11/1118_gp_sheehan_reprint.pdf

[Featuring fun facts regarding Boston Bloomberg's fiscal management!]

"sidelinesitter - what does the maturity have to do with anything??? It is a liquid asset in which you can sell TODAY or 5 years from today if you need the cash at a market rate...can you do that with a MH condo?"

I am not comparing investing in munis to a apartment, I am saying that buying long-term munis for the current yield today and ignoring the interest rate risk to the principal is short-sighted and dangerous. Buying the apartment is worse - or, as you said above, "waste of time".

Putting everything else aside, we can all agree that RorB statement:

"5% tax free munis??? what world are you living in"

is wrong

and the govt allowing widespread muni defaults after bailing out private industry is unlikely

"Based on the facts that you've given, sounds like a terrible deal. Over 600k (don't forget closing costs) for a unit that is arguably $2600 to rent. And I own, so you can't accuse me of a rental bias."

Pretty much says it all, I forgot my worst case scenario formula (200 times monthly rent).
That puts you at 2600 x 200 = 520K or 16/17 times rent roll.

Aptboy

If your looking for affirmation, your politely requested apology is certainly due.

Interesting to see where this has gone. I don't buy that Muni Bond angle one bit considering just how poor the State of New York is doing with it's money these days. We wouldn't have a mortgage payment on this so essentially the argument is keeping cash reserves in a bank account earning 1% or buying a condo that has a rent income around $2600. Hold it for 5+ years, making roughly 2.7% even with inflation (as the rent can always go up), and then potentially sell it for more than we bought.

Obviously, basing a big purchase upon the comments from a SE discussion isn't our policy...but it has been interesting sifting through the BS to get some outsider opinions. Thanks all!

so...you can see a scenario where new york defaults on its bonds but your apartment holds its value? seems to me that if you think there is any chance of a muni default that you would keep your money in the bank.

"sidelinesitter - what does the maturity have to do with anything??? It is a liquid asset in which you can sell TODAY or 5 years from today if you need the cash at a market rate...can you do that with a MH condo?"

Actually, maturity has EVERYTHING to do with the market price of your asset. Tell us, what will happen if 10-yr treasury yields blow out just to 5% or 6%...much less the 8% or 10% experienced in some historical periods. Well -- short answer -- the share price of VNYUX will collapse.

The daily liquidity is nice, and yes you could still sell in that scenario -- just at a significant capital loss.

neklok -- this is entirely anecdotal, but a friend of mine just rented a very nice 1br on 3rd and 35th, doorman elevator, for $2100. Explore the rental market in that area further before you lock in your assumptions. And take into account possible future downward rent pressures (does 10% unemployment mean anything to you?), likely months of vacancy, and increasing maintenance costs (mine just went up 5% for 2010) over the course of your investment.

Model out 5% maint increases each year, one or two months vacancy every 24 months, and the HUGE transaction costs if you sell in 5 years, and your already razor thin margins over the 100% liquid, FDIC guaranteed 1.35% that HSBC is paying on savings right now disappear. And you are also willing to risk massive additional capital losses relative to your investment gains if the market drops even another 5-10% over that period.

Cant you see that your hugely speculative real estate play is in no way risk justified?

Neklok....

It's just incredible that you would consider investing in NYC real estate if your view of the finances here is so bleak. It's just plain illogical.

Also, your assumption about rents repricing with inflation is very dubious. No matter what one says about prices in NYC, there is no doubt that rents are in a downward trend. If inflation takes off, that may well mean higher interest rates, which may well mean higher mortgage monthly costs,,,and that could potentially be bad news for re here and elsewhere.

You're just not considering the risks logically. It's basically ludicrous to present this investment as 2x what cash in a bank pays. Your investment would make more sense if you were arguing that you have a large diversified portfolio of x,y, and z, and just want another asset (but even then, diversification is not a very good reason to buy a bubble asset).

At this point, why bother responding: Either: (a) this is a joke (b) person already made-up their minds, so who cares what they do...end. of. thread.

West34, jimstreeteasy: those were the opinions I was hoping to read this morning. Thanks!

CHOPS to neklok NO WAY The Short Sellers are Coming Why not Wait ???

"Cheaper than the exact apt in the same line on a lower floor."

Cheaper than it recently sold for or cheaper than what it is currently asking? That latter does not mean much.

But the real answer is "what do you think the Real Estate market in Manhattan will do over the time you intend to hold?". Many people here are giving you very dogmatic answers based on THEIR perception of what the future will be. While I hold similar opinions to a lot of them, I still say you have to go by what YOU think, not what I think. Because if I'm wrong, nothing bad happens to me (re: your purchase here), but if YOU are wrong, something bad happens to you (either loss of income gain if you are wrong in not buying or loss in capital and/or income if you are wrong in buying).

____________________

David Goldsmith
DG Neary Realty

Look neklok, I have just purused most of these posts (or at least your rationales) and simply do not understand any reason for why you would make this purchase, in light of your stated goals. You really believe your two choices are (i) put 627k in a money market account earning 1% or (ii) pay for a 1 bdr, all cash, to earn approx 20k a year (less taxes on the rental income of course)? Am I the only reading this thread in total bewildermant??

First of all, nobody puts 600+k in the bank or under their mattress. If you do not want to play the mkt and would like some safer investments go talk to a money manager and find some diverse investments that give you some comfort. Second, 1 bdr apts make lousy investments compared to larger apts. Interest rates are at record lows. Put the 627k into a down payment on larger apt and take out a mortgage. Find a 2 bdr you can afford the debt service on by getting a commensurately higher rent. In 5 yrs you will find a much larger mkt for a 2 bdr and, if the mkt really picks up, it might even take off, whereas a 1bdr will always have limited upside.

And, by the way, to assume 20k a yr is foolish. Could take you 6 months to find a renter, he could move out leaving you months to find a replacement. He could stiff you on rent (NY is like hell to evict someone) etc... You sound like someone who is taking all of his excess savings and trying to write your own little cautionary tale.

"If the rent vs. buy math is favorable for buying, then at least the OP has the beginning of a discussion, but no one extends from cash to this kind of a risk profile to pick up 130bps in yield for 5 years."

Isn't that what this whole debacle is all about? Just slap a AAA rating on that apt, and push it out the door!

Neklok, first, you are not getting a great deal as many have pointed out. Second, your 2.7% logic is deeply flawed. To state it in the simplest terms possible, that number should probably be something more like 5%. It will probably not get there through rent increasing by 2x, but rather by price decreasing by 40% or whatever.

Nekok- based upon your responses to random strangers on a blog where YOU ask for opinions i would say this will be more heartache then it's worth. You admit you are a newbie and this may not be the best time to venture into this. But as others have pointed out, not sure you are actually looking for feedback.
Good luck with whatever you pick!

"When was the last crash? And how did investors who bought when the market was low in the 80s do when they sold off in the 90s or early 2000s?"

Hi, Neklok. No one seems to have directly answered this question but it is a favorite topic of mine.

There was actually a real estate bubble in NYC in the 1980s, which peaked in 1987. After the peak, there was a gradual reduction in prices (with a few minor up-ticks) for 8 years, followed by 2 years of flat prices, before NYC real estate prices finally started increasing again around 1997. So the assumption behind your question ("when the market was low in the 80s") is simply not true.

If you bought real estate in NYC at any time during the 1980s, and tried to sell at any time during the 1990s, you probably lost money. You may have good reasons to think that the 2008 crash will follow a different pattern from the 1987 crash, but it's not crazy to think they will be similar. If they are similar, then we have not seen the "down market" yet.

Among many examples, this generic condo that just sold: http://streeteasy.com/nyc/sale/447815-condo-171-east-84th-street-upper-east-side-new-york

07/1987 $291,500 (new construction)
10/1993 $225,000
08/1997 $270,000
12/2009 $860,000 (September contract)

Thanks for the insight Post87deflation. Needless to say, I'm fairly certain the sidelines is where we'll be for the time being. Not necessarily due to the comments received here. However, the general negative outlook expressed here is certainly worth considering.

This is aboutready's conspiracy thread? Interesting, it contains no stories about her toilet.

>However, the general negative outlook expressed here is certainly worth considering.

How did things work out by being negative in December 2009?

Being positive worked out for this former poster:

08/31/2009 Bellmarc Realty Listing sold Last priced at $999,000 $999,000
Previous Sale recorded $975,000
04/09/2015 Listed by Halstead Property $2,200,000
05/11/2015 Listing entered contract $2,200,000
08/13/2015 Listing sold $2,200,000
Sale recorded $2,400,000

The Farewell thread reminded me of how funny he was, so I looked him up, and lo and behold.

Then there's stevejhx. He waited until 2014, and bought a good-looking house in Florida, near where he'd been renting all those years after escaping from New York. A little late, but he was spared the stress of wondering whether the sky would fall in, so being negative was probably positive.

Congratulations to Steve!

Wait, which one, the OP? He said the contract price was 680sqft for $627K.

The former poster wasn't the OP in this thread.

Being negative in 2008/2009 then buying in 2011 worked out fantastic for me.
No crystal balls, just some gut reaction to 4th quarter 2010 market and some luck.

08/31/2009 Bellmarc Realty Listing sold Last priced at $999,000 $999,000

04/09/2015 Listed by Halstead Property $2,200,000

08/13/2015 Listing sold $2,200,000
Sale recorded $2,400,00

to fan old arguments :)

8/31/2009 Dow Jones 9496 S&P 1020
8/14/2015 Dow jones 17477 S&P 2091

Is it time for Stevejhx to return to New York?

Why? What a dumb question.

Why can't steve answer for himself? Why have you been speaking again for multiple other people? Don't you recall that this habit of yours is among other SE poster's primary complaints about you?

@NWT - That poster, who I believe has just outed himself, is one of my favorites; consistently high quality with occasional dry wit thrown in; it has always surprised me how he has flown under the radar all these years.

or maybe not; now I have to go back and read that other thread . . .

Its called inflation folks....you think you are geniuses ....but really you are just keeping up with the jones while the govt steals blindly from you.