Can't believe someone forked out all cash for this

what is ppsf?..

price per square foot

why?

the buyer paid less than the seller did nearly five years ago and after complete renovation. Seems well bought to me....

saved by 31 users. I think people liked the value.

Cpalms, are you NUTS? You judge a value based on the last guys purchase price? If this is the case I've got some stock I can sell you. This place is a hamster cage that sold for near 1/2 a mill!!

dmag2020: "This place is a hamster cage that sold for near 1/2 a mill!!"

You can probably say something similar about most of the apartments in Manhattan...

This place appears to be sold for about current market price. Nothing special.

If you assume this is a $3500 rental...then they bought at a cap rate over 6%...which actually is a little special in the current market. If this person plans to be here a while....and if you buy into the premise that current rents are a little depressed...6% on his money (after tax) is not bad at all. I don't see how this person is a sucker.

Maybe I am wrong....I didn't bother with the math on PSF price....eek.

Rhino, I don't know if this place would rent for $3500 given its size.

I love how the broker claims that this was "originally" a 2-bedroom space - when if you look at the layout it is simply a SMALL alcove studio transformed into a 1-bedroom.

Yet another part of the problem with the NYC RE market - small alcove studios have become 2-bedroom apts! Ridiculous...

I know. The broker tricked me briefly as well. Its 550 sqft tops. Its not only market...its above market. How much would you have hated to be the previous owner and not get paid back for any of your renovations.

Yeah, but the previous owner got out with a relatively small loss... it only would have been worse if she/he had held on...

We dont know how small the loss was. He/She lost 100% of their renovations cost.

True...

The value of the renovations and the broker's prose was getting out alive.

I miss the point here. Is the problem that the sale price was $500K, or that it was "all cash". What, realistically, should the sale price have been with and without financing. In today's market, what if any, discount (in % of sales price) should an all cash offer elicit?

"After a day of conquering Gotham City, arriving home to this splendid beauty will be a delight in every way."

Ah yes, "I've brought this city to its knees and whipped it into shape, now let me retire into the spoils of my Herculean efforts and the fruits of such a vast city: a 550 sq ft converted alcove studio."

sjtmd - finally someone gets it. Problem is had to be purchased ALL CASH (and will have to be sold next time for as well). This is what makes this a truly terrible investment...

why couldnt the next buyer possibly get financing?...is that a dumb quesiton

Based on what we've seen in Chelsea (a lot), both rentals and sales, I think this would rent for very close to what an owner would pay in mortgage. All-in (subtracting tax deduction, adding back lost after-tax income on down payment), I suspect this is a case where owning is cheaper than renting.

The apartment is too small for two people (IMO), but I love the SW light, the nine windows, and the square kitchen that allows for cabinets/counters on both sides. The owner should be happy with her purchase.

I agree that the apartment does have some redeeming features, size notwithstanding.

On the all-cash issue, can you explain why you think all-cash would make a difference thegrimp? If you were paying all-cash vs 20% down, what price difference would you require?

> Rhino, I don't know if this place would rent for $3500 given its size.

Agreed. You can get a high rise luxyury one bed with views for that price in Chelsea, and not have to be so far over near the projects.

This would be under $3k.

inonda -- all cash makes huge pricing difference to me, does it not to you?
- you are forgoing at least risk-free interest (and maybe higher opportunity cost) on all the extra capital required
- no mortgage deduction
- agree hard to value, but value of cash in this economy just because

Yes If I had $10M, I wouldn't necessarily care about an extra $400K in cash, but I don't... although if had $10M definitely wouldn't buy this

This building is almost 100% rentals (no restrictions), so unless owners suddenly all get desire to move back in (or sell their cash cow investments they bought for $24K 20 years ago, to new owmners who all decide to live here instead of leverage unrestricted rental policy), ALL CASH requirement will persist...

Im getting confused here.

In a market where something, an asset, can be bought for cash or debt then I think the asset price should be the same no matter how the purchase is financed. The rental stream -- income -- is the same regardless of how you finance it, obviously.

However, the demand for an apartment can be effected by financing requirements imposed by lenders or a coop board. If an apartment is such that only all cash buyers (or those putting up very large deposits) can bid, then the pool of potential purchasers are fewer, so the price ought to be lower, I would think. By the way, needing to buy with all cash doesn't necessarily make it a worse investment does it, since there would be a discount (vs financeable assets) on entry not just exit.

Is grimp saying that in this building a potential buyer cannot get financing?.

How you finance it shouldnt matter, but it does to most people. Why do you think we argue about it on here all the time.

The all cash requirement makes this a terrible resale.

YES JIM - A BUYER CANNOT GET FINANCING. BANKS WILL NOT LEND BECAUSE TOO MANY ARE RENTED OUT (LIKE ALL OF THEM)... AND THAT IS THE POINT -- THERE WAS NO DISCOUNT ON ENTRY HERE

I'm done

and yes it is a worse investment as appreciation (your roi) is calculated based on your investment. lack of leverage = higher investment (i.e. lower roi). that is what is happening to wall street as leverage goes down.

Im really done

Thanks for the clarification. These are obviously two separate issues :

a) all cash (or other) restriction diminishing pool of potential buyers [arguably if this is priced on entry and exit it isn't a negative factor for the investment although you could argue anything decreasing liquidiy increases risks..but...maybe that is priced in]

b) effect of leverage on return of any investment; leverage also magnifies risk, not just return...but I'm not concerned about issue b) in this conversation I'm not interested in getting into an argument about leverage....

"inonda -- all cash makes huge pricing difference to me, does it not to you?"

I got yelled at earlier today for suggesting that financing requirements make a difference to most people in terms of pricing.

The main difference it makes to me is that it makes a difference to you and most others. I.e., if I'm sitting on a pile of cash and have access to leverage in other places as well, my choice of paying cash vs. financing is going to be affected if others are willing to provide me two different prices.

If a contract will settle just as fast and just as surely whether a buyer finances or pays cash then obviously the seller is utterly indifferent. It only makes a difference to the seller if they perceive a risk that the financed buyer will not actually be able to get financing and close.

There are 2 different conversations going on.
1- would the inability to finance depress the price?
2- would an all-cash offer warrant a discount?
The answer to the first question is "duh! Are you kidding me??!??!"
The second question would require a more nuanced answer. It depends on the seller and the selling environment. If mortgages were very easy to obtain, a cash offer might have a small advantage ( if only because of time.) In a difficult borrowing environment, cash does warrant a discount (how large will depend on how hard it is to finance.)

Agreed maly. That is what I was saying..(but grimp was adding a third point that i consider irrelevant to the trading price of the apartment, his view that leverage somehow inherently makes the roi better...)