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i am about to buy a studio for investment purposed that i will rent out on an annual basis.
- is it easier to rent furnished or unfurnished
- is the profitability higher if you rent furnished (assume you buy 3-4k$ of furniture at cb2 and ikea) ?
- anything else i forgot ?
If you rent furnished it is better for shorter-term. And if you put all ikea funrniture in it, it will be ugly, so you should not be in Manhattan.
Unfurnished, you are likely to get people in for longer-term.
>so you should not be in Manhattan.
Are you in Ottawa?
thanks fot the answer
I suspect it'll be harder to find a tenant if you rent it furnished (unless maybe students are the target market). People like their own individual taste and style ... sometimes even for short hotel stays.
However, you'll piss the building off much less, and get their cooperation much more, plus minimize fees a bit, if you rent it furnished. No major move-in move-out trauma to the common areas.
what area of town? what price range? who are you targeting?
those are downtown studios for 500-650k$ thx
What rent $ are you seeking?
2400usd condo yes
Do you want executives who want a mid-week crash pad? Or 25 year olds living there?
-You have an idea to invest in NYC Real Estate
-You decide on this property type, neighborhood, price point
-You seek advice on SE on furnishings
Please fill in the missing step(s).
This actually inspired a related question. Just to have an average idea, what is considered short term rental vs. what us a long term rental? Now if furniture is involved, does the "definition" of short term (in particular) change?
why would you buy a studio as opposed to a 1 bedroom for an investment?
What nabe is studio located?
Is it an alcove or a straight studio.
Is it in a condo or a co-op?
so you are about to buy a studio for about 600K and rent it out for 2400? what is the monthly maintenance and tax?
Have to admit, this is pretty entertaining
Maybe he's going to buy it in Euros and rent it for usd.. Funny
Am in contract at the moment - this is a studio which can easily be transformed into a 1BD
> maintenance + RE taxes = 900$
> so if you put down 1/3 down (2/3 mortgage) you are carry flat (rent = mortgage + RE taxes + maintenance)
> yield cash on cash would be 3.7%
what's the most fun on this website are people who think they know everything about everything - THIS is pretty entertaining. this is the 4th apartment i am buying in NYC and looking for more
"this is the 4th apartment i am buying in NYC and looking for more"
... so you're a master at losing spending power to inflation, and to wear and tear and aging of your apartment; you're a gambler regarding loss to vacancies between leases; and you're a philanthropist who subsidizes tenants, among other things.
And cash-on-cash yield of 3.7% is truly tragic. Why do you bother?
Alan, 3.7% is tragic, you must be, what 8% risk free?
Who knew you were such a superior investor (is that with or without Sprint?).
what is wrong with a 3.7% return??? I find that quite attractive given today's rates.
In my opinion, it is easier to rent unfurnished. Take into consideration the person has their own furniture. Also, people tend to break things whether it's purposely or accidentally. Finally, some will not maintain the conditions of the furniture supplied. I'd always prefer unfurnished over furnished!
1. It's not a 3.7% return -- that's the "cash-on-cash" estimate. The yield (cap rate) would most likely be about a third of that with the proposed financing.
2. Even that is likely an overestimate, given the numbers presented and the real costs of repair, replacement and vacancy that should be assumed.
3. Real estate is a very illiquid investment. Today's unusually low rates are not likely to last; capital will be tied up in this.
4. New York has a legal climate that (appropriately, given the housing shortage) can make it very difficult for a landlord who has a difficult tenant. Think months of lost income, at least, and legal bills.
5. At least with a CD you get a free automatic electric sliced bread toaster.
6. And gods help Investor Clouseau if this property is currently tax-abated!
Plug the numbers in yourself: http://visulate.net/investment For the fun of pretending you're a misguided financial whiz like Investor Clouseau here, use zero for the value for all replacement estimates, use zero for the vacancy rate, use zero for closing costs, use zero for insurance, and for management costs. You'll find yourself with some cash flow, and a rather unappealing cap rate and cash-on-cash return (given the many risks and the illiquidity).
Then start making reasonable estimates for all those zeroed values.
A pin drop will begin to sound like a beautiful symphony.
"what's the most fun on this website are people who think they know everything about everything - THIS is pretty entertaining."
Maybe they'll offer a free toaster with the studio..,,,,
If you want a long term rental, do NOT have it furnished.
alanhart-- That calculator that you use to base your ROI on doesn't take into account the unthinkable. That is what if rents actually go up or if the studio appreciates in value.
It's not that it's unthinkable ... just that it's unpredictable whether rents go up (or down) or whether the property appreciates (or depreciates) in value. That's why traditionally the landlording business pays no attention to the question of resale value, just net income from rental operations.
By the same token, it doesn't try to adjust for increases/decreases in taxes, insurance, utilities, maintenance, vacancy rate, etc. over time.
It's a snapshot, because anything more would just be Whisky, Bikes and Doughnuts.
>because anything more would just be Whisky, Bikes and Doughnuts.
"parage" refers to social rank or lineage. Am I being too déclassé for your sensibilities?
I don't speak French.
Long-term renters will usually have their own furniture. Short-term renters often prefer furniture to be there already. Depends on what kind of renters you want.
thx for all your comments , i finally bought (445 west 19th st) it and rented it out unfurnished. Trying to buy more by the end of the year
Why wow? Because you are too stupid and poor ti invest in real estate it means others are too?
How much do you love this?
possibly the polar opposite of how much you hate it.
>>> i finally bought (445 west 19th st)
I presume you bought unit 5E then? Hard to see how this could be easily converted to a 1 bedroom as you suggested, but does seem a highly rentable unit. Kudos to you.
matsui, you clearly have no idea how dumb and desperate most renters are to live in a neighborhood like chelsea. i've seen two bedrooms this size.
correct was unit 5E
Look how 3E became a one-bedroom: http://img.streeteasy.com/nyc/image/38/14325138.gif
If the windows were spaced differently, or even as they are, you could make a LR and two bedrooms, each just shy of 7' wide.
Renterjoey, I really dont see the risk reward.
Given the listing speed to deal, I doubt it was sold more than 3% off asking.
545 time 97% = $528K And closing costs put you well back and then some to the $545K anyway.
What is the upside in value appreciation over the next 7 years? Will we really see studios surpass $600K???
What rent can be expected? $2200? At best of times? $2500? Deduct the $940 a month cc/taxes. (that goes up too)
One bad tenant sets you back 5 years. How about a broken fridge? Oven?
So 1/3rd down leaves a $365K mortgage.
On a 30 year at 4%, that's $2683 a month.
Plus the $940......
Of course you'll be using exotic ARMS
The exotic ARMs wont be looking so good 4 years from now. Banks now recognize this form of lending only works in perpetual bubbles.
Should we find ourselves at let's say 7% interest rate 5 years from now and some overleveraged owner with say, 8 apartments by that time, will there be a govt relief for the smaller business guy the next go round?
We can call it TARP SBS, Totally Asinine Realty Purchasers ....Shoulda Bought Sprint
Jim home said its a good investment, donut must be.
Wow, I typed "so it", but my iPhone figured Jimbo was a donut. These iPhones really are something else!
Brooks, really, if you dont have the pocket, or balls, or brains to invest dont sweat it.
truthskr10 you do not know what you are talking about at all...
and closing price was 510kusd by the way
Benolie? Flmaozz. Shove your head between your legs and repeat 'I made money on that deal!'
Congrats on purchase! So unfurnished? Brooks, talk into it.
Similar units have recently rented for about $2500 in that building. It is difficult for me to grasp how this can be anything but cash flow negative for 5 years or so UNLESS TOP lies on his/her tax form and claims this is his primary residence and thus gets the mortgage interest and property tax deductions while simultaneously not declaring the rental income. It definitely takes appreciation in value for it to work. Am I wrong?
Jason, 1d the unit you appear to be referring to was "asking" $2500, and removed from the market just 2 weeks after 5e goes into contract.
If I were a buyer, Id rely more on what actually rented;
closest example 2e $2300; http://streeteasy.com/nyc/rental/738449-condo-445-west-19th-street-west-chelsea-new-york
ANd the net rent is 10% to 15% less after broker, more likely 15% on the studios.
Beno,considering the apartment is listed as needing TLC, and the current owner has owned since '95, Don't be surprised to dump the 35K back. (im sure it was your negotiating tactic..yes?) :)
"and the current owner has owned since" should be
and the PREVIOUS owner has owned since '95
So anyway I don't understand how this is a good investment...except maybe that mortgage over time stays flat, and inflation raises rents? So like years from now this becomes CF positive?
so do you think if any only if you can generate positive cash flow immediately then any purchase of real estate as an investment is silly? What about if you purchase a condo in NYC or San Francisco as a long-term investment (5-10 years at least) and the rent you charge exactly covers all your carrying costs? You are hoping the condo will appreciate in the long-term and that rents will rise. Of course, they may not, but if you invest in the stock market, you are also not guaranteed that the stock will rise.
I'm just curious why there are so many nay-sayers on the forum as far as buying real estate as an investment. I own investment condos in NYC and San Francisco, for one, the rent covers all my carrying costs and for the other, the rent more than covers all the carrying costs so I am actually making some money. Both I plan to hold for the long-term. I really have a hard time believing that both properties will be worth less in 10 years. Maybe in 1-2 years, sure, but not 10. I for one, am very pleased with my decision to buy both of them (in the last 12 months).
911turbo, I agree with what you say. I own multiple condos in Manhattan and I can tell you and everyone who cares that it is virtually impossible to buy a condo in Manhattan, rent it out and make a profit. Over time yes.I just put an offer on a condo and offered the amount I would receive in rent equal to my monthly payments. I received a counter offer but doubt we can get together on price. My "profit" at this point is my tax deductions. Any profit I use to pay down the loan so my costs keep dropping.
911, I don't think it's that, it's just that both the bulls and the bears on this forum tend to exaggerate their numbers for their own purposes.
The OP, for example, may have made a very smart decision to buy in Chelsea, but he's also claiming a 3.7% cash-on-cash return, which leaves out very real landlord expenses like insurance (I am a landlady, and mine runs to close to $100/month for my investment studio) and any kind of allocation for repairs and renovations.
If this property cost $510K, and it's renting for $2400/month, and its CC + RET is $940, and you make a minimal allowance for other expenses, the return is still positive, but it's not as good as trumpeted.
Which leads me to wonder, where are nada and financeguy?
DG Neary Realty
don;t you want to add a laugh out loud?
I cant help but jump into this conversation...
First of all congrats on your sale! And lots of luck!
Second of all, you can definitely rent this unit and offer it to the public both furnished and unfurnished, for different price, it all depends how much turnover do you want to have. Buying real estate is not only for immediate return on your investment, but overtime, it can a good investment for your retirement...as I see my uncles and aunts living off of their rentals...social security is not enough ....as far as immefiat benefit, taxes are a big benefit
And as a landlord you can deduct plenty of improvement as expenses...etc...
You can do short terms but I don't know the policies of your management or your board.
I am from r elocution, and we have plenty of demand for units for short terms.
Far as furniture, if yo wish to rent it furnished, you can also rent furniture and you can do so much and over time, you either can sell for a profit or
Lease for kore money... Again Best of luck!
VP Asso Broker
CITIhabitats Relocation and Corporate headquarters
we sell, we buy, we lease and we have the knowledge and the expertise to do it all
Of cse a RE broker is qualified to give investment advice
about 3 hours ago
Member since: Aug 2011
ignore this person
Of cse a RE broker is qualified to give investment advice
what would your qualifications be? a prolific poster on streeteasy?
911 - There are a number of posters on the site who appear adept at beating the market in their investments, and they prefer vehicles other than real estate. I believe their thinking is that real estate in Manhattan is not going to appreciate significantly in the near future, and if it does, it will not appreciate enough to offset the work and lack of liquidity in the capital involved, not to mention the uncertainty regarding taxes, etc. Given the myriad of other investment vehicles out there, they simply cannot understand why anybody would choose Manhattan real estate as a place to park their capital if their goal is to make money. I do believe they think that there will be some positive ROI for a diligent purchaser, just not one that justifies everything involved. I think the flaw in their thinking is that they assume that everyone has the same acumen as they do regarding other investment vehicles; I find it a bit mean-spirited for finance whizzes to hang out on any site that is dedicated to a particular asset (in this case Manhattan real estate) and continually call people who prefer that asset morons.
Ya fking moron!
Sprint is nothing more than real estate disguised as a 'cell' company.
Sprint has assets - > cell towers and offices. It's got debt. It's got 'rent' in terms of monthly bills. It's got a 'long term lease component' with 2 year contracts. It's got upkeep like real estate.
It's got other LLs that wanna take my renter! In AT&T and verizon.
Yeah, I'm a financial genius or you are a re humping financial retard. A fktard if you will. Hilarious.
I find it a bit mean-spirited for bullish buyers to hang out on a site that is dedicated to both RENTALS and PURCHASING and continually deride those who choose to rent, but that's what has happened on this board for years. It's not just bears touting their decisions.
That's the nature of this beast, no?
Hi AR - Yes, it is the nature of this beast, and I should have also noted that while I find it a bit mean-spirited, I also find it interesting, entertaining and educational.
Wow Ali, $100 a month? I fgured around $50.
I suspect it's a no nonsense, cover my head to my toes policy.
But there you have it, $2400 (if we accept that rent), minus broker commission 10%(will for sure be 15%) = $2160, minus $60 let's say for insurance. Your down to $2100.
$510K,let's ignore the "TLC" it needs and the closing costs, 1/3 down is $168K. Your mortgaging $337K.
Your monthlies are $940
$337K mortgaged at 30 years at 4% is @ $1607 per month.
BTW, do they even allow 30 year mortgages on investment properties? I think it's 20 years max.
So you go for the 5 year ARM. What 3%? Thats $842 a month interest.
So interest $842 plus $940 monthlies = $1782.
SO holding our breath for the next 5 years that interest rates stay where they are, and the $940 doesn't go up at all. A net gain of $2100 minus $1782 = $318 a month.
318 x 12 months = $3816. Divided by $168K down payment equals 2.3%.
2.3% while ignoring closing costs,repairs,any vacancy months
2.3% anticipating no increase in interest rates
2.3% hoping (after paying $1167 per sq ft) it will go up five years from now to what? $1300 per sq ft? Or rent will go to what? $2700 per month? for a studio?
And what happens in 5 years? What would make one want or have to sell in 5 years? A large spike in interest rates? ANd what's a large spike in interest rates do to price per sq ft? It's like a double whammy.
Yes NYCNOVICE, an excellent post.
Aside from my home, all my real estate ownership is outside manahattan.
After all, the purpose of investments both short and log term is to make the most money.
Though if I were a french national looking to relocate my assets with some diversification,buying no/low gain apartments in a city like NY for long long term gain might be appealing. :)
Truth10, yes the insurance on an investment property is pretty comprehensive -- includes a million-dollar liability wrap in case one of the tenant's guests falls down in the apartment and sues me.
Also, I wouldn't back out broker commission because I'd assume in this market it's paid by the tenant.
Ali, yes, your right on commission, I was in a "commercial" frame of mind.
Of course the likely vacancies between leases will eat that % up.
In this market......
In that market.....
In zirp market.....
Rents goes up forever market.....
RE always a good buy market......
Best case scenario 3% return versus 122% for sprint in 10 months.
Some ppl make $500mm with their Harvard degree. Some can't do simple IRR beyond one year.
Oh Lordy. I'm so sane. I am the 1%.
The insanity is insane. Pls stop. I can't laugh anymore. I'm gonna cry. Maybe laugh some more and then cry. But definitely more laughing.
NYCNovice - post #122 = EXACTLY. If I could go back in time and buy in the late 90s (even though I had no money then) sure it would have been great. Now? Can't see it. I own a couple of real-estate oriented funds, that gives me plenty of exposure.
So I see there is a mortgage for $350K. I originally figured $365K Pretty negligible difference.
I see the Wells Fargo mortgage is promised to be paid by 2042. Sounds like a 30 year mortgage to me.
Wells Fargo is showing on a 30 year today 3.8% apr. I originally figured 4%. Still looking pretty negligible.
Monthly payments on a 30 year 3.8% = $1630.85, my original was a typo at $2683, should have been $1683, my second evaluation after you corrected sale price showed $1607 per month. $1630...$1607...yep still looking pretty negligible.
$1630 + $940 = $2570. THat's already past the income.
I see the mortgage requires "rent loss" insurance. Between 3% and 5% cost. Let's call it 4%. $2400 a month "claimed" rent. THat's another $100 a month less.
Ali was spot on.
I certainly was pretty close, but you are of course entitled to maintain your opinion that "I don't know what I'm talking about at all." ;)
Yes, very bad investment decision
don't forget condo mortgage rate is 0.25% higher, so if you see 3.8% apr, for condo it'll be 4.05% APR
truthskr10 thx a lot for your calculations - i am in the process of buying another one, maybe i should hire you as private consultant.
What did you end up renting it for? Fee or no-fee?
i rented it with a yearly lease unfurnished from day 1 of closing
How much for?
Yes, I was asking price & no-fee vs fee. How did you rent it? Broker?