This aint terrible: Sale at 40 East 88th Street #3F ($1.087mm)

Getting close - $900,000 is the price it should settle at.

One of the best market-rate rentals nearby is the Claridge House:

milfordmgmt.com

About $5,300 for a similarly sized apartment, which is huge.

I'm comping it to my building, 12 E 86th. Is Claridge PS 6? This is and my rental is. Probably makes a little bit of difference. I agree, that if someone offered me my rental for $900k (and maybe a deduction for the condition of this place) I'd be piqued. Issue for me is we are going to have a second kid...I think whats broken down in Manhattan is the perceived safety of buying, appreciating, and moving up the food chain.

You have to consider, though, that rents may continue to fall, as they have where I am now. Granted, I'm 1,200 square feet & both of those are larger, but if mine's @ $3600 a month, I can see UES falling to $4,500 easily. Up there you choose: park or subway. Here there's not that choice. I have no kids, school doesn't matter.

Comedy clubs do!

Current listings at Claridge House:

http://www.nybits.com/apartments/claridge_house.html

It also has an indoor swimming pool & other amenities that people might pay for.

All in all, considering the location & amenities & size, Claridge House is pretty reasonably priced.

Nice place, good price.

I agree...my only point is that PS 6 may command some kind of premium over 3rd & 87th...both in terms of feel and in terms of the school...such that $5300 may be a little low. Yeah Steve rents may fall...But I am more bearish on the basis of valuation relative to rents, then the fear of rents falling further. I think rents at 2000-2001 levels are somewhat 'safe'. For me, its kind of a moot point as it relates to buying....until those relationships get a little more favorable toward buying. I generally like your $900k figure for this one.

My friend just renewed in our 2/2 line at 12 E 86...I need to find out if he was able to negotiate down into the $4000s.

this ain't terrible either. it's technically a jr. 4, but the bedroom is a real size with a closet and a window, and the total living space is similar to the one in the OP. PS6, and closed for $875k.

http://www.streeteasy.com/nyc/sale/368352-coop-50-east-89th-street-carnegie-hill-new-york

but it ain't pre-war.

Why would we compare a large preward 2/2 of around 1200 sqft to a post war junior 4 in a gross building?

A cute 2 bed / 1 bath, I think at 10 or 7 or 5 e 85th just sold for $775k or thereabouts. Gross junior fours need to go lower than $875k.

rhino, that pre-war wasn't any larger. the living space was tiny.

40 e 88 is about 150-200 sqft larger. Yours is listed at 1100, and is probably about 1000. 40 e 88 is actually at least 1200...so 200-250 larger. Thats not a small Manhattan living room.

rhino, 13x21 with no dining space is small. but i really don't care, was just providing an example of a property that was in PS6 at roughly the same size (smaller second bedroom and kitchen, larger living space), at a couple of hundred thousand lower, wasn't opining as to which was better. i certainly didn't view it as a competition. happy thanksgiving.

Happy thanksgivng.

40 E 88 is probably at least 1400 square feet, but a lot of that space is wasted with hallways.

Nonetheless, they give you a place to hang your art.

You think its that big Steve? I had thought Hallways are a total waste...but the feel of them is not bad...And with a baby, our front hallways is a god send for strollers and whatnot.

I think def. 1400 square feet, if the dimensions given are correct. As I said, I moved from 900 to 1200 and the difference is amazing, but if I moved to this one at 1400 I don't think it'd feel so big b/c of the hallway. However, knock down the wall between the hallway and the L/R, & then you're talking some major space.

I prefer my current config, with no hallways, but that's just me.

"I think def. 1400 square feet"

Well then at $766 per sqft, this is a steal of a deal. At your $900k number, were looking at $642 per sqft. Wooooo Doggie!

To each their own of course. I find hallways a little unsung. It's nice to transition and walk. Gives a good feeling. Plus the stroller stuff. For the price you obv have a great deal. With kids I would lean further uptown and ideally in one of the good ps's.

Check out the 1997 sale at 40e88.
http://www.nytimes.com/1997/05/04/realestate/residential-resales-854441.html?scp=17&sq=%2240%20east%2088th%22&st=cse

nyc, that's $400 psf. Anybody care to figure out the CAGR?

JM, the apartment isn't a "steal" by rental standards, though it's getting close. I think $650 psf is a decent price, equivalent to rents.

Again, Rhino, hallways = to each his own. I've found mine to be a waste, though throwing cat toys down them does keep the animals entertained.

steve, wouldn't Rhino's cap rate change if it was 1400 sqft?

Approx. 9.5%, assuming that it is a C7 and would sell for 3m.

Nice apartment, but this is not even close to 1400 sqft IMO.

Looking at the floorplan, it seems easy to calculate the size of the entire box (rounding):
Kitchen 8' wide
Living room 13'
MBR 12.5'
Total = 33.5'

For the lengths:
Living Room 21'
Bedroom 12'
Hall/bathroom say 6' approx.
Total = 39'

33.5 x 39 = 1,307 sqft for the entire rectangle

But then there's that entire chunk in the bottom-left corner that does not exist, not in this apartment anyway. Let's say that's 12x12 = 144sqft

So... 1,307 - 144 = an 1,162 sqft apartment. Roughly, of course. No?

seg, that seems perfectly logical. Just understand that steve needs to inflate every floorplan by 200-300 sqft from now until forever. He does this to avoid admitting that his 1200 sqft place is actually 900 sqft.

Oh, JuiceMan - YAWN.

The problem with just measuring the lengths of the rooms is that you don't account for interior walls and closets, among other things.

No, cap rates don't change based on square footage.

Ok, I take the under on 1400 sqft...but are people trying to say 40 E 88th is under 1200 sqft? I dont feel like doing the math...but when I saw this place my gut sense was 1200. Very similar to my rental.

Just the rooms with dimensions given amount to about 950 square feet. If you can't get the rest (to 1,400, though I'd accept 1,350) from 2 bathrooms (one with a tub & shower), a long hallway, multiple closets, interior walls, then there's a problem.

A studio worth of halls closets and bathrooms doesnt sound like a given. The methodology of the guy above who calced 1160 is most sound to me.

Round up to 1200.

Do it a different way: the main square is approximately 940 square feet. The remaining bedroom is approximately 210 square feet. Total 1150 square feet. Add interior walls, additional closet spaces, you can easily get another 200 square feet. Interior walls alone are over 4" wide, and there's lots of them.

If you want to say "living space," then 1200 is about right. If you want "total space," that's a different matter.

The guy who got to 1160 took the whole box and then deducted only the part that doesnt exist...So that would seem like he included the interior walls and closets.

But the dimensions of the rooms by definition don't include the walls. I agree with his calculation of total living space - that's just not how square footage is calculated in Manhattan. Every locale has its own method: in Florida, for houses, it's "under air"; in Atlanta they don't count basements; in other locations they don't count bathrooms if they're, say, off the garage rather than the living space.

Sheesh! Don't you EVER watch House Hunters?!

Steve,
Let's conform the measurement to your system. First, all the major closets were already included in the whole box. The one exception is the small closet off the second bedroom. I'll generously say this is 16 sqft (4x4).

Next, you're right - I neglected the interior walls. How many linear feet of interior walls do you think there are in this apt? 50'? 100'? 100 seems like a stretch, but let's go with that anyway. 100 linear feet at 4" wide = 33 sqft.

So: That's a 1,162 sqft box (from before) + another 16 sqft closet + 33 sqft interior walls. Total = 1,211 sqft.

Obviously these calculations are imprecise, but I dare say they should be good approximations, and there's no way this apartment is bigger than 1,225 to 1,250 sqft (tops), by any standard.

"No, cap rates don't change based on square footage."

If you compare a 400 sqft rental to a $1.087M purchase vs a 1400 sqft rental to a $1.087 purchase, you won't have different cap rates? Larger sqft = higher rent. Higher rent in comparison to a fixed purchase price = higher cap rate. Duh steve, I think the turkey is impacting your senses.

"This is probably a $5,500 rental, implying a 5% cap rate. Not terrible."

Rhino, if this apartment was 1400 sqft wouldn't you assign a higher rental value to it? Since the purchase price is fixed and higher rental value would assume a higher cap rate.

"Oh, JuiceMan - YAWN."

Yawn all you want steve, but ever since you have defended your rental as larger than it is, every floorplan you look at is 200-300 sqft larger than it was a year ago. It is so obvious to everyone it is funny.

I think the way to settle this is ask the broker. I'd be shocked if even a lying NY broker had the balls to quote this above 1300 sqft. And if they quote 1300, chances are its 1200.

Juice, since size is in the rental value, I would not assign a different cap rate to different sizes. Size has already been adjusted for in the rental price. I dont need to adjust it in the cap rate as well. I think there is a scarcity premium (higher price per square foot) for large family apartments in Manhattan. This said, I dont think this one is large enough to command that premium. There are plenty of rentals available at this size. This however, does have nice finishes. Yet another "however" is that plenty of condos with immaculate brand new finishes are on the market, or about to be on the market.

"since size is in the rental value, I would not assign a different cap rate to different sizes."

Thank you, Rhino.

"but ever since you have defended your rental as larger than it is"

I think you're the only one who claimed 900 square feet, Juicy. Or was it 650 square feet? I don't recall, but as you've been wrong about everything else (including cap rates), why not this, too?

YAWN.

Juicy, I forgot to ask for your follow-up: how many of those thousands of programmers did Chase actually hire to integrate BSC? I've been awaiting the result of your research.

http://img.streeteasy.com/nyc/image/6/8227306.gif

Guesses?

1075-1100

I would say 1,200 including the interior walls, though 1,150 is okay by me, as well

Steve are you trying to get it right (according to the rules discussed), or trying to match what a broker would say?

I think the broker says 1,300, which is a stretch for me.

(7+24+16) x (18+7) = 1175, - 35 for the difference between the 1/2 bath and the missing piece left of the foyer = 1140...best I got.

Not far from what I get.

This one's listed at 539 square feet.

HAHAHAHA!

http://img.streeteasy.com/nyc/image/4/6320604.gif

"Juice, since size is in the rental value, I would not assign a different cap rate to different sizes. Size has already been adjusted for in the rental price."

Rhino, I agree. My point is that you figured one rental price based on what you thought the size was. If it was actually 1400 sqft, you may have used a higher rental value. A higher rental value would = higher cap rate because the purchase price is fixed. steve can't grasp these simple concepts but I know you can.

"but as you've been wrong about everything else (including cap rates), why not this, too?"

If sqft has nothing to do with the price of a rental than I'm wrong. If sqft has an impact on rental prices that you are wrong. We'll let everyone else on this board decide for themselves, just like they did with the size of your apartment

"than I'm wrong"

You mean, "THEN I'm wrong"?

And you are: find me a cap rate formula with the number of square feet in it; you'll be hard-pressed.

"just like they did with the size of your apartment "

They did - and unanimously came down on my side, as they will for this one, as well.

And all those programmers Chase was hiring....

"And you are: find me a cap rate formula with the number of square feet in it; you'll be hard-pressed."

Not looking for a formula steve. Read (if you can) what I posted above. According to you, rent is the same regardless of the sqft of the apartment. Good luck with that. Wrong again.

"Read (if you can) what I posted above"

Okay: "steve, wouldn't Rhino's cap rate change if it was 1400 sqft?"

The answer is no. There is nothing anywhere in any cap rate about the size. The rent may or may not change depending on the size. Surely a ground floor 5th Avenue storefront is more expensive at 50th Street than one would be at 130th Street. Yet the cap rates could be the same, as the cap rate is (basically) the ratio of the rent to the purchase price.

If the rent is higher for the 50th Street location, then presumably so would the price. The size makes ZERO difference.

Just admit that you're wrong, JuiceMan. For once in your life, admit the truth.

"as the cap rate is (basically) the ratio of the rent to the purchase price."

If the purchase price is fixed (as it is in the OP) and rent is higher, what happens? You get a higher cap rate! OMG, the profoundness of it all!

Poor steve. Still can't understand simple concepts. I feel bad for him. steve will continue to mislead instead of answering the simple question within the example posted in the OP. If Rhino assumed a certain rent for what he thought was an apartment of less than 1200 sqft and it is actually 1400 sqft, Rhino is smart enough to adjust his rent upwards for the larger size (he won't because this apartment isn't 1400 sqft, which is another steve sham entirely). Doing so would result in a higher cap rate (assuming same neighborhood and building which was Rhino's point in the first place)

File this into another one of the 100's of simple concepts that steve can't understand. LMAO.

Oops.... I seem to have stumbled into the Size Queen tea room....... (backs out slowly and quietly).

Steve, you keep backtracking. what is going on?

As other posts show, you keep justifying your rental based on a $1.44mm purchase price. At the risk of putting words in your mouth, I thought that was suppsosded to be 1,200sqft at $1,200/ft = $1.44.

In almost all of these cases, there is one known (the rent your case), and one unknown (the purchase price). You are (wrongly) assuming 1,200sqft, and thus backing into a $1.44mm puchase price. If the square feet are really 1,000, then the price is $1.20mm, and the cap rate changes dramatically. So YES - JuiceMan is correct -- the size does have an effect on the cap rate.

This here example on E 88 is the opposite. In this case, the price is known, but the rent is an estimate. We are estimating the rent based on the approximate square feet. Rhino assumed $5,500/month -- not bad. Based on your nonsense 1,400/sqft assessment, the rent would be higher. Based on my realistic 1,200 sqft, the rent might be lower.

Depending how you look at it -- the size has a HUGE impact on the implied rent. And the rent has a huge impact on the theoretical cap rate -- given that the purchase is a known.

JuiceMan, like it or not, is right about this.

What is it here that's so hard to understand? Very basic stuff.

Juice what are you talking aboot? If that apartment was really 1400 sqft the rent wouldnt been 5500 it would be more.... The original point of this whole thread is that in a market that is still too pricey, this thing is roughly a 4.7% cap rate... Should drift to 6% but most asks are still 3-4%

"If the purchase price is fixed (as it is in the OP) and rent is higher, what happens?"

JuiceMan, you're fishing with that one. Even the OPster, Rhino, sees the ridiculousness in what you write.

Same for you, SEG - show me the cap-rate formula that says "size". You can't, it's not there. The size may or may not affect the price or the rent: it's just one more variable that goes into them. All the cap rate does is measure the rate of return on an investment property without taking leverage into account.

Size does NOT have a huge impact on the implied rent. It MAY have a huge impact on the implied rent.

I must quote zitz here: Tools!

I play Juices Advocate. Big apartments draw high earners with less price sensitivity and higher marginal tax rates. Further large rentals are typically owned by individuals with lower risk tolerance because they own one not seven thousand apartment like a corporation. Therefore, cap rates on larger apartments tend to be lower.

"Big apartments draw high earners with less price sensitivity and higher marginal tax rates"

That is not necessarily true. A big apartment in Houston may not have the same draw as a small apartment in Manhattan, or vice versa. High marginal tax rates have the opposite effect (assuming that you mean for the tax deduction) for mortgages over $1 million. AMT fades away at about $350,000 in income, which REDUCES the marginal rate.

"cap rates on larger apartments tend to be lower."

That is an assumption that you must admit is not necessarily true. While it MAY be true for two apartments in the same building or neighborhood, attracting a homogeneous set of buyers, it need not be true for all large apartments everywhere. It is a fallacy of extrapolation.

Well first we are talking about Manhattan by context. Good point on AMT... And I am playing Juice's Advocate... I will say anecdotally though, my wealthiest b-school friend simply bought because he couldnt find anything nice enough in a rental. Maybe he should have looked harder... I can faintly imagine that for high earners who buy trophies, cap rate may have a lot less meaning to them... Wrongly so, but maybe so.

very wealthy people for whom economic value is irrelevant are by definition not bound by any rationale economic rules. the person who can show up at a Rolls Royce dealership and drive away with a car has little to do with the value of BMWs and Mercedes much less Fords and Chevys.

There is definitely an elasticity of demand - no one denies that. But just BECAUSE an apartment is larger it will not necessarily change the cap rate. I'm sure Warren Buffett can afford any apartment in Manhattan he wants; yet he lives in a 3-bedroom ranch in Omaha.

You could, in theory, also buy an apartment where there is no cap rate, as there is no rental market for it. That, I suppose, would occur at the very high end. But again, that apartment (or any other) could be a huge co-op on Park Avenue, or a smaller, overpriced condo at 110 CPW. The size is just ONE of many factors that go into determining the price (to buy or rent). Therefore, JuiceMan's post is silly, and fallacious.

It doesnt change the cap rate...maybe cap rate is just not relevant for those people. Maybe they buy it like art. I agree with CC yet again (yawn). One thing is for certain, the apartment at 40 E 88th here is not large or wonderful enough to apply this cap rate idear. Reality is, most people dont use it anyway. People buy when they have the money and their wife pushes them to nest. If rates are lower, they simply bid the price higher.

"Juice what are you talking aboot? If that apartment was really 1400 sqft the rent wouldnt been 5500 it would be more."

That was my exact point Rhino. You figured the cap rate in the OP based on a certain (smaller) sqft. My original point to steve when he claimed that the apartment = 1400 sqft was that it would have a higher cap rate than you calculated. That's it. You used a different assumption (which was accurate by the way, I'm not contesting your logic) and when steve changed the sqft, you would have to revisit the assumption you made in the rent (e.g. increase it).

"Depending how you look at it -- the size has a HUGE impact on the implied rent. And the rent has a huge impact on the theoretical cap rate -- given that the purchase is a known."

That's exactly right seg, especially in the same neighborhood and building.

So steve can spew on about "elasticity of demand" and all this other distracting nonsense. The concept is simple, if you increased the sqft in the OP you would also increase the rent.

"Therefore, JuiceMan's post is silly, and fallacious."

Well that means that seg and Rhino are also "silly, and fallacious" because they both agreed that if that apartment is 1400 sqft (which it is not) then you would increase the rent in the OP and would therefore have a higher cap rate. Guess steve is the silly one now.

Juice no I did not agree with you. Whether this is 1200 or 1400 sqft, its not the type of trophy apartment where some richie rich is going to throw out rent/buy math.

Rhino, you agreed with me when you said this

"If that apartment was really 1400 sqft the rent wouldnt been 5500 it would be more."

That was the point I was making. Did you not write that?

Yes if it were larger, it would rent for more. Your point was if it were larger, it should have a lower cap rate. Therefore, on that score, I disagreed with you. As consolation, I offered that very large trophy apartments may carry lower cap rates, but not in this case.

JuiceMan: "The concept is simple, if you increased the sqft in the OP you would also increase the rent."

JuiceMan: "If the purchase price is fixed (as it is in the OP) and rent is higher, what happens? You get a higher cap rate!"

So JuiceMan's theory - unsupportable, of course, as usual - is that the size affects the rent but not the price.

HAHAHAHAHA!

JuiceMan: "they both agreed that if that apartment is 1400 sqft (which it is not) then you would increase the rent in the OP and would therefore have a higher cap rate"

One of the factors that can affect both price and rent is size - your demand to hold one constant (price) while varying the other (rent) to suit your purpose is as insane as everything else you've ever posted.

Moreover: "Juice no I did not agree with you."

JuiceMan, use those last 3 letters of your handle, be a Man, and admit that your comment is wrong, silly, and dumb.

Rhino, cap rate is something that people understand implicitly, I think, as they do compare prices to rents (empirically proved nearly 100% correlation).

"Your point was if it were larger, it should have a lower cap rate."

My point was specific to your OP. Why is this so hard? Rhino, what happens when you increase the rent (which you said you would do if it were 1400 sqft) from 5500 to something higher in your OP? What happens?

"is that the size affects the rent but not the price."

The price is fixed in the OP! How many times have we said the price is fixed! steve can't read! The place is already sold, it is either 1200 sqft or 1400 sqft and depending on that answer, there will be a different cap rate becuase the rent will be different (as Rhino has already stated)

Good ghost, I don't know how this could get any simpler.

Juice this is so simple, but you're the one who doesnt get it.

Back in the hole. I thought I could find you tolerable, but I can't. [BLOCKED].

Purchase price is known at $1.087MM -- there's no changing that. Same with the maintenance. The 2 big unknowns are the rental rate and the size of the apartment.

Rhino initially used a rental price of $5,500, which (I believe) he premised on it being a 1,200 sqft apartment. Using the $5,500 and the $1,206 maintenance, I get to a cap rate of 4.7%

All we're saying here, is that IF the sqft are not 1,200, but something else, then the rent assumption should logically move in tandem. For example, using the same $1.087MM price:

1,100 sqft, $5,000/month = 4.2% cap rate
1,200 sqft, $5,500/month = 4.7% cap rate
1,300 sqft, $6,000/month = 5.3% cap rate
1,400 sqft, $6,500/month = 5.8% cap rate

Poke holes in the ASSUMPTIONS all you like, but I can't see that there are any flaws in the logic or the calculations here. All else equal, cap rates DO move up and down depending on the rent (which is in turn correlated to size). Sorry.

I see the confusion. Yes if the rent changes, the ex post facto cap rate calculation changes. What Steve and I are saying is that size does not conceptually change the appropriate cap rate to use to calcuate a value. Further clarification - whatever square foot you want to use on this apartment...by eyeballing it, the rental value is about 5500. If Steve has a more generous eye, or even if I concede a more accurate eye, and gets to 1400..I dont think anyone is saying that this apartment commands much more than 5500/month.

Agree on all of that. Especially -- "What Steve and I are saying is that size does not conceptually change the appropriate cap rate to use to calcuate a value."

I never meant to be arguing that size changes the appropriate cap rate that a buyer should require. I was only saying that size might impact the actual implied cap rate of this property is, taking the purchase price as a given.

I think Steve and Juice just started arguing, because it came natural.

That said, I do argue that cap rates lose their relevance the higher up the apartment chain you go. For an apartment like this rent/buy clearly applies directly or implicitly. Further, I dont think most people think this mathematically, but its at their own peril...and reflects the fact now that 1 in 4 buyers is underwater. Cap rate is tough to apply in suburbs...but I'll tell you there are a lot of house rentals in CT that make more sense to me to rent rather than buy. You cant buy a house as nice for $1.5mm as you can rent for $6000.

"How many times have WE said the price is fixed!"

JuiceMan, there is no "we" here: there's "you". You're the only one who said it, but you can't fix the price and not the rent.

Use 1300 Rhino, fine by me. I posted some comparable rentals in the area, and I agree with your $5,500 figure. The comps I posted have approximately the same room sizes, sans the hallway.

"JuiceMan, there is no "we" here: there's "you". You're the only one who said it, but you can't fix the price and not the rent."

Your just playing games now steve. The price is fixed because the apartment is sold. Do you understand or is that too difficult a concept for you? The conversation was about rent. seg said it well above:

"1,100 sqft, $5,000/month = 4.2% cap rate
1,200 sqft, $5,500/month = 4.7% cap rate
1,300 sqft, $6,000/month = 5.3% cap rate
1,400 sqft, $6,500/month = 5.8% cap rate

Poke holes in the ASSUMPTIONS all you like, but I can't see that there are any flaws in the logic or the calculations here. All else equal, cap rates DO move up and down depending on the rent (which is in turn correlated to size). Sorry. "

Pretty simple stuff steve and I'm not at all surprised you cannot grasp it.

"I think Steve and Juice just started arguing, because it came natural."

That's not true Rhino. I asked a legitimate question based on your OP. I actually like the way you look at things from a cap rate perspective and though I don't always agree with you, your math has always been solid (unlike others posters that you seem to have become found of)

"Back in the hole. I thought I could find you tolerable, but I can't. [BLOCKED]."

Please do block me Rhino. If you can't understand that I was actually supporting your OP and asked a simple question about what rent would do should the sqft change, then by all means ignore me.

Juicy, are you now quoting seg verbatim? Are you seg?

"but I can't see that there are any flaws in the logic"

Of course there are flaws in the logic, JuiceMan: THE SIZE OF THE APARTMENT IS JUST AS FIXED AS ITS PRICE. If not more so. Therefore, the cap rate doesn't change at all, because the size of the apartment doesn't.

Pretty simple stuff Juicy, and I'm not at all surprised you cannot grasp it.

Now then, if you had a variable-sized apartment your theory would be grand, but the second flaw in logic, subsidiary to the first, is that the market rental price of the apartment is also FIXED at the time it is sold. It no more moves up and down than the size does. The (stupid) calculation by seg implies that a 1,100 square foot apartment would sell for the same price as a 1,400 square foot apartment, which, in the same building, is highly unlikely.

That's why the whole argument is false:

a) The size of an apartment does not vary.
b) If the price is set by the market, so is the rent, and it does not vary in an instant.
c) A 1,400 square foot apartment does not sell for the same price as a 1,100 square foot apartment under the conditions of this example.

Actually, Juicy, Rhino & I agree on 99% of everything. How you can like what he says without liking what I say is, therefore, impossible, as we are saying the same thing (albeit sometimes in different ways).

Juice, never, I mean never, pretend that you and I agree on anything.

"The (stupid) calculation by seg implies that a 1,100 square foot apartment would sell for the same price as a 1,400 square foot apartment, which, in the same building, is highly unlikely."

No it doesn't at all. The apartment was sold for $1.087M. You said it was 1400 sqft others said it was 1200 sqft. The only reason why you call seg's calculation stupid is because it makes you look stupid.

Yet another thread where steve takes a normal conversation into oblivion. He has no idea what he is even arguing anymore.

"Actually, Juicy, Rhino & I agree on 99% of everything. "

Great so if you agree with Rhino, he has said in this thread that the rent would be higher if the sqft was higher and that the cap rate would change if the rent was higher. He also understands that we are dealing with a sold apartment so the price is fixed. That means that seg and JuiceMan are both correct. Thanks again for proving my point.

Here's another way to look at it Juicy: calculate the cap rates in these cases:

A) An apartment sells for $1.087 million AND it is

1) 1,100 sqft
2) 1,200 sqft
3) 1,300 sqft
4) 1,400 sqft.

B) An apartment sells for $1.087 million AND it rents for:

1) $5,000 per month
2) $5,500 per month
3) $6,000 per month
4) $6,500 per month.

"The only reason why you call seg's calculation stupid is because it makes you look stupid."

No. The only reason why I call seg's calculation stupid is because it IS stupid.

We know what it sold for....if we have the rent 'wrong' - for size or whatever reason - then we have the wrong cap rate. My original point was because this maintenance is low-ish and this apartment can be agreed upon as a $5500 or so rental, its cap rate is more attractive as a buyer than many other things on the market right now.

And Steve, you may not remember, but before this apartment sold and was asking $1.25mm, you had said it would be interesting at $1.1mm. Also this said, a 4.5-5% cap rate is nothing to crap all over onesself about in the grand scheme. I was just putting this one out there as a bit better than most offered apartments in the neigborhood and on the Manhattan market in general.

I don't remember if I said that it would have been interesting at $1.1 million though I may very well have. How long ago? Because much has changed rent-wise in the last 6 months or so. I recently said that, as well.

I also agree with the $5,500 rent on this place as a good market rate. But before we go any further, I'm waiting for Juicy to answer the SAT question I posed on cap rates, see how he does it with just the square footage. I'm curious.

I blocked Juicy again. I hate to get in the mind of a Juicy, but I think he was trying to win the point that if we were wrong about the square footage, we might be wrong about the rent, and therefore the cap rate we calculated for the transaction would be wrong....Which is a truism of course. Then to further aggravate things...I offered that very large apartments may have a buyer pool that cares less...because well, they care less and also because rentals that suit them are difficult to find...and ownership is a status symbol especially in a rising market.

Juicy is probably a nice person deep down. But I think it's time for him to admit that the cap rate can't be calculated using a property's square footage.

That's the least of the admissions he needs to make. He is still insisting that I fabricated the 1990s Manhattan real estate market.

What 1990's Manhattan real estate market? As I recall, there wasn't one.

I understand from juicy and alpo that I have manipulated the data is some way, and that in fact, the price to rent and cap rates were quite similar to those prevailing in today's marketplace.

Real estate only ever goes up in value, Rhino.

Except when it goes down.

If it bottoms here, then I am a Steve-style forever renter investing in stocks and bonds. Its still 20x rent even up in CT. You can rent a lovely $2mm ask house for $6500 or so.

Steve, your SAT question:

A. Indeterminate. Price and size are not enough to calculate a cap rate.
B. The answers are the same as in my example above: 4.2%, 4.7%, 5.3%, 5.8%.

You know these answers, so does Rhino, so does Juicy. What's your point?

All we're say is, ALL ELSE EQUAL, as apartments get bigger, rents get higher. Any argument from you on this point? Nope.

And with a fixed purchase price, when rents go up, cap rates go up. Again, any argument from you on this? Nope.

So what's your point?

This is wild....I am the ref here. The point is, whether you want to measure this apartment at 1200, 1300, or 1400...the measuring convention doesnt change the general impression that its a $5500 rental. Therefore, the estimate of cap rate remains constant.

OK -- if it's a $5,500 apartment, it's a $5,500 apartment, and the cap rate is what it is. I agree that one SHOULD be able to look at the floorplan and get a sense of the appropriate rent, without measuring everything to the nearest square foot. I never disagreed with the $5,500, and I don't believe JM did either.

But what is alarming, is when everyone else believes the apartment is 1,200sqft, and one single person (Steve) is throwing out 1,400sqft without any justification. It is impossible to a form a reliable view on the appropriate rent, when you're THAT far off on just the size of the apartment.

"ALL ELSE EQUAL, as apartments get bigger, rents get higher. Any argument from you on this point? Nope"

Not true, either: every apartment is unique in space and time, therefore it's not possible to hold "all else equal."

"with a fixed purchase price, when rents go up, cap rates go up."

That is about as useful as saying, "When you add 1 + 1, you get 2."

Yeah oh well...I agree the 1400 is high. I doubt the broker would even venture such a guess. Of course I am happy with my own estimate. A brazen broker would probably say 1350. A stingy SOB might say 1120. This apartment is so similar to my rental, that I somehow feel kinda confident to call it 1200 and be done.

I agree with Steves point...its kind of stupid to hollar about algebraic truisms. Seg, be careful getting in bed with Juicy. He's a known idiot.

I'll be happy to reconsider and say 1200-1300. The room sizes are comparable to what I have:

http://ellingtonnyc.com/18_28_c.html

which I calculate at 1200, some say 1100 & I'm happy with that, too. I think I misoverguesstimated the size of the hallway.

However, "It is impossible to a form a reliable view on the appropriate rent, when you're THAT far off on just the size of the apartment." is a bit of a stretch. I made my misoverguesstimate based on the individual room sizes, not on the overall size of the apartment.