Riverside Prewar Co-op Studio up for Auction

It's an abandoned estate unit, which doesn't bode well for the condition. If you have to do the kitchen, bath, floors and walls, that 15-22% "discount" will disappear very quickly.

#710, which appears to be a slightly bigger, updated studio with the same exposure, failed to sell in March for $299K. So I would question your statement that similar units "consistently sell for 275-300k".

I agree that the rent-buy math is favorable. But I think most buyers who have enough cash to afford $47K down, plus transaction and reno costs, are going to set their sights higher. I also think the downside risk with a unit like this is enormous. Remember 1993.

#710 was listed for only three weeks which is hardly a test of the value. How do you know it's not the same footprint? Two other similar sized units sold in this building, with only a month on the market sold for 295k and 279k. By comparison, the cheapest studio rental in Brooklyn Heights, a less expensive neighborhood, is currently $1200, according a story in yesterday's NY Times. Brooklyn Heights is very nice, but its not walking distance to a Whole Foods or Riverside Park. After tax savings, the buyer of this unit would pay about $900. The very small kitchen and bath could likely be nicely updated for $15-20k.

I have a friend who owns a studio in that building. I suspect her unit is about the same size.

Her unit is extremely EXTREMELY small. It's a nice block, it's a nice building, but I personally couldn't live in a space that small. Or at least, I would not voluntarily do so.

W81. Isn't it interesting that the larger condos have been discounted more than smaller condos this time. The fact is that half of Manhattan residents live alone, and smaller units are more economical in a era where people are looking for new ways to save money and not looking to profit on their homes.

W81, why do you think the downside risk here is enormous compared to anything else out there? Not agreeing or disagreeing, just wondering what led you to that conclusion.

PMG, I think that even at $280K after getting bid up and renovation, there's a nice argument to be made for buying this unit. Based on rents for similar units in the building, I'd guess this thing would easily go for $1350 renovated. Between that, the low maintenance, effectively-no-money-down FHA loans with subsidized interest rates, and full usage of all tax subsidies, the "buy" logic at this price point is compelling for a long-term resident.

"Isn't it interesting that the larger condos have been discounted more than smaller condos this time."

What do you mean by that?

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aYIiwNL0qnEY

I couldn't find the reference to condo pricing that I recall reading, but this reference of all apartments says that studios did a bit worse than one bedrooms, but that larger apartments of three or four bedrooms suffered the worst decline.

Extremely small and/or undesirable apartments generally make poor investments. Three examples:

1. 96 Perry Street: microstudio I saw in 1985 asking $33,000 was still asking $33,000 in 1088 after
tremendour run-up in mid 1980's market

2. 226-228 East 95th Street, apt. 2-O: on market in mid-late 90's for $15,000 ask
3. 408 East 73rd Street, 5th floor: on market at same time for $8,000 ... and it didnt move

For you less experienced buyers, that same rule applies to 1st floor apartments, especially those
facing front, apartments facing walls, and those where you can literally reach out and touch your
neighnor, or hear noise reinforced by interior courtyards, as at 225 Central Park West, the Alden,

I viewed a number of studio lines in 310 in the middle 1990's, and they were extrenely small. I would
tape measure the unit for sale before bidding on it.

Don't you also have to pay a significant % fee to the auctioneer if you are the successful bidder?

"Extremely small and/or undesirable apartments generally make poor investments."

I seriously regret passing on a small prewar condo on a high floor near Columbus Circle. The asking price was $99k in 1998. I can assure you it has proved to be a very high cash return property for the buyer. All of the improvements to the area, TW Center, Whole Foods, 15 CPW were just around the corner. By contrast, this small studio doesn't have the neighborhood or unlimited subletting appeal. But for someone that can only afford to a $1400 rental, and doesn't expect significant income growth or a change in family status, paying $900 per month after taxes is savings that will add up over time.

"I couldn't find the reference to condo pricing that I recall reading, but this reference of all apartments says that studios did a bit worse than one bedrooms, but that larger apartments of three or four bedrooms suffered the worst decline."

I think this is just an instance of making crap up with random statistics. For example, the ppsf of Manhattan coop+condo studios peaked at $1033 and is now at $792, or a 23% drop. For 4BR+, it's $3253 to $2072, or a 36% drop. Based on the comp postings people have been doing, I don't for a minute think this is because the 4BR market did any worse: it's just a reflection of a change in what's being transacted.

this was a great post..i always learn something, thank you

inonada: During the last slump, we saw a lot of tiny studios like the subject lose 60-80% of their value. Will that happen again? No idea; I'm just drawing on experience. Granted, developers didn't build a ton of studios during the latest boom, so there's less of a glut.

BTW, I think you are exactly right about the effect of the product mix at the high end.

PMG: I don't think small apartments can be characterized uniformly as good or bad investments. I do think there's good reason to consider them volatile investments.

Inonada, you might not want to "believe" that 4BR apt have performed worse, but your own figures prove the contrary. People can say what they want about the investment merits of buying small. But if you own for $900 after tax vs. rent of $1400, you're saving $6,000 per year or roughly 4 months of rent per year. People sign high priced rentals for 1 or 2 months free rent. An opportunity to save substantially on rent is the reason to buy an apartment. In 2005 or 2006 when people signed over-sized stated income mortgages just because prices were rising, that was not a good buy.

I'm not saying dont buy small. I own a 275 sq.ft. rental and intend to keep it as a rental because it
is well-located and was gut rehabbed to maximize the utility of the space.

But some apartments are just plain really undesirable. Such as sidewalk level ground floor front ones, those facing brick walls, those where miniature pygmies would feel confined, and apartment facing interior courtyatds which magnify and convey sound from every other interior-facing apartment.

I've got no horse in the 4BR race, PMG, just calling it as I see it based on SE-posted comps.

On this particular apt, I agree with your conclusion, although my math would go down a different route. Add a zero to rent and/or price, though, and the whole picture changes: much worse price/rent to begin with (close to 2x worse), higher maintenance as a fraction of price, bye-bye to tax benefits, bye-bye to subsidized mortgage rates.

These people were happy to pay $150k last year for a co-op studio half the size 7 blocks north:

http://www.nypost.com/p/news/local/manhattan/cozy_crazy_couple_makes_tight_studio_R15ToNFTaJE3c17zkw4efP/0