I have a foreign friend who owns a large 1 bedroom in a 5th Ave co-op somewhere around 70th street, which they purchased in 2001 and have used the property as a pied a terre. The building is very good, hard to get in (requires significant asset in cash), but the building is not good for investment as the building's price level stays flat in the past 10 years. Now the couple does not come to New... [more]
I have a foreign friend who owns a large 1 bedroom in a 5th Ave co-op somewhere around 70th street, which they purchased in 2001 and have used the property as a pied a terre. The building is very good, hard to get in (requires significant asset in cash), but the building is not good for investment as the building's price level stays flat in the past 10 years.
Now the couple does not come to New York as often as before, and would like to exchange the 1 bedroom co-op with an investment property with better price appreciation potential. They are thinking to sell the 1 bedroom co-op next spring, put in additional money, and purchase a 2 bedroom condo in Tribeca.
They have asked for my opinion and I have told them to wait, as they would not get a good price selling the 5th avenue co-op in this market. But they seem to think that if they don't buy in Tribeca now, Tribeca will be too expensive in 3-4 years. They also think the 5th avenue co-op has little potential for appreciation anyway, so selling at a small loss now is acceptable. My understanding is that Tribeca is already very expensive and much in-demand now, and there is no real bargain in Tribeca even in this awful market. I suggested to hold on to the 5th ave co-op for a few more years, which they can use whenever they are in town, in the mean time, purchase another 1 bedroom condo somewhere as their investment property. I appreciate all suggestions!
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Response by huntersburg
about 14 years ago
Posts: 11329
Member since: Nov 2010
JFK III is moving to Tribeca, so forget it.
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Response by nyc_sport
about 14 years ago
Posts: 809
Member since: Jan 2009
If they bought in 2001, and are "selling at a loss," there is something seriously wrong here. If they view Tribeca as expensive compared to 5th avenue in the 70s, something also is seriously wrong here. Loft-like apartments tend to be bigger than high-rise apartments, so sure a two bedroom Tribeca loft might be more expensive than a two bedroom 5th Ave high-rise, but it also might be 50% larger.
The transaction costs of selling and re-purchasing because of a perception of improved price appreciation outlook for one high-end neighborhood versus another is difficult to justify, but they seem to have a lot of money to make that bet. There are not a lot of full service buildings in Tribeca, which may make the absent owner idea less palatable. I don't understand the "investment" aspect of this -- do they want to rent the unit out? If that is the case, it is hard to make that math work at current price levels in any neighborhood in Manhattan.
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Response by dwell
about 14 years ago
Posts: 2341
Member since: Jul 2008
"But they seem to think that if they don't buy in Tribeca now, Tribeca will be too expensive in 3-4 years." Maybe, maybe not, difficult to say.
"They also think the 5th avenue co-op has little potential for appreciation anyway" I disagree. 5th is a luxury address & will remain so for a long time.
"so selling at a small loss now is acceptable." If they bought in 2001, I doubt they'll have a loss. Maybe less profit than during the height of the bubble, but not a loss. No?
Depending on the apt & location, I think that Tribeca & 5th Ave are almost equivalent price wise. Both areas are expensive & desirable.
Why hold onto a property they don't like/want & then buy another they do want? Wouldn't it be better to get rid of the property they dislike, take the sale proceeds & put it into a property they want, especially if it's an investment property? Of course I don't know all the details, but I'm not sure I agree with you.
But all this is hypothetical w/o knowing prices: how much can they sell 5th for & how much to buy Tribeca? And, if it's an investment property, can they do a 1031 tax free exchange? I'd say they should figure out all the prices, costs & taxes, consult a good accountant &/or tax lawyer & then make a decision.
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Response by front_porch
about 14 years ago
Posts: 5321
Member since: Mar 2008
P, I would love to talk to your friends about selling their Fifth Avenue co-op if they're looking for a seller's broker.
On the buying side, brokers in NYC don't talk specifically about school districts, because we're afraid of violating fair housing laws. But as their friend you should remind them that Tribeca is in the throes of a big political school redistricting battle, and some locations may well end up as more desirable than others.
ali r.
DG Neary Realty
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Response by peninsula101
about 14 years ago
Posts: 18
Member since: Jun 2009
"so selling at a small loss now is acceptable." If they bought in 2001, I doubt they'll have a loss. Maybe less profit than during the height of the bubble, but not a loss. No?
You are exactly right, they will sell it for less profit than during the good times. Sorry I may not have worded correctly.
"The transaction costs of selling and re-purchasing because of a perception of improved price appreciation outlook for one high-end neighborhood versus another is difficult to justify"
Agreed. Prices in Tribeca have appreciated so much in the past 10 years, I don't know how much higher they can go. It seems to me that the sensible thing to do is to keep the pied a terre they own for a few years before the market comes back, and buy another 1 bedroom investment property in the mean time. Agree?
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Response by jordyn
about 14 years ago
Posts: 820
Member since: Dec 2007
If their goal is to make money off an investment, they should probably invest in something other than Manhattan real estate.
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Response by NYC_RE1
about 14 years ago
Posts: 14
Member since: Aug 2011
It's hard to find a deal in Tribeca, especially in newer condo buildings. You'll find that a lot of the condos that were purchased at the peak in '07 or even during the downturn ('08/'09) are now on the market for 30% higher than what the owner paid for it. Whole Foods certainly helped values around Warren Street, but the 30% higher asking prices are ridiculous.
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Response by peninsula101
about 14 years ago
Posts: 18
Member since: Jun 2009
Thanks for all the great advice everyone.
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Response by Brooks2
about 14 years ago
Posts: 2970
Member since: Aug 2011
If their goal is to make money off an investment, they should probably invest in something other than Manhattan real estate.
JFK III is moving to Tribeca, so forget it.
If they bought in 2001, and are "selling at a loss," there is something seriously wrong here. If they view Tribeca as expensive compared to 5th avenue in the 70s, something also is seriously wrong here. Loft-like apartments tend to be bigger than high-rise apartments, so sure a two bedroom Tribeca loft might be more expensive than a two bedroom 5th Ave high-rise, but it also might be 50% larger.
The transaction costs of selling and re-purchasing because of a perception of improved price appreciation outlook for one high-end neighborhood versus another is difficult to justify, but they seem to have a lot of money to make that bet. There are not a lot of full service buildings in Tribeca, which may make the absent owner idea less palatable. I don't understand the "investment" aspect of this -- do they want to rent the unit out? If that is the case, it is hard to make that math work at current price levels in any neighborhood in Manhattan.
"But they seem to think that if they don't buy in Tribeca now, Tribeca will be too expensive in 3-4 years." Maybe, maybe not, difficult to say.
"They also think the 5th avenue co-op has little potential for appreciation anyway" I disagree. 5th is a luxury address & will remain so for a long time.
"so selling at a small loss now is acceptable." If they bought in 2001, I doubt they'll have a loss. Maybe less profit than during the height of the bubble, but not a loss. No?
Depending on the apt & location, I think that Tribeca & 5th Ave are almost equivalent price wise. Both areas are expensive & desirable.
Why hold onto a property they don't like/want & then buy another they do want? Wouldn't it be better to get rid of the property they dislike, take the sale proceeds & put it into a property they want, especially if it's an investment property? Of course I don't know all the details, but I'm not sure I agree with you.
But all this is hypothetical w/o knowing prices: how much can they sell 5th for & how much to buy Tribeca? And, if it's an investment property, can they do a 1031 tax free exchange? I'd say they should figure out all the prices, costs & taxes, consult a good accountant &/or tax lawyer & then make a decision.
P, I would love to talk to your friends about selling their Fifth Avenue co-op if they're looking for a seller's broker.
On the buying side, brokers in NYC don't talk specifically about school districts, because we're afraid of violating fair housing laws. But as their friend you should remind them that Tribeca is in the throes of a big political school redistricting battle, and some locations may well end up as more desirable than others.
ali r.
DG Neary Realty
"so selling at a small loss now is acceptable." If they bought in 2001, I doubt they'll have a loss. Maybe less profit than during the height of the bubble, but not a loss. No?
You are exactly right, they will sell it for less profit than during the good times. Sorry I may not have worded correctly.
"The transaction costs of selling and re-purchasing because of a perception of improved price appreciation outlook for one high-end neighborhood versus another is difficult to justify"
Agreed. Prices in Tribeca have appreciated so much in the past 10 years, I don't know how much higher they can go. It seems to me that the sensible thing to do is to keep the pied a terre they own for a few years before the market comes back, and buy another 1 bedroom investment property in the mean time. Agree?
If their goal is to make money off an investment, they should probably invest in something other than Manhattan real estate.
It's hard to find a deal in Tribeca, especially in newer condo buildings. You'll find that a lot of the condos that were purchased at the peak in '07 or even during the downturn ('08/'09) are now on the market for 30% higher than what the owner paid for it. Whole Foods certainly helped values around Warren Street, but the 30% higher asking prices are ridiculous.
Thanks for all the great advice everyone.
If their goal is to make money off an investment, they should probably invest in something other than Manhattan real estate.
ditto