Inonada vs. Rich Lemmings or: UWS Rent-Buy Math

Over on the "Favorite Price Choppers" thread, Inonada pointed out that an Upper West Side coop that would cost close to $5MM to buy can be rented for well under $15K per month. I pointed out that, while a buy/rent multiplier of 25-30x annual rent is nutty, a coop rental might be a misleading benchmark because coops rent at a significant discount to the market. Inonada replied that the discount on... [more]

Over on the "Favorite Price Choppers" thread, Inonada pointed out that an Upper West Side coop that would cost close to $5MM to buy can be rented for well under $15K per month. I pointed out that, while a buy/rent multiplier of 25-30x annual rent is nutty, a coop rental might be a misleading benchmark because coops rent at a significant discount to the market. Inonada replied that the discount on the PURCHASE of a coop should be similar, because many of the negatives associated with renting a coop also apply to owning one. We were starting to derail a thread that was already over 1600 posts, so I figured we take it outside. Anyone else have thoughts on this? My view is that coops do trade at a discount vs. condos, but the discount is smaller than the difference between a coop rentals and a similar apartment in, say, a nice Rudin rental building. There also might be a problem with our assumptions about the "right" level for buy-rent multipliers. Since coops comprise a very large percentage of the sales stock and a very small portion of the rental stock, I think our idea of a "normal" rent-buy multiplier already reflects the negatives of a coop on the purchase side of the equation, but not on the rental side. This has no effect whatsoever on inonada's cash flow comparisons (the numbers are what they are), but it does make a 25x multiplier more shocking, because we're accustomed to higher rents and lower multiples. Here's the listing that sparked the discussion: http://streeteasy.com/nyc/rental/838202-coop-300-central-park-west-upper-west-side-new-york [less]