Do people pay a premium for low maintenance coops?
Started by noobienoob
over 13 years ago
Posts: 30
Member since: Apr 2012
Discussion about
i understand that a high maintenance apt will be priced lower than an equivalent low maintenance apt. For monthly payments, the low mortgage is offset by the high maintenance. But do low maintenance apts have more "intrinsic" value? Are low maint. apts valued higher than is simplt reflected in montly payments b/c maintenance does not contribute to the equity of the investment? For example taking... [more]
i understand that a high maintenance apt will be priced lower than an equivalent low maintenance apt. For monthly payments, the low mortgage is offset by the high maintenance.
But do low maintenance apts have more "intrinsic" value? Are low maint. apts valued higher than is simplt reflected in montly payments b/c maintenance does not contribute to the equity of the investment?
For example taking two identical apts, which case would (generally) be true, or would neither?
Case 1 - low maint. monthly payments == high maint. monthly payments
Apt 1:
2500 mortgage
500 maintenance
Apt 2:
1500 maintenance
1500 maintenance
Case 2 - low maintenance has greater value, and thus greater monthly payments
Apt 1:
3000 mortgage
500 maintenance
Apt 2:
1500 mortgage
1500 maintenance
[less]
Response by noobienoob
about 13 years ago
Posts: 30
Member since: Apr 2012
bump
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Response by greensdale
about 13 years ago
Posts: 3804
Member since: Sep 2012
No difference in services? Eg doorman, utilities included, amenities? Then yes, you can measure a difference.
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Response by truthskr10
about 13 years ago
Posts: 4088
Member since: Jul 2009
Yes but not often or not enough, just as people frequently overpay for high maintenance co-ops.
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Response by alanhart
about 13 years ago
Posts: 12397
Member since: Feb 2007
lubieboobie, you also need to find out the condition of the building, the size of the capital improvement reserves, the amount of maintenance being automatically diverted each month to fund those reserves, etc. Otherwise the low maintenance is a time bomb, unsustainable.
So you'll overpay for phantom savings, then the value of your apartment will drop to more realistic levels.
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Response by pier45
about 13 years ago
Posts: 379
Member since: May 2009
A few thoughts:
To someone who is buying at the edge of their affordability, a maintenance savings of $200 translates to $5k less in assets needed to show 2 years of reserves after closing. The same $5k translates to funding a 25k higher purchase price.
To determine the real value of the lower maintenance, a very astute buyer would determine whether the low maintenance is due to low recent spending (by the entire building) or a favorably low share allocation to the unit. The latter would provide real value whereas the former can go away any time.
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Response by caonima
about 13 years ago
Posts: 815
Member since: Apr 2010
not really, i know some rich coops charge no maintenance because they have too much asset, but they don't sell higher
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Response by Oxymoronic
about 13 years ago
Posts: 165
Member since: Dec 2007
To the original example. It should be the second situation since the monthly maintenance will continue to increase each year whilst the mortgage is fixed. That being said, that is theoretical. It also predicates that current interest rates are static when they're at historical lows. From what I'm seeing right now, very high maintenance properties have higher total carry costs (mortgage + maintenance) than lower maintenance properties. However, I'm also not seeing too much differentiation in price or time on market for equivalent properties with slightly different maintenance. It does appear that as long as maintnenace isn't "too high" that people will still buy even if maintenance is on the higher end of normal.
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Response by NYCMatt
about 13 years ago
Posts: 7523
Member since: May 2009
Honestly, I think buyers see it mostly just as a bonus.
There are far too many factors involved in finding the right apartment; location ... size ... condition ... utility ... etc., that unless the maintenance is completely out of whack, I doubt it's high on the priority list.
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Response by deanc
about 13 years ago
Posts: 407
Member since: Jun 2006
no not really.....though they should.
Our co-op with 8 apartments has no mortgage and we purchased it for this specific reason......basically underlying mortgage can add A LOT to the monthly co-op fees.
bump
No difference in services? Eg doorman, utilities included, amenities? Then yes, you can measure a difference.
Yes but not often or not enough, just as people frequently overpay for high maintenance co-ops.
lubieboobie, you also need to find out the condition of the building, the size of the capital improvement reserves, the amount of maintenance being automatically diverted each month to fund those reserves, etc. Otherwise the low maintenance is a time bomb, unsustainable.
So you'll overpay for phantom savings, then the value of your apartment will drop to more realistic levels.
A few thoughts:
To someone who is buying at the edge of their affordability, a maintenance savings of $200 translates to $5k less in assets needed to show 2 years of reserves after closing. The same $5k translates to funding a 25k higher purchase price.
To determine the real value of the lower maintenance, a very astute buyer would determine whether the low maintenance is due to low recent spending (by the entire building) or a favorably low share allocation to the unit. The latter would provide real value whereas the former can go away any time.
not really, i know some rich coops charge no maintenance because they have too much asset, but they don't sell higher
To the original example. It should be the second situation since the monthly maintenance will continue to increase each year whilst the mortgage is fixed. That being said, that is theoretical. It also predicates that current interest rates are static when they're at historical lows. From what I'm seeing right now, very high maintenance properties have higher total carry costs (mortgage + maintenance) than lower maintenance properties. However, I'm also not seeing too much differentiation in price or time on market for equivalent properties with slightly different maintenance. It does appear that as long as maintnenace isn't "too high" that people will still buy even if maintenance is on the higher end of normal.
Honestly, I think buyers see it mostly just as a bonus.
There are far too many factors involved in finding the right apartment; location ... size ... condition ... utility ... etc., that unless the maintenance is completely out of whack, I doubt it's high on the priority list.
no not really.....though they should.
Our co-op with 8 apartments has no mortgage and we purchased it for this specific reason......basically underlying mortgage can add A LOT to the monthly co-op fees.