Market discount for condo needing gut Reno

Or is it $500 per sq ft if there is plenty of supply of such condos.

Some of it depends what you mean by "want". In my experience, only a small percentage of the market is willing to consider such properties at all, and those who are actively seeking them out often "want" a substantial (even if unrealistic) discount.

I mean actual market clearing discount range by ‘want’.

The way I look at it is that the discount from a buyer for the headache and risk of having to do the reno themselves should be 1.5-2.0x the cost of the reno. So if an apartment is worth $1,500,000 fully renovated and the renovation costs $200,000, I would be willing to pay $1,100,000.

But perhaps just as importantly, doing the right kind of reno (one that reasonably meets the needs of most buyers) will bring many more buyers to the table and results in a shorter marketing period, both of which are worth money.

300_mercer,

My personal discount would be more than $400 - however, that would make it $900-$1100/ft pre-reno. The problem is I can't really find a doorman condo in manhattan (is it?) at that price/ft without serious structural problems (like facing a brick wall). Often, you'll have people bidding for more than that range because they think it'll just need a fresh coat of paint and new appliances. Whereas if you want to do a high-end gut, all in cost could be well over $300/ft. I would do it backwards: tabulate all the planned reno bills, dead holding period costs when you await DOB permits while paying common charges + RE taxes, your opportunity costs of down payment and reno costs (if not financed), and what you would pay yourself for your time/effort. Then divide by the sq. ft and arrive at your minimum discount.

Just as a point of reference, back in the mid 90s to early 2000s when we were buying foreclosures renovating them and then selling them, we found that the increase in prices between the 'as is' units and renovated units was between 2X and 4X the price of the renovation. However, it should also be noted that since I was designing, GCing and Project Managing the renovations, our cost of the renovation projects was probably half of would it cost had an end-user thought it themselves.

For example, here is a unit where we put in all new electric including breaker panel, changed the unit layout by opening the wall between the bedroom and living room and installing mahogany French doors, added lighting like overhead lighting in the bedroom and the sconces in the living room, skim coat of the entire apartment, put in a new kitchen with full Custom Cabinets, granite tile floor, granite countertop and middle of the line stainless steel appliances, and refurbished the existing bathroom. Project cost was about $45,000.
https://streeteasy.com/sale/552421

Tribby, You model will suggest well north of $400 per sq ft discount with $300 per sq ft cost. In addition you have to effectively put higher percentage down say 25 percent plus the cost of Reno. That is probably why no one does high-end gut Reno in a place like Murray Hill as you not necessarily get $400 per sq ft plus discount. In this market with a lot of finished new product at various price points, I would think the discount is closer to $500 per square ft.

30, Thank you for sharing your experience and example. What do you think of $500 per sq ft discount number as the current market discount for an apartment needing gut Reno?

That would put your mid-tier Manhattan doorman condo in original condition at 800-1000 per square foot. I haven't seen those prices in a while.

Chasing, That is my observation as well. Hence the question. Guessing there are people who are willing to live in the apartment with minor clean up and high end Reno is not necessarily reflected in resale price in less than prime areas.

https://streeteasy.com/sale/1222034
Here is an example. Sold for 3.2mm. Appx $900 per square ft. It is a nice condo with 9 foot ceilings. Mid- High end Finished (not ultra high end) is probably $1300.

I think this is a standard problem when markets get overheated. You don't get the appropriate discount for anything including condition. Marginal location? Minor discount. Maintenance too high? Minor discount. Estate condition? Minor discount.

OTOH, in a down Market it's exactly the opposite. One major defect or two, the unit is unsellable without an enormous discount.

https://streeteasy.com/sale/1313752

If they spend $300 per square foot on the renovation they probably lost money.

This Thread just got me thinking about what's going to happen to all of these ultra-luxury new construction Condominiums with high-level finishes being sold in the last couple of years. 10 or 15 years from now they are going to have to be sold as if they were "wrecks" because whatever the new style of kitchens and baths is then it will be different.

Actually they did not as they are selling 11C separately. Sold for $4.1mm (more than 1500 per sq ft). They probably will sell the 11C for $1.1mm min. So $5.2mm total sale. Bought for $3.2mm at $900 per sq ft.

300, would never touch that kind of property (even at $900/ft) - imagine the total monthlies when trying to sell in a year or two. Agree completely with 30_years, in a down market, properties like that would need a major discount, sometimes would fail to sell altogether. 30_year's example: i'm actually quite surprised it got sold -if anything closed to ask, perhaps this market is not as bad (yet) as i thought it would be.

I think I got my answer. The discount is closer to $500 for something needing a gut vs high-end finishes in the same building. This makes sense if the reno cost is $300 per carry plus trouble plus effectively higher down payment as you have to pay for reno in cash.

Always better to do some work if only to improve curb appeal and get a few bids from buyers who are OK with the unit "as is" or can move in and live through a small renovation. But I agree with some here that the math is increasingly more difficult to justify if doing a high end job.

Just saw this unit today. No as-is photos only renderings. Unit needs complete reno. Even if you only spend $200 psf, you are in for over $800,000 for a very small (less than 500 sf) one -bedroom facing the rear of the building with no views at over $1,600 psf. Makes no sense.

https://streeteasy.com/building/39-west-67-street-new_york/503

Look at what investors do in this situation. They do a bare-minimum renovation of the kitchen, baths and maybe sand the floor. No investor does a high end renovation.

Yes, Chasing but what one considers to be "bare-minimum" depends on the market for this type of unit. No such thing as "one size fits all" although I admit I am confused when sponsor units, many recently vacated by long-term rent regulated tenants, are being sold in their existing condition. Seems they are leaving a lot of money on the table. What am I missing?

I'm also surprised at how many perfectly fine and recent renovations are ripped out by the new owners because they aren't tailored to exactly what they want.

I think the value of a renovation follows a hockeystick curve, it's value is only realized when it closely matches the buyer's taste. This is too hard for most people to do for a future buyer, so why risk the money?

Yes, its difficult to cater to a specific buyer which is why I think vanilla renovations make sense. Few buyers would mind a Sub-Zero fridge, Viking range or Miele dishwasher but features like bathroom and kitchen tile or cabinets can be very personal choices. I think most second-hand buyers want to put a personal stamp in some way on their new apt. At least that has been the tradition.

But big developers know what the "typical" buyer wants which they hope will attract the most foot traffic and give them the highest ROI. But investors don't always think like developers. I think some of these sponsors are reluctant owners/landlords and are willing to leave money on the table in order to get a quick closing and put it all behind them. At least that is my guess.

There is a market for resale apartment with clean/neutral renovation at a discount to new development where the buyer wants to move in right away. If every one wanted to renovate, no one will buy new development.

It's absolutely untrue that all investors to the bare minimum. Take a look at the example I posted. Here's another one where we put in all new electric, new kitchen, new bath, took the French doors off site for a "furniture quality" refinishing, etc.
https://streeteasy.com/sale/543990
Note that in both this and the above posting these are the resales after we sold it to these owners.

In terms of wanting to do "vanilla" renovations, I'm actually kind of shocked at how non-vanilla a lot of the kitchens and baths are in a lot of the new construction condos over the past few years (and frankly think that a non insignificant amount of them are just plain but ugly).

30, would love some links on what you think are “non vanilla” and “vanilla” finished new developments.

Not vanilla: 514 West 24th St.

Thank you. Completely agree. It feels more London than New York which is what I guess they are going for.

Any vanilla example/s you like?

42 Allen St, but I certainly can't say I like it.

Thank you. I think it crossed over to cheap category for me. I like this type for vanilla with some flair (except the powder room)
https://streeteasy.com/building/100-barrow-street/5a

It makes sense for high end lux segment to be non-vanilla these days: there's just too much competition for the top $ they need to differentiate. Personally love Roman William (drooling over that La Canche oven!) and think it's reasonably priced at 50% to Walker Tower (yes views at the latter are better!)
I cant believe people would develop from the ground up 42 Allen St. style: it's rental quality and for the price would rather buy a re-sale. The building is plain ugly!

Tribby,
Roman William?

300,
One thing which I think is going to make buildings look "very 2010's" is these smallish Apartments with under-sized bedrooms and you huge bathrooms. I think of the not-too-distant future people are going to be asking "why did they do that?" In the same way that they ask that question about pre-war one bedrooms with only one bath that is suited to the bedroom so your guests have to walk through your bedroom to use the bathroom.

Also, here is an example of kitchens which I think have a good chance of going out of style: 211 Elizabeth St. What's with the Butcher Block counters and those pot fillers that are like a mile off the cooking surface? As you can see from the two current listings the first thing the owners did was change the kitchens (one by replacing the counters with granite and the other by painting the cabinet doors).

When we bought our GV coop apartment in 2016 I think the discount we got for needing a gut reno came to about $300/sqft, compared to an apartment in the same line that's not brand-new but in move-in condition. We then spent 14 months and $400/sqft to do the gut reno. A lot of stress but no regrets, as everything is the way I want it to be.

We looked at a few move-in condition apts when shopping. I hated the vanillaness, but felt guilty about ripping out perfectly working kitchen/bathrooms. In the end we picked the hard way but I'm happy I went through it.

It seems there are three options in deciding how to deal with apartment condition when selling:
1) offer apt. "as is"
2) offer apt. with a plain vanilla renovation
3) offer apt. with a high-end customized renovation

#1 sets you up for steep discounts, less traffic and longer days on market
#2 increases traffic but will turn off certain buyers who prefer #1 or #3
#3 lowers traffic, increases days on market and only works if buyers are willing to pay for your tastes

To me, #1 makes little sense, #3 rarely makes sense so #2 might be the lesser of three evils.

For those that want a custom apartment and have the strength and will to undertake a gut renovation, it is totally worth it, but, with the high transaction costs of NYC real estate, do not expect to be able to flip it for a profit. A high-end gut renovation will probably cost you a minimum of $250/sf, but the pricing I typically see for gut projects is less than that. When I purchased my wreck of an apartment (lived in by the same rent controlled family for 80+ years), the discount was approximately $250/sf relative to 2012 prices.

Dan Gotlieb
Digs Realty Group
www.digsrealtynyc.com

This is an apartment we looked at when shopping:
https://streeteasy.com/sale/1219263

Renovation and decoration is tastefully done (though it seems they left one bedroom out so the style is different). It attracted a lot of traffic and sold quickly despite no-as-nice building, and smaller rooms.

Dan, you are right. We had rented for a long time previously and saw our needs evolve. When we bought we were looking for a place to stay put for the next 20+ years. Due to this reason, getting stuck with kitchen/bath/floor/doors that I don't actively love feels wrong. But I'm the kind of person who has a lot of opinions when it comes to decor style.

30, I completely agree with you about 211 Elizabeth. Too dark everything and very peculiar taste.

This is very nice and do not think will go out of fashion anytime soon.

https://108leonard.com/residences/

The problem with using $250 per square foot for your renovation cost is that it doesn't include the cost of living somewhere else for a year.

FireDragon,
Two issues I have with that unit at 295 West 11th Street (although I do agree with your assessment that in general it's a nicely done renovation):
1) that may be one of the most expensive but cheap looking kitchens ever (at least that's what it looks like from the pictures),
2) that sale is almost double the price of the next highest sale in the building, and probably more than four times the average sale. Which kind of violates the old "you don't want to buy the best house on the block or the worst house on the Block" adage.

300_mercer, that 108 leonard kitchen looks great. I'm so tired of those wood grain slab doors in many new condos.

30yrs,

For 1), I'm not sure why you think the kitchen is cheap looking. It's pretty basic white shaker doors, chrome hardware, quartz countertop, paneled fridge, a nice induction cooktop. The Ann Sacks backsplash tile adds a bit interest. My main issues with it are: not enough counter space/storage, and no venting to outside (not even a pretense of a recirculating hood). To me "cheap looking" kitchens would be Ikea-style super glossy slab door cabinets that do not go all the way to the ceiling.

For 2), yes. the price stands out because it's a combination of 3 apartments, and nicely done. The building is older, elevators are slow. There are steps leading up to the lobby. We gave up because we were only looking for completely accessible apartments.

But I learned a lot from the open house. I got chevron-patterned floors for my living room (they were using herringbone), which looks very special. I also loved the headless shower door and used them in my renovation. It looks good and makes the bathroom feel bigger.

I like the 295W11, #5C reno a lot. Very elegant and would please more buyers which I think deserves some kind of premium.

Just curious, this is the first induction cooktop I have seen in Manhattan. Does the building not have gas service? I have one in my second home and am still getting used to it after two years.

I also like the wood floors and the sliding shower door. Wish I had thought of these features for my reno. I also want one of those teak shower stools. Anyone know where in the city to buy?

We used an induction cooktop for the first time in our renovation. I love it. So easy to control, timed automatic shutoff, easy to clean. We just capped the gas meter and hid it in a cabinet. Asked about removing the meter but they said it means the apartment can never have gas service again due to the notorious pressure test.

Firedragon, Did you end up buying a loft or prewar coop? $400 per sq ft is very nice reno. I am assuming this does not include carrying cost. I bet it looks very nice. I like chevron and herringbone floors a lot - especially if they are wide (4-5 inch) and long planks.

For people with hardwood floor fetish
http://www.element7.co.uk

This includes everything but carrying cost. I'm very cost-conscious, without compromising on what I really want.

Flat fee architect, Design&Build firm (with the lowest bid), appliances (but the previous owner left us good refrigerator and dishwasher ), closets, and a few pieces of furnitures. All 14 windows were replaced brick-to-brick, and 3 through-the-wall ACs were put in in pre-existing-but-wrong-size openings.

I splurged on kitchen cabinets, but it's still the lowest price I can find, working directly with kitchen designers. Getting it through our GC will probably be 30% more at least. Also spent more on TruStile doors, close to 8' high and with a more ornate sticking: The first two photos for TS2060 style on https://www.trustile.com/inspiration/photo-gallery?page=10

Nice!! I also have trustile 9 feet high door very similar to what you have. We love them.

I've cooked on an induction top for 5 years now. Terrific control, easy to use, very clean. Best thing ever (short of having a personal chef and never going in the kitchen again), and I never want to go back to gas if I don't have to. I really wanted to put in an induction top when I bought/renovated my early 1960s apt, but the power requirement (240v/30a) meant I would have had to run new power to the unit and replace panels, which was a bridge too far.

Looks like induction is a great option for people who do not want the trouble to move gas line. Guessing it will add $50 to electric bill at most if you cook a lot.

Gas cooktops are so second nature to me that I can turn one on and adjust flame in practically one motion to exactly what I need. My induction hob requires pushing three buttons to 1) turn on hob, 2) select burner and 3) set to correct power. Also, I have been warned against using cast iron cookware as it can scratch the glass. Copper pots and pans are also non-starters. And forget about having a grill. Lastly, power requirements make induction cooktops more expensive than you might think.

I think induction is a much better choice than a simple electric cooktop for places that do not have natural gas service. But for those who choose induction over gas, do you think it is a positive selling point?

No copper? Did not know that. No heavy braising pots? So what do you use? Just stainless steel and typical non-stick which is probably what most people have?

No copper. Heavy cast iron is not a problem for us. We also use some stainless steel pots. Compared to gas, the range of power is wider: the low is lower and the high is higher. In the summer it won't make the kitchen that much hotter than other rooms. And did I mention the timer also shuts the burner off? So you can leave while the soup is still stewing.

Cooler kitchen is a big plus and probably will offset electric costs due to less ac needed during the summer. Can not use wok as I was googling.

The issue that I have with induction surfaces is the same as Ximon: I cook pretty much every single deal I eat except for maybe getting a pizza once a month, and I don't adjust the gas they start looking at the dial I adjust the Flame by eye. You can't do that with any kind of electric cooktop. (You also can't just tilt the pan when you flambe something and have it Flame).

Do you have to upgrade electric for induction as they take 50-75 amps? Thank you.

My 36", 5-burner Frigidaire Gallery model required two 30 amp breakers (tied together, because it's 240v). Whether you need to upgrade service depends on what's currently available at the box.

Thank you.

Aaron2, does 240v require a 60 amp fuse?

Ximon -- For an appliance that calls for a 30amp/240 volt service, a modern breaker (fuse) box will have two 30 amp breakers, coupled together (one for each leg of the 240v circuit). If the appliance requires 40a/240v service, it will have two 40amp breakers coupled together. 240v appliances are a great way to use up available space in a breaker box.

If I am remembering my electrical engineering correctly, these set ups aren't "true 240V", but a split-phase +120V/-120V yielding an apparent 240V differential (but it's been a really long time since engineering school, so....)

So if I have say 100 amps in my pre-war apt., I need to dedicate 60 amps just to have an induction cooktop? Would a coop board ever approve of this?

That certainly will not be sufficient along with two window ac units.

If you have 100 amps service you probably have more than 100 amps of circuit breakers in your panel.

Gut reaction: Run. Run far far away.

Since you don't seem willing to do this, I would go big.

As in...am I the only one who doesn't like granite counter tops and what the industry claims are stainless steel appliances? When will this trend ever end?

I vote for stainless steel (the real deal) industrial counter tops. Also, everyone and their brother has a sub zero fridge. Meh. Get a fridge with glass doors. Ideally, a separate fridge and freezer, but whatever fits.

Also, unlike everyone else, I don't like gas cooktops. Nope. Give me an electric glass top any day.

Sorry. I know that doesn't answer your initial question. I'm basing my answer upon others here.