Carry cost for Gut Reno

And don't forget that it's going to take three times as long as the estimate and cost twice as much. But if you really in a hurry you can get it done in only twice as long as the estimate if you're willing to pay three times as much.

That is a good point. 1 year is indeed a reasonable time frame. 4 months for design, condo architect approval and dob approval and 6 months for build. 2 month delay allowance.

I think the short answer is that these so-called finance-savvy buyers do not do this math or as 30 suggests, do not take into account any contingencies. If they did, I suspect they would not be able to prove out any reasonable profit and they just hold onto it long enough for inflation to build up equity. Isn't that what most residential investors do?

ximon, I think pure investors calculate it but I am wondering whether the people renovating to live in it factor the carry cost in? Most people know that it will take a year as they have heard horror stories about delays but underestimate how painful and time consuming the process can be.

The last apartment I renovated for myself to live in took two and a half years, but there were significant periods of downtime involved because I was taking crews off the project to work on various investment projects the whole time.

It took us 14.5 months but I lived to tell the story. Even with carrying cost factored in this is the best deal we can find as e have limited ourselves to one single school zone.

I regretted the decision everyday during the reno and was very stressed out. As soon as we moved in and settled down I think it's the best decision. We plan to stay here forever so not super concerned with investment return.

Ximon,
I agree but it's not just residential investors. How many development projects have we seen developers sell in the last couple of years based on the increased value rather than develop them themselves? And how many projects could developers simply have sat on and sold and made the same amount of profit as they did as "developers"? At this point in the development cycle a lot of Developers are just "Deal Jockeys."

30, Agree that at this point of time, the developers are really in it to collect deal and development fees.

Also, I do not think individuals can deduct the interest and cc/taxes from their cost basis. So the carry cost is even higher.

Fire dragon, I understand where you are coming from. You had mentioned that you got appx $300 per sq ft discount relative to comps and spent around $400 per sq ft. $100 difference is not significant for personalization and changing the windows etc. Personally, I would look for $500 per sq ft discount but in an area like Greenwich Village, there is very little supply of large coop apartments.

When we were looking, there was another candidate apartment that also needs a gut reno. It's bigger, can be made into a 4bed, but floor is lower, not as many windows so light is not as good. We used a formula to decide it's worth 300k more than the one we bought.

Hit reply too early. We bid on both and since that one has a higher bidder we gave up. It sold for 500+k more.

Thank you. At what $ sq ft did the second one sell? Assuming it is a coop.

We probably calculate sqft differently. It's this one
https://streeteasy.com/sale/1220181

51 5th Ave can be particularly hard to comp out because even within that "line" in the building, there are multiple layouts (and when using comps from elsewhere, how do you account for the 1.5 floor ceiling in the living room?)

Out of curiosity, had you purchased 51 5th, would you have gone with their proposed layout change?

Call is 2000 sq ft and and $50k-$100k ($100-200 per square for 500 sq ft max Living room size) premium for high living room ceilings. Traded very rich indeed at $1600-1700 per sq ft for north and east view.

Wouldn't you also add a "Rarity premium"?
How many pre-war doorman Apartments this size even exist in Prime Greenwich Village?

I am including rarity premium when I say rich. If it faced 5th Avenue, I would say reasonable. East side seems very close to a wall.

I hear you about the view, but think you may be underestimating the rarity premium. The entire pool of original prewar doorman 4 br units in the Village might be less than 20 (whereas you might have that many in one building on West End Avenue).

It is not really a 4 bed room. It is a 3 bedroom, living, dining minus maids room and a well functioning combo. A real 4 bed room is indeed rare and will have 2500++ sq ft for a prewar vs 2000 sq for this and likely a library in addition to living and dining room. That said, agree that large spaces in the village are at premium.

>>>Out of curiosity, had you purchased 51 5th, would you have gone with their proposed layout change?<<

I don't know if I'd have trusted the 'proposed layout' since moving the kitchen to the den would require a 'wet' area (sink and DW) in an apparently dry zone, at least per their drawing... Wonder what the new owners wound up doing? Personally I would have kept the grand formal dining room and left the kitchen where it was.

30, I haven't got to the stage of carefully thinking about floor plan yet, but I suspect it'll be fairly close to the proposed one. I'll probably put the bathtub in master bath right under the windows.

Squid, I think it's a combo and the den was probably another kitchen. See that tiny half bath in there?

300_mercer, the high ceiling living room is quite special, but I'm not sure whether I will enjoy it that much. Even now, I find our whole family spending a lot more time in the kitchen/dining room area than in the living room. I'm quite happy with my decision to open the kitchen into the dining room as it created a central area for daily living.

Years ago when we were a young family living in Jersey City, our rental apartment has a Manhattan view and a balcony facing that way. It was exciting at first but we quickly forgot about it. I can count on one hand the number of times we went and sat on that balcony. So I learned to find features that fit our routine, instead of the other way around.

Firedragon,
I have always canceled people to buy Apartments the same way you did: you paid for any features because the market values them, whether you use them/appreciate them or not. So, since there is always a trade-off paying for features that you don't care about at the expense of those that you do care about is always going to be an L.

I don't think that this unit is actually a combo. 51 5th Ave has many units which were divided up, and this unit may have been divided up and then we combined or not (like the A/F line).

Correction: I think it might be the B/F line.

Backtracking to developers just collecting deal fees, etc.:
David Dweck just bought this site in Williamsburg with 96.5% financing?
https://therealdeal.com/2018/05/04/david-dweck-buys-boricua-colleges-williamsburg-buildings/