Lincoln Towers - Is It Overpriced?

Greg--I find the building yuck and the neighborhood just okay and location mediocre and poorly accessible to transit. The apts are expensive mostly because they are zoned for a good school.

I have said for a long time is that there are so many similar units, and the original prices so low that in any down market there will always be a ton of other people who can undercut your sales price and still make money. Now that doesn't make them overpriced today, but it makes it a situation you have to go into with your eyes open.

I almost bought here 10 years ago and am so glad I didn't. It's on WEA, sure, but closer both physically and in spirit to the blah Columbus Circle area than to the lovely prewar buildings in the 70s and 80s. Plus it seems like there is frequently something bad happening in the nearby projects, whether it's passerby getting sucker punched under the scaffolding or someone getting shot to death in the vestibule. The inside gives retirement home vibes.

Greg, If you compare the mortgage cost back in the day to now, you probably will find that your total monthlies are probably less on inflation adjusted basis.

Compare it to what else you can buy in the neighborhood. As West 81st Street used to say on these boards, "Lincoln towers, the buildings upper westsiders love to hate".

What do you think they're worth?

Wow, those monthlies are very high. Keith actually recently helped me purchase a move in ready 2/2 in a brownstone on W78th for the same price as gut-reno ready 6G in Lincoln towers is asking with monthlies about $900 lower. I think there are better places to be had at that price on UWS.

I think this area had improved tremendously in the last 15 years starting with Time Warner center.

But the Time Warner Center is nearly a mile away. Its advent didn’t bring anything here, three avenues over. It remains a commercial and architectural wasteland — very uninspired.

Time Warner may not have, but 1 West End and everything else in between have.

If I were to be on a budget on UWS and looking for good schools, these building will be on top of my list. Maintenance is very low considering many utilities are included.

Boards can be tougher than one might expect for an UWS postwar.

I lived in Lincoln Towers for about twelve years. I had direct river views until Trump started building and blocked my view. Then I had to sell; it became uninhabitable.

When Trump started building, the NYC Building Dept. ordered Trump to take down ten stories; the Dept. said he was watering down the concrete.

streets Mart,
If I remember correctly he didn't and the building is still there with the concrete which was labeled as faulty.

Or maybe some but not all?

Nicely kept building in a great area. Nice sense of . but the apartment's were designed as a middle class housing poject and there are deficiencies like limits on in-home washer's and the buildings are decidely not modern in terms of plumbing and ability to use washers and dryers or being properly wired for high speed. Value is relative, everyone decides for themself however

Everyone I have known that lived here loves it, not that I completely understand. It's a hike to the train and those Hudson winds get cold in the winter.

This classic SE thread has a discussion of Lincoln Towers in it, buried amidst in depth discussion of new development economics and a host of other issues. I have no idea what The Rushmore looks like today or how any of this panned out, but the thread is a great read in and of itself: https://streeteasy.com/talk/discussion/9550-disaster-at-the-rushmore

The general advice on the risks of leveraged finance is great, particularly when sponsoring new condo development. So is the perennial rent/buy chatter. But wow, were they ever wrong about early 2009 being a bad time to buy.

(Personally I don't get the appeal of buying a sponsor unit. Sky-high closing costs, immense downside risk, all so you don't have to spend an afternoon painting over the previous owner's scuff marks?)

This is just an aside, but I think RichardBerg is an AWESOME new member. Welcome!

@30yrs
All the buildings were built. It’s a wall of buildings. I guessTrump likes walls.

2009 was a terrible time to buy residential real estate unless you had leverage, which most people at the time didn't. Meanwhile the Dow went from under 7000 to almost 30,000, a 4x gain unlevered, with instant liquidity and basically no transaction costs. What real estate gained 4x unlevered?

Even if you had leverage, it sucked. I was on these threads back then, including the one MCR references, arguing the point. My net worth was a nice little chunk of change back then, and I put all of my money where my StreetEasy mouth: into stocks, not buying a home in NYC. It of course ballooned 4x. More than a decade has passed, I've earned a lot more money than that 4x now, and I've made more in investments elsewhere than that 4x. But none of it was more sweet than that 4x.

I do kinda chuckle every time I hear this "2009 was a great time to buy" crap. I've been hearing it since 2009, and the more time passes the worse the story gets.

@George and @Inonada - Please don't scare RichardBerg away! If we put aside your comparison of real estate as an investment vs stock market as an investment and assume that your preference structure is such that you are willing to pay something (i.e., forego some investment return) for the product defined as "having greater control over your living space as an owner than you do as a renter." If we do that, does your view still stand that 2009 was a terrible time to purchase NYC real estate vs other years between 2005 and 2020?

My position has always been that one has to view purchase of NYC real estate as part consumption and part savings. Given my preference structure, I am going to buy real estate in the same way I am going to buy a car rather than lease one, although leasing might make more sense under many scenarios. If that is one's preference structure, when was the best time to buy in the last 15 years?

To make the point, let's look at the most recent sale in the Rushmore building that was the topic of that 11-year-old thread. This is 10M:

https://streeteasy.com/sale/1447186

Bought Jan 7 2010 for $4.53M. Sold Aug 2020 for $3.95M.

So $600K in loss. Another $400K paid in transaction costs. Monthlies (including abatement) total to $600K. Seems like $1.5M in total loans at average interest of ~3.5%, so another $550K there. So $2.15M out of pocket for 10 years of living, plus tying up $3M of capital.

Works out to $18K/month. Rent (asking, that is) in 2014 on same line, 6 floors higher (16M) was $14.5K/month:

https://streeteasy.com/rental/1329286

So $3.5K less per month, and the quadrupling of whatever fraction of $3M one would have otherwise deployed.

"Already in stocks, blah-blah", sure. But even keeping $2.5M in cash and putting an incremental $0.5M in stock would have yielded $1.5M in gains, or $12K a month.

"But it's a beautiful home they love, blah-blah", sure. But it's not an end-all, be-all home. Give me $30K/month in rent to work with, and I'll show you some places that'd make that home seem downright depressing.

RB, please don't be put off by us. We do like you indeed!

MCR, you predicate the argument on "I'd rather own a hovel than rent a palace". Err, OK. Fine. God bless that viewpoint. It contributes to cheap palaces, so I'm all for it.

>> If that is one's preference structure, when was the best time to buy in the last 15 years?
If your preference structure was to buy a hovel with cash, then 2005 and 2009 and pre-Covid 2020 are all at the same level inflation-adjusted using the StreetEasy Index. Post-Covid 2020 seems to be 10% (?) lower, so I'd go with post-Covid 2020 as the best time. On the other hand, the worst time would have been 2008. But that was only 10% higher than 2008. So if your goal is to buy a hovel with cash, it really doesn't much matter.

If your preference structure is to buy a hovel with borrowed cash, then 2009 was definitely not the best time to buy. In addition to paying 10% more than now, your cost to borrow with a 30-year mortgage was ~5% then rather than ~3% now. Sure, you can refinance for a cost and chase it down, so let's say ~4% on average. So for borrowed cash, that makes 2009 around 45% more expensive than post-Covid 2020.

But it's another great time to buy right now.

This thread has taken a very unfortunate turn with Inonada, George and 30yrs united. I do not care for this at all.

With that said, thank you for doing the math, and you are welcome for my preference structure's complementing yours. You've know what I've elected to buy for cash, and I have no doubt it leaves you scratching your head. I think I told you about one friend of ours who actually got angry about our choice because it so boggled his mind to the point where his wife had to intervene and stop his rant at a dinner party. ("I just don't understand? Why would you do that?!!!!!!)

It’s all kumbaya here, MCR.

30yrs thinks it’s all going down in price & rent. I’m down with that. George thinks renting has been good but would rather put his money elsewhere rather than rent something nicer here. I’m down with the rent-reducing actions. And you’d rather own no matter what, works for me too: drives down rents.

BTW, is there any palace out there you’d be willing to rent? I know that Rushmore apt isn’t your thing, but you do seem to drool over $4-5M penthouses of a certain style that would have consumed a similar $30-40K per month over the past decade. If I were to show you a $30M palace, of the same style only much better, that could be had for the same $30-40K per month of pure consumption would you:

A) Drool more.
B) Drool the same.
C) Drool less.
D) Not drool at all, because renting is so distasteful that the mere stench inhibits all appetite.

D.

Totally irrational, I know.

Combined income $700k, savings $1,300,000... buy my listing (if it tugs at your real estate hearth strings : ) https://streeteasy.com/building/315-east-88-street-new_york/4g

You have a million dollars to deploy into the s&p 500. Not such a terrible situation for an individual that wants to actually own a home versus renting. *Actual client profile.

You could have done the same thing in 2009/2010. NADA you make it sound like it was committing financial suicide.

There are people who want to buy and there are people who just want to rent. Who cares? As a broker who doesn't even advertise, I'm not out on a street corner waving a flag trying to force people to buy real estate, lol. People actually contact me, typically after a referral from a friend or a colleague that have made up their mind that they'd like to purchase.

I've helped a lot of very smart people purchase homes, including one that just sold his financial services company for a few hundred million dollars, yes you would know him.

Curious: George, NADA and 30 when was the last year you thought would be a good time to buy in New York City? This is not meant to be a snarky question, I'm genuinely curious?

Anyway everybody have a great weekend!

Keith
The Burkhardt Group

I'd say that the spring of 2013 was the ideal time to buy. The stock market had recovered but the NY real estate market was only then bottoming out. It was possible to get a mortgage. Best would have been to buy in a fringe area like Harlem or whatever is a little beyond Park Slope, and sold around 2017 or 2018. Many properties in these fringe areas have doubled. Simple math, putting down 25% = 4x leverage times doubled price = 8x gross return. But if you could actually time a market so well, there are tons of ways to make 8x returns.

Hah. I've been arguing on the internet since the mid 90s, to the tune of ~100K posts. A little math isn't going to scare me away.

When Lehman exploded, people said Wall St was dead. I took it as a cue to ditch a cushy red-state lifestyle ($80K income from an ultrastable megacorp, $400 rent, $50K savings) for a tiny NYC hedge fund. And put all my savings + most of my relocation bonus into the market. Alas, I was a couple months too early to get 4x, but I'm quite happy to have pocketed 3x -- more importantly, to have positioned myself someplace I could grow my overall balance sheet north of Keith's client profile.

Yes, I rented a garden duplex in Fort Greene rather than buying, but I don't think that made much difference. Rushmore's issue wasn't timing; it was being priced too damn high. The condos I considered during my first search as an NYC real estate baby turned out just fine:

https://streeteasy.com/sale/421867
https://streeteasy.com/sale/462701

By my calculations the rent/buy breakeven to hold those units from 2009-present would've been under $1K/mo, even factoring in opportunity costs. Of course, that was far from certain at the time. That's why they call it risk.

Today's shopping has risks too. That's why, despite favorable conditions, I'm limiting myself to downpayments around 10% of HH net worth. Most of our powder is kept dry for future market moves + general buffer for our inherently bumpy careers.

I don't need to beat stocks, or beat the Trumps/Dursts at their neverending slimy games. To "win", all I need is 1 apartment whose 2020 price is low enough to offset the inevitable rent increases of 2025 and 2030.

Keith, I think we are discussing whether “2009 was a good/bad time to buy”. I think this phrase implies a question of “Relative to what?” I first answered it as “relative to the quality of space you get spending the same amount of money renting”.

MCR then asked “What if you have a mental issue that prevents you from deriving enjoyment from your living space w/o ownership, and we compare to other times predicated on ownership?” I gave a long-winded answer saying “now is much better”, and 30yrs got it done in 9 words. More broadly, I explained why 2009 wasn’t even all that special relative to (say) 2007/8.

So my question to you is this: what else would you like me to compare buying in 2009 against? Against living in the streets?

George, that’s funny that you say spring 2013. Back then on this forum, I was extolling the goodness of AAPL stock compared to NY RE. I bought a big chunk at $14 (in today’s split prices), and crazy w67th went nuts with a big chunk of options. Some predicted our impending bankruptcy, others explained why it was imprudent and how they could never do it, not even with a small fraction of their net worth, because they’d lose too much sleep over it. So you’ll excuse me as I scratch my head on 2013.

Looking at more broad measures, SPX is up like 115%. The SE Index is up like 12%? Well, at least that matches inflation (for now).

RB, thanks for sharing your story. I think you’ll be doing just fine this go-around.

I don’t know the first thing about the Fort Greene market circa 2009, but whatever was going on with pricing at the Rushmore was pretty typical for Manhattan. As MCR gladly explains, for the same amount of cash out of her pocket she’d rather buy a place than rent one that is worth 6x.

To answer your question, yes I think it was better to buy an apartment sometime in late 2009 versus 2006 or 2007. From 2006 until late 2009 I started my company to offer discounted rental commissions, I was not selling apartments during this time. George I think you're just a little bit late, I thought the New York Market bottomed out around 2010, but it seems a number of sources including Miller Samuels notes that it bottomed out November of 2011, this also according to the street easy index.

I'm just not going to get into this game of real estate versus stocks. Owning stocks has made me relatively wealthy over the last nine years, I highly recommend it. I've been buying my youngest daughter shares in spy every month since she was born, 8 years later it's a tidy sum. I've helped my other children with simple dollar cost average investing. simple, efficient and cheap. I'm not a sophisticated investor so I keep it simple.

As I said for probably 10 years on these boards, I view a real estate purchase differently than I view a stock purchase. When I buy stocks I only have one intention, to make money. When I buy a primary home I'm looking for a place I can create, live in as long as I want, pay off eventually (I currently have no mortgage) and suits my family's lifestyle. I've also done okay with a few investment properties I've bought, most recent one in Jupiter, Florida I bought for 360k 2017, with seasonal rental, broke even to 5K a year after expenses, and just sold it for 490k. When it wasn't rented family and friends had a place to stay a few hundred feet from the ocean. It was a very enjoyable investment.

Buying home doesn't preclude you from purchasing equities. Unlike some here I just don't view home ownership as financial suicide or stupidity. And I would say there are a number of people who think the same way. if I had a sink every penny I had in my bank account into the purchase of a home, I wouldn't do it.

So whether you buy or rent, whether a vacation home or primary residence I hope you enjoy it.

Again I'm curious NADA when was the last time you thought a New York City apartment purchase made sense? Not trying to be cheeky, just curious. Never is certainly an answer as well.

Keith
TBG

“What if you have some mental issue that prevents you from deriving enjoyment from your living space w/o ownership” made me laugh out loud. I plead guilty, but for leniency in sentencing offer this additional information in my defense: That mental issue is limited to NY. I would happily rent alternatives in the other places we own.

" I highly recommend it. I've been buying my youngest daughter shares in spy every month since she was born, 8 years later it's a tidy sum. I've helped my other children with simple dollar cost average investing. simple, efficient and cheap. I'm not a sophisticated investor so I keep it simple."

Smart move. The vast majority of sophisticated investors can only dream of beating the S+P

>> Again I'm curious NADA when was the last time you thought a New York City apartment purchase made sense?

I’m a simple guy. I don’t care to play amateur architect, and I don’t have any mental issues with possession. I’m here as long as I’m here, and then I’m dead: a rolling stone catches no moss. So all I’m looking for is as nice a roof over my head as possible for the money I spend.

If I rent, I know exactly what I am spending. If I buy, I consider the spending as (30-year mortgage rate on the full purchase price) + monthlies. I can’t fully explain why the latter shorthand is a good proxy to “spending” on a purchase without getting into matters surrounding forbidden words (like “investment”), but intuitively it should make sense.

When was the last time it was “good” to buy in NYC? Anytime the former exceeded the latter for whatever you were buying. And that depends very much on the target acquisition.

To be concrete, let’s talk about a prototypical apartment that’d rent for $4K and sell for around $1M these days.

In post-Covid 2020, 30-year interest at 3% means $2500 per month. Monthlies are (say) $1750, so $4250 total. About the same as renting at $4000, so “good” under my metric. This is why RB will end up just fine.

In 2009, price was incrementally less: $800K, let’s say, with $1500 monthlies. Interest at 5% meant $3300/month there. So $4800 a month total, compared to (say) $3500 in rent. So no, not a “good” time to buy.

In 2005, $800K price, $1350 monthlies, & 6% interest mean $5350 total. Definitely “bad” compared to (say) $3300 in rent.

In 1999, $400K price, $1000 monthlies, 7% interest means $2300. So total of $3300 is close enough to (say) $3000 rent to be “good”.

As you go up in price, however, the story changes drastically even in 2020.

A $5M apt at 3% interest works out to $12.5K, plus $7.5K monthlies, so $20K. Rentable for $13K these days.

A $10M apt works out to $25K interest plus $12K monthlies, so $37K. Rentable for $20K these days.

It all starts begging the following question: if you are willing to spend $20K per month on housing, what mental issue precludes you from taking the $10M home over the $5M home? At that point, my financial advice is to invest in therapy.

>> That mental issue is limited to NY. I would happily rent alternatives in the other places we own.

Uh-oh, the issues are worse than I thought. Isn’t NY the place where the rent alternatives are vastly superior in depth (lots to choose from) and breadth (any style, any price point)? Is this all coming from that shit half-condo/half-rental building you were in with the loser/asshole landlord?

Keith>> Combined income $700k, savings $1.3M, buy my $1.15M listing. You have a million dollars to deploy into the s&p 500.

Well, first off this isn’t 2009, and I’m not suggesting deploying that last $1M into SPY today. So let’s not get that mixed up.

Second, everybody needs some cash. If your net worth is $1.3M, you probably keep (say) $300K in cash. If you’re a rolling stone, that’s enough. If you have a $900K mortgage & $100K in payments a year no matter what, even if you lose your job / your home value drops / you move, you tend to keep another (say) $300K around.

Third, I know lots of people who fit into that financial profile (or at least did at one point), and a ~$1M / ~1000 sq ft place is under-housed. Many figured that out up-front and just bought a $2-3M place, a stretch at the time, but working out well in the end as the needs of their family grew over the next decade. But after a larger down payment and a larger cash buffer, there wasn’t much room left for stocks otherwise. Those were the wise ones.

A few ventured into your land of under-housing. As the decade went on and the family grew, it just became more and more painful. It felt like they were sorta stuck, not because they couldn’t afford anything bigger, but more because of the inertia of ownership / loss aversion. Eventually, something gives and they end up buying a second home or stepping up to a $2M apt. But for whatever reason, I don’t think the extra cash went into stocks. Why? Because they are not behaving like they have an extra $4M around from SPY gains. Whatever quality made them think it was a prudent idea to buy a 1BR apt for a growing family of means, it also seemed to make them think putting their $1M nest egg into SPY imprudent. Perhaps it’s the fact that they know they will need a larger place soon enough, and they don’t want to risk down payment money they know they’ll need?

Nada-you don't come across as a simple guy ; ) you just made buying a home sound like Dante's 7th circle of hell. Enjoy the rest your weekend!

@nada - Lol. It is about stability for me and needing a "forever" home that I can purchase and sustain on my own indefinitely. Drives my husband nuts because he absolutely loves his job, and, as a result, the money he makes from it is simply a by-product that he would be happy to spend on getting me my dream NY apartment. I am sure there are deep-seated psychological issues at play that I don't really care to explore, but at the end of the day, I just want one place on the planet in the city that I love that I can count on (to the extent one can count on anything) if everything else were to fall apart.

@keith - The give-away is his screen name. The only thing I really know about Inonada (as well as a few other posters on here) is that his brain is firing on more cylinders than mine.

Keith, there you have it. After ~15 years of NYC residency, inonada has declared 2020 a good time to buy a median-ish apt in Manhattan. Your listing included. When the circumstances change, I can change my tune. Maybe 2021 will be better, maybe not, but the high end still seems a ways off.

We both agree that 2009/2010 was better than 2006/2007. I just don’t think 2009 crossed the threshold of “good”, but that 2020 has for the median apt and 2020 is far better than 2009 for all Manhattan market segments.

How about you, do you think 2020 is appreciably better than 2009? And are you willing to declare some years “good” and others “bad”, or does employment-based neutrality prevent you from making such proclamations? I totally understand if it does, and you have been very measured over the years. Not so much for some others here, brokers included, who did declare 2009/2010 as some sort of once-in-a-lifetime opportunity, but here we are staring at apts that are a bit cheaper in real terms and borrowing costs that are a lot cheaper.

Nada, I know that ultra-luxury (min $3k plus per sq ft) is not a buy. I remain bearish due to over supply in this segment and rents just being much cheaper than buying which you are have been taking advantage of for while. Are you saying the affordable segment - call it $1000-1500 per square ft (naturally higher for exceptional properties / buildings) average seems a reasonable value?

MCR, I’m just trying to get you to dream bigger & more efficiently! I like you, so I don’t mind the incremental competition.

You saw my last place, it was a nice. Renting it netted a place that was twice as nice as spending the same money buying a more pedestrian place.
A few years later, I swapped to somewhere that was twice as nice at 1.6x the price, something I consider a dream apt. Really couldn’t ask for anything more. Except now I’m staring at nutty places that are 2.5x as nice that could be had for 1.6x the price. Really don’t need it, but the money doesn’t make a difference to me either, so I’m feel a calling to the sacred duty of inonada, which is to jump on a mispriced market and/or take largesse from rich patrons.

So I am looking at perhaps spending 2.5x what I used to spend, you might have been on a similar path with your buying, I dunno. But had I been buying, that 2.5x spending would have placed me in a 2.5x nicer place than I would have originally bought. Instead, I’m staring at 10x nicer places.

There was no master plan behind any of that, just serendipity. But serendipity often requires a willingness to open yourself up to allow the good things to happen. Having a set plan for life works against that, but it’s never too late to change. If not for me, do it for your husband!

That’s right, 300. You heard it here first. I’m not saying it’s a screaming buy like I did with AAPL in 2013 on these forums, but its starting to look reasonable. Then again, I don’t pay that much attention to that market. RB, what price vs. monthlies vs. rent are you seeing out there?

inonada,
Do you think rents are so decoupled from sales prices that what to me are crisis level vacancies and price decline in the rental market (and I think both those numbers are both being understated in the reporting) won't affect prices (all across the board)?

https://therealdeal.com/2020/09/08/wall-street-calls-bs-on-apartment-landlords-rosy-projections/

I like your non-attachment Nada. I live a very simple life, practice Kriya yoga, do my absolute best to assist people who engage me as their broker. I think it's a reasonable time to purchase, prices have certainly fallen. Is it a good time for 'you' to buy? I can't answer that question.

Be patient, it's a buyer's market, don't be afraid to make low offers and make many of them until the right one sticks. If you can't afford to buy quality, you're probably better off renting. Location remains King, don't settle for a mediocre apartment in a mediocre neighborhood, rent instead.

Keith
TBG

@Nada the two condos I considered in 2009 (linked above) were $700/800K with $1/1.2K monthlies. I picked something very different in flavor (garden level brownstone), but similar in location + sqft + rent to the larger of two, landing at $3900.

Today those two would ask for $1.35/1.55M, having peaked a little higher in 2017ish. When their abatement expires next year, monthlies will hit $1.5-2K. I think whoever took "my" spot made a fine decision.

Harlem, where I lived in the mid-10s, had a similar trajectory in both prices and rents. Main difference being lack of vertical construction; owning the "good stuff" required parceling out a multifamily yourself. So I rented again.

FiDi, where I'm living & shopping now, had the opposite trajectory. My landlord bought this condo at the end of 2008 for $1.8M + $1200/mo. https://streeteasy.com/sale/326662

Judging by comps, its value lost 20% in 09-10 and will *never* recover. Sponsor had initially tried to rent it for $12.5K (lol); once they'd pawned it off, my landlord had to drop the ask to $4300. Come 2017, I moved in for $5500, let it tick up a few % each year, then 2wk ago renegotiated back to $5400 + tenant's option to terminate. He's open to selling, but given that monthlies will exceed $3500 when the abatement expires next year, I think I'd need a fire sale (like, half off) to consider it.

Most of the condos for sale around here are equally terrible deals, just with worse floor plans. That's despite prices falling / inventory growing significantly faster than Manhattan in general. Long way to go, if you ask me.

I'm mainly eyeing co-ops, plus the 1 or 2 condo buildings where neither monthlies nor layouts suck.

Examples from my spreadsheet:
$1.18M asking price - $3302 monthlies - $5300 est mkt rent - 1450sqft
$1M - $2903/mo - $4400 - 1200ft
$1M - $753/mo - $4100 - 930ft
$1.29M - $934/mo - $4350 - 1200ft (needs reno)
$1.2M - $1527/mo - $4300 - 1100ft
$1.2M - $2538/mo - $4700 - 1080ft (condo, would lowball)

Note that those market rents are 5% lower than they were just a month ago, or 20%+ off the high. Things are still dropping as the glut grows. Sale prices are moving much, much slower, with a few exceptions (like that one I posted in the "Fire Sale" thread).

I really love the first co-op in the list but have yet to talk myself into owing $3K+ in perpetuity. Although it has capital stock in excellent repair, decent cash on hand, and a potential windfall when a sweetheart (50yr flat rate!) commercial sublease finally expires in 2030, they -- like many housing corps -- are highly leveraged in order to favor current owners over future owners and make as much maintenance tax-deductible as possible. Seems risky to assume rates will still be low when that balloon payment rolls over in 2028. Even if retail rents come back to life, and they're able to monetize it post-2030, the board has left themselves no path to actually turn that windfall into significantly lower maintenance.

FYI Nada: I unequivocally agree that the Market segment that you're in, yes you should be renting that and not buying it. However even in that market there seems to be a submarket of competition for the best in show apartments that entice hedge fund Titans etc to a purchase rather than a substantially discounted rental.

@richardberg, I am a broker who is somewhat focused on experience and light as well as financials, and the caution for me with the first one would be how fun it would be to live at that location once tourism comes back. The reno, I certainly think that's a long-term value play (pause for 30_yrs to weigh in here), but the other question is how much of a negative you think the low floor is.

ali r.
{upstairs realty}

@Nada - You and my husband are comfortable and capable of thinking big in a way that I am not. I am limited in a number of ways, though, as an aside, I cannot help but note that size is not one of them. How is that body double project going? The more time I spend in the midwest, the more urgent the need becomes for those times when we visit NYC.

Thanks Ali. You have correctly identified my #2 choice. Low floor is fine by me (dog owner whose prior townhomes were both garden+basement duplexes), so long as the building has pests & noise under control. In fact, the way that unit's concrete "balcony" sits on the garage roof is a plus for direct -- if unofficial -- access to the private playground beyond.

The reno question is more about time & effort. Financially, it would surely break even by year 5 or 7, and just get better from there. But is that really better than putting the time & effort into my career instead? Or into hobbies/travel for that matter? I could imagine spending several months supervising design/build...and still never be as cool as the turnkey loft in #1.

Ali,
I have no idea what unit we are talking about.

Oh, sorry, 30. The #2 choice is this: https://streeteasy.com/building/80-beekman-street-new_york/2j

Those balconies are slightly odd because of the way they face -- you get a lot of sound bounce -- but if you like SBT, as I and many do, and you want a three-bedroom, there just aren't that many. They tend to be estates in need of reno, and they're not in the towers. There have been some quality-of-life issues at the complex but hard for me to imagine that it won't be fancier in seven years than it is now.

The #1 choice is in a 72-unit building on a sort of nondescript section of Broadway, and I say that lovingly as someone whose office is on Broadway right next to a Dunkin' Donuts. (325).

https://streeteasy.com/building/80-beekman-street-new_york/2j

Note the listing has many inaccuracies. Rooms are significantly larger by tape measure than by floor plan (which I suspect was ripped from a higher unit on the other side of the complex).

My reno vision would be: open half of the kitchen, move the tub into the master suite, and demolish the smallest BR. So the end product would be something like this, but with a 60% larger LR and an extra 1/2 bath: https://streeteasy.com/building/100-beekman-street-new_york/sale/1489286

Richard, Maintenance is incredibly low. What is the secret?

IDK what Richard's answer is to the "low maintenance" question -- my take is 1) it's a big complex so the overhead is somewhat spread out and 2) these buildings came out of Mitchell-Lama within recent memory so the property taxes are probably lower than they "should" be.

Thanks Ali. Michelle Lama driven low property taxes probably explains a big chunk of it.

There's no phase-in period when a M-L goes private. Property taxes should've been assessed at full value since 2015, at least in theory.

While I have not received detailed financials, my guess is they are sitting on a very large reserve from the buyout process + from the special 28% flip tax assessed on first-time resales. About 250 units have changed hands so far, at an average price of say $700K, so that's a tidy 49M pot from flippers alone, before you even add in what the former M-L corp was required to set aside by law.

They also have substantial retail holdings, most which happened to be "essential businesses" (large supermarket, veterinarian, 2 doctors) when Covid hit. Their 3 restaurants may be struggling, but a captive audience of 1650 apartments to whom you can deliver by elevator probably cushioned the blow. (Keste, which prominently faces Gold/Fulton, did board themselves up during the initial summer riot but came back quickly.)

Big question mark is what shape the heavy equipment is in. Opened in 1972 = everything with a 50yr lifespan will come due in the near future. The Board seems competent & professional, but it's unclear whether the residents have the stomach for what lies ahead. If I moved forward (looks unlikely at this point) I would set aside more billables for my lawyer & inspector than usual.

Bottom line, if you want a well-proportioned space to raise Covid kids with easy outdoor access, the long-term value is there. My head likes it. But my heart wants the oversized bachelor pad on Broadway.

Thanks for coming to my TED talk. We now return you to your regular non-Richard programming.

Ha. Thank you for sharing detailed info and a joke.

I think it would be very easy to over renovate that unit (i.e. where every marginal dollar spent results in very little increase in value). Is the layout substantially different than 5J? (Seems unlikely). How much credit for your renovation costs/trouble, plus something for being higher than 2nd floor, and then what did it actually sell for? Seems like you would need a reasonably substantial discount off current ask to make it priced equivalent. I'll add that pretty much every Mitchell Llama Coop I've dealt with have tended to have entrenched Boards/Management, highly politicised factions of shareholders, and made lots of questionable "business" decisions. You also have the wild card of what happens when the City actually gets around to overhauling the RE Tax system (was supposed to be this year but it's just another thing COVID gave DeBlasio cover to kick the can down the road again.

As far as 176 Broadway goes, I am somewhat jaded because when I managed the JI Sopher office we sold more than anyone else in that building (about 1 a month at one point) between $200k and $275k. Perhaps only old-time rental agents will understand the reference when I say it's a Thurcon building. The layouts in general are sub-par (in addition to the challenged location) so they have always seemed like a better deal than the actually are if all you look at is $/SF.

To some extent you have to ask "What's a good deal on a line green liesure suit?" (Of course in this case that's an exaggeration, but my point is that unless you are absolutely certain that we have hit market bottom buying grade B/C product might be a risky proposition if you're not sure this is a "forever home.")

RB, thanks for all the deets!

30yrs, I personally think the vacancies & drops in rent is a short-term issue. If rents are down 20% right now (say), in a year it’ll be 10% and continue creeping up. When COVID peters out, this’ll start looking like a normal recession / recovery cycle.

On price, I’ll say what I said a decade ago. There probably won’t be any spectacular crash market-wise. It’ll just be a slow bleed in the form of flat prices & carry costs. Most of the hands holding the RE can / prefer the slow bleed to cutting their losses. So if your carry situation is decent, you’re probably fine. Will RB do better if he waits a year and buys at 10% less? 20% less? I dunno, maybe it happens maybe it doesn’t. But this is all on the margins relative to yields at the top end, where things are off by a factor of 2-3x. I.e., RB is posting (rent - monthlies) / price that yield 3-4%. At the top end, it’s more like 1-2%.

Is 3-4% after-tax yield in the current environment decent? Sure. Not great, but decent. So if you don’t have better options for your money, I can see the attraction. But really, it’s not something I need to think hard about. For me, my play is to lock up a negotiated option on 20%-off rent for as long as I can. If I’m wrong and rents drop further, I can re-trade. If I’m wrong and prices crater by 2x, I can re-trade. So I don’t have a lot of skin in these predictions, and therefore I’d trust (say) RB’s opinion on this a lot more. He sounds like he know what he’s doing. For me, it’s an easy decision, which is just how I like it.

Doomsday bunker any one?

I think there's a very good chance a year from now we won't even be through the evictions (which keep getting kicked down the road). If we end up with a couple of hundred thousand vacancies from that (which at this point are still on an upward trajectory) then I'm not so sure rents bounce back 10% but are more likely to continue to fall. Especially if renters who renewed even though their landlords didn't reduce rent to market hit another renewal and say "not again."

“So if you don’t have better options for your money . . .” is the key. Lawyers, doctors, many others I am sure, have great cash flow from their labor, but the investment opportunities/traps are beyond us in terms of time to figure out even if we had the skill set (which I don’t). The “mass affluent” (a demographic of which I would be a prime member were my husband not in the picture) have to make difficult choices. Now you can understand the call to “Free Mr. MCR!!” He could fly so higher were he not constrained by my idiosyncrasies.

@30yrs - I still think of you every time I listen to “You want it darker.” My husband loves all the SE personalities that I narrate as I post and queried whether we could organize a post-COVID poker game. I said I would throw it out to the board, but the condition precedent is that it must be hosted by Inonada purely for the real estate voyeurism. I only saw the place pre-the-current-place, and it was pretty spectacular, so I am definitely hoping for an opp to see the next place.

Done.

@30yrs I learned about Thurcon a few years back, when researching the question "why are the rents at 33 Gold so cheap?" Answer: DOB violations galore, plus the charming bedtime stories collected at https://haroldthurman.blogspot.com/2012/02/security-deposit-not-returned.html

Anyway, it will not surprise you to learn that the sweetheart commercial sublease at (and frequent litigant against) 176 Broadway belongs to Brad Thurman, son of Harold.

Like much of FiDi, that building is no stranger to strange layouts. (Even here at 20 Pine, an otherwise lovely building for renters and/or investors who hate money, most of the units below the 25th floor are dark and jigsaw-shaped.) 176 #15D's oddities will not resonate with most people. Thankfully, I am not most people.

As for 80 Beekman 2J, you're right that any reno beyond what 5J saw would never be reflected at resale. It would be customized to me, not to the market.

Without giving too much away, the porch listed at 17'10" is actually 21'5.5" long; the LR is actually 20'2" x 16'0"; the smallest BR (that I'd demolish) is actually 14'9" x 10'1"; and the MBR is actually 18'9" x 11'0.5". Plenty more errors in the 2J listing where those came from.

Of course, this is all predicated on the ask coming down to reality. They seem to be holding out for a unicorn.

@Nada in practice, how often do your re-trades require moving? Moving sucks.

Not very often. My last 3 moves were 2007, 2010, and 2014. All were motivated by upgrading too, as this one would be, and for that type of re-trade moving is a requirement. But that’s just a a matter of money: I’ve learned to have movers both pack & unpack for you. Hell, in 2014 we realized that we had a trip planned during our move date, so we ended up hiring someone to oversee the move in our place. Really disconcerting to come back from a 10-day trip, go to a new apt, and see all your crap just there.

FWIW, I wouldn’t re-trade for less than 10%. Not worth the hassle / using up your “re-trade option” compared to what might be coming next year. However, it starts looking very attractive at 20% and/or with a desired-anyways change.

>> How is that body double project going? The more time I spend in the midwest, the more urgent the need becomes for those times when we visit NYC.

That project is for my next life. In this life, all I have on offer is a single body, slim & with a six-pack if you prefer it. The good news is that it is available at free of charge to most people. The bad news is that it involves daily, incessant suffering.

@mcr not quite sure how else to reach you, and didn't want to start a new thread for this. Could use a referral to a broker in North Virginia. This is for a client, let's call them high net worth.

Thanks!

Keith
keith@theburkhardtgroup.com

@keith - Were I selling, I would use Marc Fleisher (thefleishergroup.com). I don’t know if he does buy-side, but he is in a league of his own in the DC-MD-VA area. I have in my head that he is more DC and MD than VA. I don’t know anything about Northern Virginia market (much of which is closer to downtown DC than we are despite our living within DC limits), other than that I am “busy” anytime we get an invite McLean, but Marc Fleisher will be able to direct you to the right person if he is not it.

@Nada - About as helpful as our plastic surgeon friend who directed me to the treadmill when I asked him what he could do for my situation.

Thanks!

@RichardBerg - Thank you for sharing your thought process with the additional humor (“investors who hate money”).

@keith - You are welcome! and if you have any trouble getting a call back from Marc, ask for Stephanie Corcoran in his office, and she will be able to get you through or at least get you the info if Marc Fleisher doesn’t prioritize it personally.

Thanks to everyone for the discussion. It seems that people are split between not liking 140 West End Ave due to it being old, far from the subway and being in a somewhat "shady" area vs liking it due to the school district and sense of community. There are investment factors to consider as well, but my family needs to live somewhere :) Do you guys think that 1.2M for a gut reno on a high floor with city views 2/2 is a decent deal in the Covid era? There are risks that companies will increasingly adopt a remote workforce and we've seen an exodus from expensive cities like NYC to "tax-cheap" places like Florida. A prolonged shutdown will put more strain on NYC's finances and will shutter more business than it has already. With a growing government, a shrinking tax base and growing poverty (for a variety of reasons) NYC's future may not be a rosy one. On the other hand, the Fed's printing press is running hot and will continue to spur asset appreciation, including real estate. The question is whether some of that appreciation will be in NYC :) That's a long-winded way to ask if 1. this price is reasonable and 2. whether it makes sense to undertake the risk of buying in NYC.

Greg, not sure if you are in the market still but I bought into another Lincoln Towers building in 2018 and did a full reno on a 2BR. Overall, if you look at Lincoln Towers on a price per square foot basis it is comparable with similar buildings on the UWS - I know because I looked into plenty of them! In my case I was very interested in a larger doorman building and a unit with outdoor space and typically when you adjusted for monthlies everything ended up being roughly the same. (For example, Schwab House and CPW Towers had much lower monthly charges but then cost quite a bit more up front.) One exception was Lincoln Guild, but those apartments were quite small and the hallways weren't maintained very well I thought.

As to whether property values might fall - well, no one really knows. That being said, I do think Lincoln Towers has a good chance to maintain its values. There are many longtime owners who have minimal or no mortgage left to pay and are already retired so job losses won't be a factor; indeed, during our last board meeting my building said they had not experienced any issues with unpaid maintenance due to COVID. I also think coops have some built in protections against declines since boards simply might refuse to approve sales that are priced too low.

Paying $1.2 for a 2BR in the 140 building is definitely a decent price; in general gut renos were going for more like $1.35-$1.45 when I was looking two years ago, although the 140 building was cheaper due to an ongoing assessment (while the 205 building was most expensive, due mostly to its river views). It's just a few blocks from the subway at 66th and the southern units have nice open views. I would be cautious about taking on a gut reno right now though - if there's another shutdown you may be stuck paying for an empty apartment for some time if work is put on hold. If you are nervous about job stability a condo might also be a better choice though.

Overall, I personally have been very happy at Lincoln Towers however. The building staffs know what they are doing, the neighbors are friendly but given the size of the building not intrusive and having the private park area has been a godsend during COVID. I do miss having a washer/dryer but you can't have everything! Good luck with your decision and perhaps I'll see you in the neighborhood in the future.

What happened to 315 East 88th St. #4G?