Was thinking of buying UES, but going pencils down

So in our small building, there are always 3 staff on duty 24/7 - doorman, porter and super. That makes for a hefty monthly service bill on top of RE taxes, infrastructure maintenance (plumbing, gas lines, roof, Local Law 11, etc), not to mention debt service for those coops that maintain an underlying mortgage (virtually all of them these days).

Finally, members of the dedicated staff will do
anything for you outside of their work description on off-shift hours if you tip them. Treat them well and they will treat you well. I love the staff of our building and they make life in NYC incredibly easy for me. Others in our building don’t feel the same way because they don’t offer to compensate the staff for work they would like done that is not part of CBA job description.

Anyone who pays $600/hr for a plumber gets made fun of by said plumbers for being totally clueless.

You try getting any tradesman to go to your Manhattan townhouse for less and report back. Note that it doesn’t count if you are “connected” in any way, whether that be through family members in the trade or a anyone else who is viewed by the trade as a volume purchaser/source of significant repeat business.

There is a reason more small buildings in Manhattan are not self-managed. Again, please report back after a few years in the trenches. If you have one family member who does not work outside the home, is highly competent and willing to make the house their “job,” count yourself lucky and more power to you. I have friends whonare former investment bankers who were willing to take that on so they could enjoy their children. That is a model that works well, but one friend who made that bargain left their partner for a new partner that made significantly more money. If the family member views the work as a “job”’rather than a labor of love, the family is vulnerable to being broken up if a new “employer” offers a higher compensation package. No judgment here; whatever works for the interested parties in any situation.

lol

>> must have as much control over home as possible - no landlord for me!

Ugh, such feudal terminology MCR. Maybe that’s the root of the psychological problem. It’s a business transaction. When you lease a car, who do you deal with — a horselord? Airlines are powerless over their planelords? If you must use such archaic terminology, perhaps try “benefactor”.

Speaking of which, your former benefactor’s $12M / $13K monthlies 111 Murray apt is now down to $23K/mo:

https://streeteasy.com/building/111-murray-street/45west

But there’s competition from another benefactor 2 floors up at the same price:

https://streeteasy.com/building/111-murray-street/47west

Circling back to the main point of the thread, this is why I feel for Anonymouse’s predicament. I don’t really know what’s available in the UES because the neighborhood does not interest me, but here is another family-heavy neighborhood with zero-compromise $12M 4BRs asking $23K/mo in rent. Getting $20K/mo is a no-brainer, and $18K/mo is possible.

Meanwhile, by Mouse’s math each $1M in price equates to $3K/mo. At $3.5M with $8K in monthlies, that works out to $18.5K/mo for 125 E 74th 8/9a.

Maybe Tribeca doesn’t work for Mouse, maybe that rent is out of Mouse’s range, maybe ownership is important to Mouse going forward, maybe that rent can only be locked in for a few years. Nevertheless, the contrast is dramatic.

Nada-what's your take on this one? With 20% down it's about $8990 a month at the current ask, 3% 30-year fixed. We did not pay the asking price, 60% of the commission I receive will be rebated to buyer if you want to calculate that in, 3%.

Keith
TBG

https://streeteasy.com/building/astor-terrace/24h?context%5Bcontroller%5D=%23%3CBuildingController%3A0x000055f8de62c550%3E&context%5Bcurrent_user%5D=1025566&hide_if_empty=true&section=sales

Seems to be in the right ballpark for someone in that market. My rough “spend” calc is 3% of purchase price plus monthlies. After a little space for negotiation, leaves you a bit above $7K. Same ballpark as this $6750 pre-pandemic ask on a higher-floor worse-condition unit:

https://streeteasy.com/rental/2918240

So that makes sense IMO. System breaks down at higher prices and/or higher ppsf, as 300 often points out.

I fear Mouse is on the cusp of where the system starts breaking down a little buy-wise ($3-4M $1500-2000 ppsf) thereby putting rent-equivalents within reach of where it’s broken down a lot ($6M+ / $3000+ ppsf).

That, I think, might be the dilemma for Mouse and what my contrasting example means to illustrate, especially when rents are down (say) 30% but prices are down only (say) 5-10%. Basically, the point you made earlier, but with a show-and-tell component.

The market is efficient to the extent that it squeezes the mass affluent the tightest. i know a host of marrieds with two children who could easily afford 3.5 - 4.0 mil and left the city because that did not get them what they needed; but those in the $5M+ price bracket had an embarrassment of riches in terms of choices.

Poor kids. What they needed are parents like these:

https://www.nytimes.com/2020/11/23/realestate/in-a-pandemic-even-minimalists-need-space.html

Buyer actually got 2.3% with Wells, for that rate had to make a large deposit/$8430 per month.

I grew up in an 800 square foot garden apartment in New Jersey. I had an absolutely wonderful life. My kids went to PS3 in the village, although we were living in a brownstone, I went to many play dates/birthdays where families of three and four were living in smallish tenement/railroad apartments in the village/chelsea/east Village.

I know many of those 'kids' today, still down the earth, well adjusted and many of them quite successful in their chosen fields. I think we can comfortably live in a lot less space than we think we actually need.

I will add these were definitely families that wanted to live in New York City, in particular wanted to live in these neighborhoods so they made adjustments. especially back then you could have easily moved to many neighborhoods in Brooklyn, and paid significantly less and gotten much much more space. However there was really something very special about these downtown neighborhoods, certainly a real community feel including at school.

@Nada, LOL at planelords

@Keith, I am in one of those families living in a somewhat small space. What was fine when the adults worked out of the house (and there was in-building school) is untenable when you need to have multiple workspaces and room for work product in the home.

Every single person in the family now needs an office, and we need to each have a place to put our reference materials and our work product, and we need to be able to not hear each other's calls. However much space that requires, a small tenement apartment isn't it.

Mouse, one service that you're missing when you think about service is additional parenting. If you have kids, as your kids gain independence and you want to lengthen the leash, it's good to have friendly hands helping with that process. So when your kid is whatever age you are ready for them to self-dismiss from school, walk with a friend to get fro-yo, etc. then in a full-service building with someone always at the desk, there's one more contact point for them while they're learning those skills.

IMHO, it doesn't matter if five-year-olds are in the city or the suburbs, but I think that there's a lot of advantages to ten-year-olds to being in the city. (Which can flip later, of course, depending on how sporty your kids are and what your HS landscape looks like).

Second, if you're going to live a lifestyle where you're going to be out of town *a lot,* then it's nice to have a human and not a video camera watching over your city place while you're gone. YMMV as to whether your PT doorman or super provides enough coverage for you on that point.

This was just a general comment regarding the amount of space one needs. The pandemic won't be with us forever, things will get back to a more normal state, especially if this vaccine is as effective as they're reporting.

I take that point Keith, but ... I don't know if this is what you're seeing... a lot of the business I'm seeing is trading up by people who are putting a home office (or two) into their calculations.

So upon reflection, I realize our search has run into a few realities
1. I underestimated monthly maintenance charges generally. WIth the vast majority of stock being co-ops, and these co-ops having underlying mortgages or other expenses, maintenance charges have ran righer than I expected (recognizing I had no baseline). This is probably worth at least $1K/month higher than I expected, and potentially a few $K per month higher.
2. For reasons still slightly unclear to me, the units we have looked at tend to be $1500+/ft (with any reno). I guess the < $1500/ft units are 8' ceilings, less windows, worth condition, farther from subways, less square feet.
3. Sale prices in these units are not down as much a my gut expected them to be.
4. Not as much inventory in these types of units as my gut expected as well.

Go with your gut. Nobody in NY needs to sell, so prices remain high. The last crisis, it took 4.5 years to get back to positive sales momentum (Spring 2013). This time could be even worse bc there is more overbuilding and the rapid stock market recovery lets sellers deny the reality that the prices of NY resi RE need to come down.

Won't/can't/will not force a purchase like this. Started searching for rents for the first time, did a box around the 77th 6 subway station... not a ton of inventory either and a few places seemed to price above what buying the place would be (this is in the < $10K/month range). Maybe this area of the UES is just super desirable?

I appreciate all the thoughts on this forum! It is very helpful to have a sounding board with so many different opinions/perspectives.

Mouse, In general, best values are lesser apartments in stuffy coops if you can get in and have 50 percent down and liquidity. Think lower floors not facing park avenue in a park avenue coop. Of course 8 foot ceiling post war are good value but low ceilings do not work for large say 1600-1700 sq ft plus apartments.
Good luck with your search. Do let us know what you decide.

Mouse, I think you are underestimating the degree to which people:

1) Have half a foot in NY, half a foot out. Many of the leavers you read about plan to be back, maybe plan to be back, etc. They are just camping out in second homes.

2) People tend to carry an irrational accounting of money when it comes to real estate. They hold a belief that if they paid $4M for an apt, leave it empty at a carrying cost of (say) $200K/year, that $200K isn’t a loss. Especially if they come visit here & there. MCR’s condo president is a good example.

On your rental search, maybe I can be of help there. Questions:

1) When is your lease up? Don’t bother searching any sooner than 5-6 weeks out.

2) Why is your search so narrow in scope? The wider you go, the more likely you’ll find the gems. As George said in a different context, what you are looking at is mostly the high-priced crap that no one is willing to rent.

3) By your own math of $3K/mo for each $1M of purchase, the market you were looking at for buying had you spending on the order of $15K/mo. Why are you looking at rents below $10K?

@300, in other words, the best apartments are the least desirable units in buildings whose boards would reject anyone who would be willing to buy that apartment. Think River House.

@Mouse - your search parameter is very small. No, that area is not booming. There is nothing magical about the 77th St 6 train, for you or for anyone else.

Our historically stuffy coop is, as Inonada points out, illustrative of what is going on in many if these coops. Ours is in the process of modernizing out if necessity and our current board will let anybody in who looks like they can pay the bill. I am sounding a constant warning to purchasers on here (as well as to my building’s board) that nobody is doing any purchaser any favor by letting them buy when there are flags that they won’t actually be able to pay the bill (whether that be low post-closing reserves with job in any industry famous for job instability). We have some newer shareholders in our building who did not quite understand the assessments that are inherent in buying a pre-war. Monthly maintenance only covers operating costs in most coops; make sure you factor in extra expense of capital expenditures that will materialize in the form of assessments that will add a few thousand every few years.

Someone who can't afford a few thousand every few years doesn't have any business buying anything, whether condo or coop or shack, whether in NYC or Nowhere.

You make a good point about maintenance though. Is the maintenance solely opex or is the Board adding another $1000/mo to put several million into a capital fund? Personally I think that's quite prudent.

And one thing I recommend in due diligence phase: Look up how many board members are trying to sell their apartments. Board meeting minutes will give you identities of board members; Streeteasy or City Search will identify apartments for sale; ACRIS will tell you who the owners of those apartments are. I personally would not want to buy into a building where board members themselves are selling (unfortunately that includes my own building).

@George - Agree on all points. I recommend any purchaser examine coop financials to see whether maintenance payments include allocation for Reserve Account and the balance on any such account. I am apoplectic that our building has no allocation for that; burned through the proceeds of our 2018 underlying mortgage proceeds in 18 months and has now tapped into the Line of Credit. I am prepared for what this is doing to the building, but some cute young families in our building are not. They are already panicking about assessments and have realized that not only is their “home” not appreciating invalue, but they would have to recognize a loss were they to try to sell it today. I just don’t understand anyone’s being in that position, but I have gotten to know some of the individuals, and it really never occurred to them that they would not be able to sell their NYC apt at a profit at will.

And the reason these cute young families were allowed to stretch themselves so far is board-at-the-time was desperate for transfer fees. Our current board will repeat this, so any cute young family who sees a Classic Six for a price that seems too good to be true should beware. Note that if you have the money for maintenance and capital expenditures, the purchase can make a lot if sense; but I would advise against stretching to purchase.

BTDT. I was one of those cute families, bought in a poorly made building off blueprints in '06. Made just about every mistake that could be made. Maintenance soared, assessments came atop assessments. Board fights. Today it's worth a lot more than I paid bc the neighborhood improved (as I expected), but it's a case of once bitten twice shy. You need to get 10-12% price appreciation in NYC just to cover closing costs. Where will that come from? I could tell in '06 bc the neighborhood was up and coming and amenities were being built to draw people. I can tell where it's coming from in Nowhere bc I can see the out of state license plates on the Escalades parked in the driveways and the buyers' addresses recorded on sales, and I know what's drawing them. I can't tell on the UES. Maybe this is why I'm still bearish.

Both purchaser's broker and purchaser's attorney ought to be able to walk you through co-op financials; that's a standard part of the service.

Mouse, like nada, I don't think you'll be able to find what you want at $10K, but I think you can find it between $10K and $15K.

The unit which I had in mind for you was this, https://streeteasy.com/building/the-brompton/rental/3202364 . List is $15K, but your broker (who you'll have to pay) can maybe wrangle a discount off that.

If you want to come to my side of the world, there are a couple of things on WEA that are NER (net effective rent -- what you pay monthly after a concession) around $12K; there are things cheaper, but I don't think you would like them. Also, leases are out at the Ariel West, but maybe have your person make a call so you can jump on that if they don't come back.

If you do want to stay on the East Side, there's this at the Gotham for around $13K list
https://streeteasy.com/building/the-gotham-170-east-87-street-new_york/w10de.

I would also suggest that Carnegie Hill townhouse, though then you're probably schlepping, by your standards, in which case you might want to take that combo at the Saratoga and stay in your budget.

ali r.
{upstairs realty}

@George - Yes, I would be considerably less worried about my building’s future for these families if the building were in a “hot” neighborhood. That makes all the difference; people will pay top dollar to live in a paper tent in the West Village; not so much in the netherlands of Turtle Bay.

>> Mouse, like nada, I don't think you'll be able to find what you want at $10K, but I think you can find it between $10K and $15K.

FP, I didn’t mean to imply whether or not Mouse could find anything at any price range. More curious to understand why the budget for purchase was so much higher than for rent.

A common action taken is that people will spend a lot more on buying than renting. (By “spend”, I mean the part of the purchase that would be independent of appreciation / depreciation / investment; I like to use 3% of price + monthlies these days, regardless of the amount borrowed.) This means that more expensive apts end up renting cheaper. E.g., many people just “refuse” to pay more than $10K in rent, making the $10-15K segment a better value. I’m not saying you should spend / can afford that, just that whatever psychological trigger $10K might make in you, it occurs in others too, so take advantage of that.

Also, full-fee apts are your friend if you are interested in staying for more than a year. Same reasoning. A lot of people “refuse” to pay a fee. I gladly & willingly pay a fee, one-sided, and just ask to make it 12% rather than 15%.

On a 3-year stay, it’s a 4% increment. On a 6-year stay, it’s a 2% increment. Besides giving you access to all the apts that are listed for a fee, which are generally lower-priced, I think you get it back (and more) in the negotiations.

Let’s take a place listed at $15K. In the current market, that should be closeable at $12K, 20% off. If you put in a low bid AND tell the owner that they have to pay the fee, you’re the asshole who is squeezing for everything. If you put in a lower bid BUT just say that you’ll pay for the (generous) fee, your representative to the owner (the broker) will be inclined to sing your praises. I.e., “Yeah it’s a low bid but otherwise they’re wonderful / reasonable people who would be great tenants.”

Remember, 4% of $12K is about $500. But the discounts off ask will be in increments of $1000.

The broker is NOT your representative to the owner unless you hire one yourself. The listing broker always works on behalf of the owner. The broker you hire may or may not represent your interests; their economic motivation is to do a deal. Only you can look out for yourself. If you look around the closing table and can't identify the fool, it's you.

Said the person who could only manage 2 free weeks in the middle of a pandemic....

If you’re around a closing table for a rental, something is wrong: no one gets around a closing table. If you’re in situations where there needs to be a fool, you should reassess your life, the type of scum you are willing to deal with, and the type of scum you yourself might be.

If you want to lease an apartment at a great price, surround yourself with:

1) An owner whose main motivation is to find a hassle-free long-term tenant rather than get top dollar.

2) A broker whose main motivation is to satisfy their client. Mostly because it’s the right thing to do. But also motivated by eventually getting the sale. A broker who brings a high-paying but PITA tenant to the owner will not be looked kindly upon when it comes time for a sale.

The broker’s short-term economic motivation is to do the deal at any price. They are the only person who speaks to the owner, recommending whether they should take the deal with you vs someone else perhaps willing to pay more vs wait. The long game they are playing economically is to get the sale.

Here’s the concern I have with the Brompton’s 19E rental, FP. Back in the day, the place could have perhaps fetched $2400 ppsf or so. On the other hand, 111 Murray 47W fetched $3850 ppsf. Meanwhile, asking annual rent on the former is $77 ppsf while the latter is $85 ppsf.

Different price points, different neighborhoods, etc., but if I can find stuff like the latter I think Mouse should be able to find something better than the former within his/her search. Pre-COVID, Brompton 19E’s pricing would have been very attractive, but now I think you can find better.

Speaking as a broker who only gets involved with rentals when it's to assist a former client (315 East 88th Street is a good example). We are absolutely looking out for the best interest of our clients, first because it's the right thing to do. 2nd, because in my experience I've realized if you treat people right it will come back to you both socially and financially. This is how I took a business from essentially zero to close to a hundred million dollars in annual sales.

All salespeople aren't cretins George, just like in all aspects of life there are the good, the bad and the ugly and it's your responsibility to find the good.

In this current market we've been working for a one month Commission from the client so we can advertise the property as no fee. We think this best serves the client in the current market. With 315 East 88th Street we received nine offers and we ended up accepting one that was $200 above what we were asking. All 9 clients were unrepresented by a broker.

There are plenty of great agents out there. I don't know if you necessarily need one for a rental if you're already familiar with the city, especially with the information available right here on Streeteasy.

There's really not all that much to this. You're either willing to pay,meet the terms of what a seller/owner wants or you're not. There's certainly no shortage of options out there right now, especially in Manhattan.

Well said, Keith. It’s also important to remember that unlike a sale, a lease is a repeated game between the parties. The stakes are also much lower: the terms & price are about 1-ish years’ right to live there, not a forever-ish right discounted into perpetuity.

Nada, 111 Murray 47W is at a higher price point ($22,915 NER) than the Brompton ($15K). So yes it's a "better deal" compared to what it had been, but shoppers aren't always looking for the best discounts. They're looking for good discounts on things they need or want. The pandemic suffering has probably been such that I could score a great bargain on an evening gown, but it's more important to me to get a slightly discounted but-will-wear-more often pair of work pants.

Keith, while I understand that your business model has been successful for you... and in the case of rentals is fairly widespread at this point (with the owner paying the listing broker one month)... mouse still has the problem of getting his/her broker compensated. That broker has been working with him through what sounds like a fairly involved search to purchase; it makes sense to bring her/him into the rental search, and in that case the Owner Pays one month model isn't going to do that. That's all I meant by "you're going to have to pay your broker." It wasn't meant to be an attack on how you, or any of the listing brokers of the rentals I mentioned, do things.

ali r.

I have rented in the city for many years without a broker representing me. For my most current place, where I moved in 2015, I paid a brokers fee for the first time in my life (1 month). I found that paying the fee amortized over a period of time was very economic vs. the big box buildings advertising "no fee". I secured a 2YR lease at the same rate where big box buildings wanted 8% rent hikes and I could see the buildings run with high vacancy/turnover because they did not seem to care about vacancy as much as their headline rental rate. No bid for a 8% CAGR rent but people gave them their money. I haven't checked their vacancy today but I'm guessing its high, and I would only consider renting fomr them if I got a 2YR lease AND an option on a 3rd year... I just would not trust.

I will only rent with a firm 2YR lease. Owner gets less vacancy and broker fees and makeready cost, and I get some certainty on cost. This a particular must have in 2021 when I suspect many real estate owners are just licking their lips expecting to hike rents 20% in 2021... and asking this requirement upfront will screen out those easily. Ideally I could snag a 2YR lease with an option on Year 3. I doubt that's easily secured though without much looking around.

If I go the the rental path, I will approach it as a 3YR time. I do dislike moving (especially as we have more 'stuff' with a family). My thought is in 3YRs I will have better sense of financials (definitionally this will be the case!) and I don't think apartment prices will be up by a lot more than whatever I can earn on not putting down a deposit. Renting in the UES will also give me a better sense of what its like to live there.

Yes $10K is a mental number and it makes sense this should create some expensive units for $9500 and cheaper units for $10,500. The number is anchored by actual budget however. I planned on only spending $10K/month all-in when purchasing a place . Doing the math on what actually interested us (although not to buy) we were willing to increase our budget to $13K. But this was an increase if we were committed to living somewhere for a decade (or decade+). For a rental, without any principal pay down or without committment for an illiquid asset... I would pay less. For context, I pay a bit less today ($6K) so just going up 50% is a big mental leap!

I'm not specifically addressing mouse or his/her situation. More caught up in the general spirit of the conversation. I'm assuming mouse will do whatever mouse feels is the right thing to do.

Apologies ali, I actually didn't read your comments previously, so I certainly wasn't responding to you... I was actually addressing some of George's comments...

I figured I'd be stirring the hornets nest by pointing out the inherently conflicting incentives of brokers and their "clients". But it needs to be said from time to time.

Understood, Mouse.

FWIW, I’ve been doing 3-year leases for quite some time structured as a option to terminate any time after the first year with notice. I’ve never had pushback on it, not even pre-COVID, so you should just ask. Honestly, if an owner isn’t willing to do multi-year and respect the hassle I am going through in dealing with a move, that’d be a giant red flag. Another thing you’ll find at higher rents is an increased degree of professionalism from the broker & owners. And the final thing you’ll find is openness to final rents significantly lower than asks.

Here is a suggestion. Take a place you find in your search at a price appreciably higher than you are willing to pay, but that you’d take it at the right price and would be happy drop if not. Let’s say the place is $12K. Make a bid at $9K and see what happens. Worst-case, they say screw off, but it’s not like you were going to take it at $11K anyways. Best-case, they counter at $11K and you close it at $10K.

I did not know 3 year leases were that easily obtained. So you structure them as two options on Year 2 and Year 3, if exercised prior to [3 months] of lease expiry? With 0% rent increase or an assumed %?

Down at the $6K tier, I got my current place for 10% off ask + options on year 2 and 3 with increases pegged to NYCRGB. That was in 2017 when the rental market was still strong and area prices trending up. I'd consider the original ask close to "market" -- which meant there were dozens of comparable units sitting unoccupied @ 10-20% more, as Manhattan landlords (perhaps even moreso then than now) tend to be overoptimistic, plus a small handful of recent trades whose last ask was around $6 (no way of knowing what they actually paid).

This year, with nearby asks down 20-25% from 2017 (so, 10-15% below what I was paying), I asked for a big discount, instead landing around 5% off with option to leave anytime given notice.

I've seen a lease as long as 5 years: 3 years initial term with two renewal options with 90 days notice to the landlord of their exercise. Only way the owner could cancel the lease was after 2 years if the owner occupied it personally and gave 90 days notice before doing so. Tenant got the right to bar all showings until the final 30 days of the lease, and then only in certain hours.

If you get creative, you can come up with almost anything. Works better with a human landlord as opposed to a giant leasing corporation.

As George said, you can structure anything you want. I prefer longer-term leases with early termination option, rather than option to renew, as the latter involves active effort when (in the expected case) you end up staying.

LOL, now we are thinking of just renting a 2BR again. It feels like a failure of aspiration to own a 3BR /flex4BR long-term home for the family, but I can't justify it. Someone asked me "what is the upside of owning" and I couldn't answer it in a great way. It clearly does not make financial sense as I can find higher uses for the co-op downpayment than parking it into a zombie asset. There is a mental satisfaction of putting down a stake that literally will anchor us, but we can address that via mental reframing as 'just because we are renting does not mean we are not putting down roots'. Spending a similar amount to rent a 3BR doesn't make sense to us either as the third bedroom would only be used 2 months per year, post vaccine.

Getting a 2BR would save $25-40K/YR versus a 3BR. Two month hotel for a guest would be $10K, leaving us $15-30K in the green, to perhaps use for weekend escapes and other fun stuff.

So the best approach for us I think is just to rent a 2BR for a couple years and monitor the sales market and try to grow our savings in the interim. Have plenty of time to buy and I don't need to market cash into an asset that won't appreciate.. which it seems owners/sellers are willing to do.

"'just because we are renting does not mean we are not putting down roots'."

Back in the day (30+ yrs ago), I knew sombody who spent 15k out of their own pocket on a new kitchen -- for their rent controlled apartment. Their justification: "I'm going to be here for another 20 years, why shouldn't I have a nice kitchen?" They were around 70 at the time.

@Mouse - so do what I did and buy a weekend home out in Nowhere, USA. Then you own something, and you can rent it out for weeks or months where you won't be there to cover the costs (which are far less out there than here). And you have a place you can run to if NYC goes to he11.

@Aaron - it's common in Europe for people to install their own kitchen. In some countries, all leases are rent controlled, but there is no requirement for a landlord to provide a fully furnished kitchen any more than a fully furnished bedroom. Therefore it's not uncommon for the apartment to be delivered with a completely empty room that one might use as a kitchen, and you as a tenant hang your own cabinets, install your plumbing, and bring your own appliances. Ikea has a huge business providing cheap modular kitchens to European renters.

As someone that recently sold a beachfront second home, that generated plenty of income in the winter, don't underestimate the potential headaches of being a landlord, even in an upscale market. Whether you have management or not. For me it wasn't so bad the first few years, but it started to wear on me and I realized I just didn't want to worry about it anymore.

I prefer owning my primary home, and I'm happy to be on the other side of the trade when we travel, rent an Airbnb. That's just what we decided works best for us.

Certainly you're not alone deciding to rent in New York City, it's what the majority of people do. And based on some of your comments it sounds like the most sensible thing for you to do.

Keith
TBG

I don't need to tell you that beachfront homes can be a real pain because of the corrosive effects of the seaspray, the humidity/mildew, and the constant threat of rising water. The maintenance can be a lot more than even being a few blocks inland. If I were to do a beachfront second home, it would be as a condo.

FP, there's something unspeakably satisfying about being a "cute young family" who owns a classic six right next to central park. The listings you gave IMO are not giving off that vibe.

Mouse - see above. The experience is totally different living in a cookie-cutter post-war 2 bed vs a solid prewar classic six. TOTALLY different to the point that I can't even imagine the former anymore. Don't know if you have kids but the classic six layout is just so sensible it essentially can be an entire lifecycle space. I can literally see myself dying in my apartment.

@Mouse How about buying a nice 2br and temporarily renting one of the empty apartments in your building as a home office?

Nothing wrong with renting your primary residence.
I did that for first 12 years in the city, including 8 years in the same apartment with rolling 2 year leases. Finding a low key landlord and going for 2 year leases is really key.

We ended up buying a place 3 years ago and have my doubts we will make it 8 years here.

Renting would have saved us on custom window treatment, electrical work, numerous appliance, repairs, leak repairs, board dramas, loss of SALT deduction, increases in maintenance..
Not to mention splashing out more on furniture now that we "had our own place".
Looking forward to attempts to close NYC budget gaps with RE tax increases.

Buy a weekend/summer house and rent your primary.
Houses have a lot of variable costs but they aren't nearly as overbid relative to their rental value as NYC real estate, even in the COVID bubble.

sluox, the problem, sadly, is that money is not unlimited.

I agree that a Six near CP would be a lovely choice ... however part of my job as a broker is not to gravitate towards my personal preferences, but to work within the framework of a client's preferences.

Mouse has stated a requirement for four bedrooms, which means that a Six wouldn't be big enough; the need would be for a Seven or even an Eight. And Mouse also indicated a preference for being near the subway, rather than North; note than none of the three original apartments that we were asked about was West of Lex.

Well, if the equation inputs are "big "and "somewhat south," then the output is going to be "expensive." So I posted what I posted, not because I can't listen, and not because I don't love the Classics, but because I was attempting to stay within budget.

Can I find an Eight nearer the Park? Sure. And I do think that https://streeteasy.com/building/930-park-avenue-new_york/sale/1504355 is a superior apartment, both in terms of location and ability to stay in it "forever." I apologize for not making that plain before... but it's just too expensive. It's for a different buyer.

ali r.

@steve123 I guess everybody's situation is different, it's certainly not one size fits all.

@george agree with much of what you say. I used the word home to describe a condominium that was on the ocean. Still a lot of wear and tear, we bought right after a $15,000 per unit assessment, and certainly ongoing assessments for maintenance are part of the landscape. Family/friends certainly derived a lot of Joy having a oceanfront condominium to stay in when they visited Florida. And the seasonal tenants essentially covered all of my carry costs for the year. Along with this and other properties, I'm referring more to the pain in the neck of being an Airbnb landlord, at this stage of the game it's just not for me. Although that doesn't stop me from perusing Zillow...

Keith

FP--yes, but mouse was talking about renting a two bedroom under 6k vs. a 3-5M (TH) forever. I don't know why you can't draw some happy middle with a 2M six, that can still totally fit 2 adults and 2 kids (and a nanny).

Like I feel this thought exercise is muddled by things more than just the simple math of sq ft, location, etc.

Also, a lot of newish construction rental/condos, the 3rd/4th bedroom is 10x12 max, which is basically the size of a large maid's room. There are sixes out there (like mine) where there is a space for dining outside of the dining room so you really don't need it. Lots of sixes can be used essentially as a 4bd.

Yeah I agree with sluox that we've somehow skipped over a whole price tier or three. This one (mentioned on another thread) caught my eye as a potentially Mouse-y unit: https://streeteasy.com/building/the-landmark/2801

We're talking postwar ceilings and bridge traffic here, not exactly an Eight on Park Ave, but I imagine it must still represent a healthy upgrade from a sub-$6k 2BR while landing just over $700/ft. And if its downsides make you reluctant to invest for the long haul, well, you can rent such places too. Probably under $10K these days.

@RichardBerg, I would love to stay in Midtown East. So much cheaper. Quiet on weekends with less residential and tourist traffic. Very high diversity of restaurants (ethnic, low, mid, high). Great for commuting. But a dead zone for kids and my partner wants to be closer to schools. Also no green space here at all, which is a factor. But with the $1MM saved, can Uber to Central Park and not feel guilty about it!

@mouse this higher floor 3br is huge: https://streeteasy.com/building/the-landmark/3304
I love this area, but I don't have kids. Are schools not great in Midtown East?

That one only has two "touch points" (as I understand his definition above) and no 4th BR.

It's about the same distance from the park as e.g. the Eastgate Complex posted above, albeit with nastier traffic on the crosswalks in between.

I do_not_get school metrics (they invariably measure your average classmate, not your teachers/institution) so no comment there.

@Krolik, Midtown East is a bit of a dead zone for young kids. There are preschool options (Garden House and St. Barts are two nice options, and there is IPS near UN etc.), but we commute to UES for our preschool. However, most families and kids activities are in Murray Hill and UES, so you have to commute to either location if you are interested in this stuff -- there are some classes in Midtown East but the majority/vast majority are not here. As kids get older, i.e. after preschool, most of the top (if you believe that any school can be a "top") are in the UES. There are publics in Midtown East, but the toprated publics are in other areas as well. And again, limited parks/green space in Midtown East. Ultimately, there are not as many families here versus other areas of the city. We can absolutely stay in Midtown East, and kids take a bus (free I think till 6th grade) to Kindergarden+ schools but the trade off is no green space and hard to schedule playdates etc. If one has the luxury of choosing a geography, we are choosing to be closer to schools and green space. I would be fine in Midtown East, but I don't know how to think about the lack of green space/parks to raise a potent argument against moving!

@Mouse Thanks so much! How far up can one go and still be near good schools?

The school-age kids in our Beekman area go to the UN School, and while the greenspace is definitely lacking at the moment, it is only a matter of decades until the Midtown East Greenway/Esplanade/whatever they are calling it transforms the neighborhood.

@Krolik it is all relative. At any given K-12 program, 1/3 live near school, 1/3 rest of Manhattan and 1/3 farther away - or so I am told. That is for private of course. There are plenty of great rated public schools as well.

Pre Covid - just look at the crosstown 66th street bus with school kids after 3:00pm going from the east side (private) schools to the west side through the park

Always a fun commute (not!) -

That IPS school in Turtle Bay closed due to low enrollment a year or two before covid. It's true that many of the TT schools (in UrbanBaby lingo) are way up on the UES and that there are lots of commuters. The push for diversity means there's always the token kid coming from Flushing or Bronx.

I've tried walking the length of the city from the UES to downtown, and it really doesn't work. I don't expect the several missing pieces of the "esplanade" to be done any time soon.

That esplanade will done any decade now - just you wait!!

Officially put the pencil down. Saw a few units on aonther tour and re-saw prior ones. Saw two that worked for. But one was asking 10% more than what it sold for in 2019 and another that wants to set a pre-COVID high in their building. Moreover, it does not make sense to put 50% down and lock up that capital with higher monthlies... said another way, we can rent at a lower price (even if just marginally or parity) and free up capital to invest for what I think will be a higher return than these units. This makes me sleep better as well. I am curious about the tax increases coming, and started another thread on that subject. I am little confused by the aggressive asks of sellers, but I still think these 2 units will sell for above what I would pay, by year-end next year.

Congratulations on making a rational decision!

You'll be wise to keep a folder of all the places you saw and what you thought. Watch when they actually sell... or not. That's when you start to see where the market really is.

https://www.bloomberg.com/news/articles/2020-12-07/manhattan-luxury-home-buyers-come-back-lured-by-deep-discounts

Discuss.

1. Does not say who sellers are, were these also New Yorkers?
2. Does not say those who moved to Hamptons/CT/NJ actually sold their NYC places versus were always planning to come back to NY anyway (i.e., is this new news?)
3. Does not address macro question of whether prices hit a floor or are going up
4. Would like to understand areas. Based on my broker conversations, some areas have been harder than others. When I see UES priced the same as more desirable areas, I wonder if that means other areas are priced low or UES is priced high. With UES pricing not declining, perhaps it means these other areas are priced low (for the immediate timeframe) so seeing an activity pick up here may make sense.
5. Based on my own search, it does seem that (i) record stock market and (ii) low rates are driving some amount of demand and reducing some amount of supply. To me, this means asset prices are already inflated versus are destined to go up.
6. Article does not talk about the reasons for discounting or why that may grow/persist. Not a balanced/all encompassing article.

Mouse, there's an extraordinary amount of cheerleading in the NY market among brokers, politicians, developers, and everyone else who benefits from you spending $4 million on a small and outdated apartment in a crappy building on the edge of town. I don't see that anywhere else where I follow the real estate markets. That narrative that NYC is great and everything else is awful has kept the city going for 25 years now, and a lot of people who bought the narrative in the early days did very well, just as pyramid schemes work great for the first people in. But do you really want to be the last person into the scheme as it starts to fall apart?

Eventually it will break. it probably is breaking. The fact that you can rent an $8.5 million property with $7.5K/month of carrying costs for $15K a month is proof of that.

https://streeteasy.com/building/time-warner-center/sale/1364990
https://streeteasy.com/building/time-warner-center/rental/3155154

You're missing the intangible component to this, there are people that are buyers and people that prefer to rent. Those two have the mentality that owning a home is preferable are viewing the current market as an opportunity to buy at a discount. And this is certainly not a opinion, it's whats happening. All the analysis in the world, trying to comprehend what's driving the market will fall short of this simple fact. After each market shock we've seen the same behavior and the same head-scratching here on streeteasy. Simply go back to the threads of 2008/2009, the overall thesis was an outright extended market crash. Certainly anything could have happened, but the market had other plans. Trying to figure out Mr. Market is not an easy task.

And of course when you can get a 30 year fixed rate mortgage at 2.3% and the stock market has absolutely been killing it, it doesn't hurt.

Brooklyn continues to lead the way, our listing at 524 Manhattan Avenue received multiple bids and went into contract after less than two weeks on the market at ask. We currently have 18 deals in contract, more than I can remember at this time of the year in quite a while. We have another four or five accepted offers that should go into contract this week. We're just one small brokerage, but you can keep tabs on our website on what we're doing in real time.

https://therealdeal.com/2020/12/07/88m-worth-of-brooklyn-luxury-deals-inked-last-week/

Jonathan Miller's Matrix blog and of course Urbandigs are great places to actually track what's really happening in the market, beyond personal speculation.

And before the Bears wake up angrily from their den, I'm not cheerleading this market, I'm just saying there is activity and signs of life, time will tell where all this leads to, however, I'm optimistic. And it's important to remember, people come to us after they've already decided they'd like to purchase.

Keith
Tbg

@George, I used to be in that narrative that NY was center of the universe. I lived in SoCal for 3-4 years for a job, against my will. The first 6 months were a shock, but after a year I began to like it, for a COLA that was dramatically less. I remember going to a starred Mexican restaurant, having dinner for 2 with drinks and total check with tip was $67... I thought it was a mistake. And I enjoyed coming back to NY but was shocked at how much pricing/gentrification accelerated in that gap... went to a pizzeria restaurant with my wife (a restaurant not two bros) and I remember the check was $100+ without any drinks.

Big picture, I think the cultural advantages cities had 20 years ago have been eroded. Youtube has democratized recipes. Every Tier 2/Tier 3 city in America has multiple ethiopian/indian/ethnic restaurants to choose from. One can stream so much more content today, that you dont' need to be there in person.

So this huge COLA disparity doesn't make sense to me. There clearly are still cultural advantages to being in a city, but just less today than 30 years ago. The only anchor I can think of was being close to employer/commute times, and now you have some openness for WFH.

I am not calling for the death of cities etc. Just saying I agree with you @George that there was a narrative some time ago, and I suspect COVID-19 will shake many out of that narrative.

I've lived in Paris, Limoges, LA and Jupiter, FL. ... All great places to live for different reasons. But there's nothing like New York City, and you will hear that from people around the world. Sure I can get great Ethiopian food and decent Indian food in West Palm Beach.... But I don't try to kid myself it's a substitute for NYC.

I totally get it's not the only place to live and after having put almost 30 years into NYC myself including raising a family there, I definitely felt like it was the center of my world. But one has to live where they want to live and where they're going to be the most happy. But New York City is a special place... And people put up with a lot of crap to live there for a reason... I certainly didn't live there all those years just for the food or the theater or museums, somehow it touches people a little deeper than that.

Keith
TBG

Mouse, Tortaria on University. You will be done under $80 with a strong margarita each.

Numero 21/Ribalta, the same with a glass of wine each. $100 without drinks must be tourist trap or you guys must be ordering salad with truffles.

Lupes...

Ha! It was 6-7 years ago, I cannot remember the exact order. Maybe it was two pizzas and two drinks and no trufle salad? I think it was Pizzeria Co. in Chelsea. Closed in 2018. The general point was the COLA was wildly above California, and I think the food quality gap between NYC and other regions has closed tremendously. I still remember getting the check in CA and thinking there was a mistake! I understand NYC holds a special place in people's hearts, and it did for me until I lived outside of it is for a few years.... the longer COVID goes on I think the more worldly people will become. I also think NYC needs to be compared to other cities like Boston, DC, Austin, Denver, Portland, LA, San Diego, etc. versus Louisiana!

To be clear, I am not calling for the death of NYC. If I thought that I wouldn't have been looking to buy. I just think it has become less competitive than other cities over the past 15 years: the quality of life in these other cities has gone up while NYC's COLA has gone up.

Looking casually at units outside the UES... it seems the y have been smashed more than UES. It strikes me that UES needs to go down, or these other areas have found their floor and may rally some over coming two years... one shoe has to drop as I can't believe the UES is on parity with more fun downtown neighborhoods. My gut, unfortunately for me a buyer in the UES, is the latter. That said, having gone through the process as a buyer makes me a more informed renter and those are the economics that make sense to me at this moment.

This has been discussed before but UES might have more old $ and less need to move product.

@Mouse you mention that instead of buying an home you decided to invest into other assets that produce higher returns. What might those be?

My understanding is that bonds are a very poor investment right now with a low yield and potential to loose money when interest rates go up; stocks are at an all-time high, reflecting a very low equity risk premium. Perhaps VC/PE funds are an option, but only for an individual with a lot of capital. So my though was, however overpriced Manhattan housing is, it is probably a good asset to hold in these circumstances. How are you thinking about this?

Mouse, The reason you find UES has not had any correction is that within UES you are looking for very prime area, close to certain subway stops, under certain $ per sq ft, and a certain 3/4 bedroom layout. There are limited number of condos which fit the bill and private schools on UES keep a bid for these type of properties. There was a property I posted which is much below its price 2-3 years back but somehow you were not happy with layout. Diamond House 10a. So there are deals but you will need expectation management when/if you eventually buy. Midtown East rental to prime UES is a big mental jump.

Of course, it is in contract now. Market speaks much louder.

What, aside from being close to the park and south of 96th, is "prime" UES?

George, Look through mouse's requirement. He wants to be close to 4/5/6 line subway stop not too high up rather than 1st avenue which is certainly not prime. So as a minimum he is excluding clearly sub-prime areas. I mean Prime in only desirable sense (top 30-50%) rather than top 5-10% of location.

Krolik ,
Plain s+p has been hitting various highs and lows since its existence, if you can hold during downturns, and continue to hold , you have not been disappointed. Avg return since 1926 8-10% .
Simple low cost and liquid.

I think for now, mouse's move is a good one. Its one I recommend to my kids who have been contemplating buying in NYC. I tell them the environment is changing .That slow grind of increasing taxes and expense of living in the city make it a less desirable place to invest in. Invest in the s+p. For the money, they have done way better then NYC re. Even though the equity mkt looks rich now, I expect higher returns. An easing fed is mkt supportive. Maybe when it starts tightening, things get a bit dicey. But long term, s+p over Man re any day, more so now then before.
On a side note, MTA bonds 1-2 years 2% yield triple tax free. Immune to fed rate increases for such a short term. No, I dont believe they will default but thats another story. A bit of risk, but worth a look imho. Tax equiv yield for highest NYC residents ..3.7%, not bad for 1-2 yrs.

@knewbie Don't forget that the main benefit of RE investment: It is useful, I can live in it. I cannot live in the S&P. Also, cheap debt. My after tax cost of debt is likely below inflation.

good tip on the MTA bonds, thanks.

https://www.bloomberg.com/news/articles/2020-12-11/moelis-gives-his-bankers-blessing-to-work-wherever-they-want

"My after tax cost of debt is likely below inflation."

-that would be my most compelling reason to buy, incredibly low rates

Sherlock, like the " Globalization " of manufacturing, this pandemic may have opened the doors to a whole new job ecosystem. I know the "death" of cities like NYC and SF have been bandied about forever and work from anywhere may just be another candidate for that discussion, but I dont think its a stretch to say while its not going to kill big cities, I would guess its going to make a noticeable lasting impact.

"that would be my most compelling reason to buy, incredibly low rates" I think this is reflected in pricing already.