Was thinking of buying UES, but going pencils down

@anonymouse, I am pretty sure you are right. Hence the coops that require 40-50% down have the biggest discounts.

@George: Historically (i.e., back when townhouses were dominant) "prime" was not east of Lex, maybe low 60s to mid-high 70s. And I think that is still mostly true, although there are some quality buildings on Lex and btw Lex & 3rd. While not without its flaws, I'll offer up Imperial House (69th btw Lex/3rd) as a quality post-war building outside the classical 'prime area'. (though points taken off for loss of views due to the Hunter buildings to the SW).

@Krolik:
I am not an expert, but my observations after looking at units, I think co-ops are lower price because (i) they have higher maintenance first and foremost, which is a higher cost of ownership/should be capitalized at 3-4% in current rate environment, (ii) the whole ownership thing, (iii) more restrictions on leasing out, (iv) less ability to finance in a low rate world, (v) more restrictions generally and (vi) anecdotally they seem to be under improved versus condos (not sure if that's because of ownership base, restrictions on remodels etc.)

@Anonymouse
Not an expert either, but counterintuitively, I found that many coops have generally a lower cost of ownership. Of course, most buildings have a small mortgage (30-70k when allocate to a 2-3br unit), but on the other hand it was suggested in another thread that coops typically pay less taxes. Also, some coops seem to have rental units, which in a good market are helping offset operations costs. I agree about coop apartments being less improved overall, primarily because condo stock is newer on average.

What maintenance were you seeing on a 2-3br unit at a coop vs condo? I was frankly shocked by tax bills and maintenance on some condos.

Sounds like buyers getting 1.75%-2.0% for 7/1 or 10/1 ARMs through relationship bankers at CITI, WELLS etc. Have to put $1MM with the bank, and you can use this same $1MM to make your equity down payment. I did not model in this cost of financing when I was looking to buy, but this would have been a meaningful improvement to the 2.75% 30YR I had penciled in. I don't regret putting down the pencil on buying, but I wonder if I would have been swayed in the moment if I had that lower cost financing locked in.

Also should mention, I know two buyers buying properties at pre-COVID levels. One said he put 15 offers in and finally got one accepted, and the seller is bregrudgingly selling to him. $2000/ft in flatiron area. Definitely suggests some stability despite a weird time of year and an imminent shut down + talk of NYC's secular decline. To boot, he is a DINK.

@Anonymouse Amazing. I am also modeling 2.75%.
by the way, when is the right time to shop for financing? before accepted offer? before contract? or after contract?

The best deals are available to the wealthiest as always.. maybe there exists something that requires less than 1m deposit, but is still better than 2.75%? Let me know if you have any leads!

You're all sharpening your pencils, you should also be looking for a broker that can add tangible value. On a 3M purchase you could be rebated about 67k at closing. We don't advertise, however I'm amazed that more buyers (and sellers) don't also compare rates on brokers along with bankers and lawyers.

Keith
The Burkhardt Group

Oh Keith, we all love you to pieces (and someday we will have drinks in person again, dadgummit!) but you advertise plenty here.

There is no place like NY for DINKs. It is the only city we spend time in where virtually nothing appears to revolve around children.

@ali as a broker that's been posting on these boards since around 2008, yes I'm definitely here to discuss my business model among other things. It certainly is a good place to make people aware there are alternatives available to them, which may also be beneficial to them.

And I'll certainly take you up on a cup of coffee, I love talking about real estate.

Keith
The Burkhardt Group

I have to add to fp. I signed up for Keith's podcasts and my information has been sold to someone sending me spam/junk mail. Not good.

@Krolik shop for your financing before! Get preapproved up to XYZ and you will be in position to move more quickly when you find something.

Stache, Keith and podcast? They aren't any. You are sure that with your self-isolation in COVID, you are not losing it.

@Stache I don't have any podcasts... Please elaborate...

Found a unit I liked. Got the lease terms that worked for me. Landlord won't accept any break over first two years lease portion, not even with 2 month penalty.

(a lease)

One correction above: for relationship pricing on a mortgage, you CANNOT use the money that gets you relationship pricing to pay the down payment. It has to be in the account after close. Then you can move it out the next day, but don't count on a good rate when you refi if you move it out.

Generally you can get 1/8th off the rate for each $250k up to $1m on deposit.

@george we very recently had a client who is purchasing at 245 East 93rd Street get a 30-year fixed rate mortgage at 2.3 with a relationship deposit of $1M. The bank allowed them to pull there down payment out of that deposit. I'm not sure if Wells is still allowing it, but these clients were able to.

Keith
TBG

Congrats, Mouse! What sort of change did you end up making in terms of neighborhood, bedrooms, sq ft, price, etc.? Whatever you’re comfortable with sharing.

Interesting that the owner wanted a 2-year no matter what.

@George am told by two guys buying a place now, the relationship capital CAN BE used to make down payment but its not advertised. This is from Wells and I think CITI as of yesterday.

@ TheBurkHardt 2.3% for a 30YR fixed and $1MM? Was that Wells? Wow.

@Inonada I should start a separate thread on our journey, but will just post it below:

THE JOURNEY

1. I started this process looking to take advantage of pandemic pricing and use hard fought capital to buy a place in the UES. We started at a 4BR, and then moved down to a Flex 4BR. Would like 3BA but were OK with 2.5BA. Turned off by 4BA or larger (a waste of space!). We wanted elevator (disability), doorman (not sure if this is a must have anymore), central air , at least 9' ceilings/recessed lighting capacity, open floorplan etc. Outdoor space not a must have. The spaces that resonated were large, 2200 sqft+. Also close to 456 or Q (2 blocks or so max) and either 77th or 86th street (over time our preference shockingly grew to 86th...more diverse, more NY, more families).

2. Unfortunately the few units we saw that interested us wanted pre-COVID or above pre-COVID pricing. So the idea of pandemic pricing did not exist. Also, the just the $/foot were a bit higher than we were expecting (although we went in with no expectations).

3. We modeled it out with 50% down on a $4MM spot and 2.75% financing (in retrospect this was incorrect) and the monthlies ended up like $13-14.5K/month all-in. This would be $1K lower with the 2% financing, so $12.5-13.0K.

4. I started this process, naively, thinking we could pay $10K/month and assumed 25% down. Effectively, I thought prices would be 20-25% lower than what they were, with more leverage. I did not appreciate that (i) units that interested me cost what they did pre-COVID and (ii) they weren't down in COVID. The UES is mispriced/too high IMHO!

5. I also did not plan for, and did not like the idea, dropping 50% of purchase price as equity into a zombie asset. That crushes my liquidity and ability to invest. (Nevermind the fact that I don't have that $2MM equity).

6. So we pivoted to renting. Rents are down 20-30%... pricing down 0%. So (i) reduce the monthly carry cost by renting AND (ii) keep $2MM in my pocket (nevermind that I don't actually have $2MM).

7. In looking at the rental market, comparable units rented for $11-12K/month, with that locked in for 2-3 years. Definitely cheaper than buying, about 10% so. Definitely shocked to see these units go for $15K pre-COVID. There is not that much rental inventory and I don't think the 10% gap holds through Fall of next year, especially as people were willing to pay 30% more to rent these units just a few months ago. But still, if rents go up 10% and its parity to buying... and you can keep the $2MM in your pocket.. renting will make sense next year.

8. We thought about spending this $11-12K/month on rent. It will give us the space to de-stress. However, we don't value this space as much as we do other things in life. This was 10-20% above what we wanted to pay for a house we were buying!

9. So we are going to rent in the $8-9K range. I would stay in Midtown for value, but partner wants to go UES for kids and check out the area. So this probably means a 1400-1600ft 3BR/2BA that hits our parameters. It is a lot of money, but we are goign to budget for it. (BTW, we saw a $9K unit that rented for $13K pre-COVID.. and are stupefied someone spent $13K/month to be there.. I can't even envision it).

CONCLUSION:
We will rent for 3YRs and then reassess. Hopefully we will have more savings to increase our purchasing firepower, more career visibility to feel more confident in any decision, and more insight into the UES. I am a secular bear on NYC, but 2% rates may push property prices higher and higher - I am willing to take that risk because well.. I can't yet afford what I want to buy.. : )

Thanks for reliving the journey for our reading pleasure, Mouse. It sounds like you split the difference between what you are currently paying in rent (~$6K if I recall) and the $10K you would like to pay in buy.

Mouse, I am glad you made the decision which makes you and your family happy. It is not easy to make double upgrade - Midtown to desirable areas of UES (20% plus price difference), smaller place to a larger place with likely nicer finishes and layout you like.

@mouse yes that was through Wells Fargo. They locked in those terms about 3 weeks ago.

@Inonada it clear that what I want to buy will cost more than $10K. 50% down and $12-13K. Ultimately I was willing to pay to satisfy my needs which was dictated by the market, and this was less than $12-13K. My real estate want looks like $13K/month, but I can get higher ROI happiness on those "want dollars" elsewhere than real estate.

With me, Wells was clear that they wanted to see the money in the Wells account AND see where the down payment was coming from, and the two were clearly not the same.

Keith, I started getting spam from Paula Innocent, whos original email to me said she got my information from you. I put it in the trash so now it's gone. Then I got two separate Christmas cards from her. I recently sent her a postcard asking her to take me off her mailing list.

Honestly stache I have no idea what you're talking about. Who is Paula Innocent? What podcast are you referring to? You realize I'm not affiliated with urbandigs.com?

@stache just for the record I have no idea who you are? Do we somehow know each other?

Paula Inocent is an agent at Keller Williams as per my Google search.

Stache, why do not you call and ask her?

What do you guys think about:
https://streeteasy.com/building/the-hayworth/8d

New construction condo $1600/ft. Why are monthlies so high, and how does one forecast them?

aren't taxes for apartments based on potential rental income? What would it cost to rent a unit like this nearby? With similar square footage and finishes.

Looks like NYC uses this neighborhood ranking when figuring out potential income on a property.
And UES ranking is very low 1.2; only UWS is even lower at 1.0; Midtown and FiDi are at 1.45.
https://www1.nyc.gov/assets/taxcommission/downloads/pdf/neighborhood-rankings.pdf

In terms of common charges, not sure how it works for new construction, but for resale would look at expenses in financials and assume next year will be same or a bit higher (3-6%). Then look at income and what the main sources are, and project those. Most of the income is always common charge to shareholders - figure out how much increase is required to cover the increased costs.

If historical financials are not available, would ask management for a budget for next year.

Finishes are not a part of the equation. Just similar vintage and size building. But there are a lot of issues with that as well. Taxes are determined at a building level and then subdivided as per common interest for condo.

Not in the market anymore, but would have been looking to this new construction as a benchmark of sorts. Is it attractively priced? Would you expect being able to get 20% off the ask?

@mouse - I have enjoyed following your search and thank you for your updates. FWIW, I don't think you should be benchmarking using a fully amortizing mortgage. To compare apples-to-apples as between buying and renting, you should either use an interest only product or only counting the interest component of a fully amortizing mortgage. Also, why are you considering using 50% down? I'm running a very similar search as you and my goal is to put as little down as possible (unless I can get a significantly better rate for a higher LTV ratio).

@George - I've had the same experience with Wells. Eligibility for relationship pricing is confirmed shortly before closing, so therefore, the down payment doesn't count towards the relationship pricing, though you can remove the money right after you close.

Mouse, There is no attractive pricing on new construction unless it is the same price as nicely renovated resale. You will get fxxked in high taxes.

>Looks like NYC uses this neighborhood ranking when figuring out potential income on a property.
And UES ranking is very low 1.2; only UWS is even lower at 1.0; Midtown and FiDi are at 1.45.

Central Harlem 2.6
Brownsville 3.6

Ok, I sense a trend. But Greenwich Village is also 2.6? What?

Re 8D: Other than the bathrooms or the closets, for a family living there a person has only two places to spend time: your bedroom or the EIK. In a lockdown-prone world, I'd want more separate spaces. Better hope the amenity spaces aren't crowded.

Keith that was my mistake. I thought you were part of urbandigs. Please forgive me.

@RichardBerg yes I also have a lot of questions about that ranking list. lol

Brooklyn: Bay Ridge at 1.9, same as Brooklyn Heights. Park Slope at 1.6.

I believe the rankings take in a lot of properties in the neighborhood, including a rent stabilized buildings, walk up tenements, etc and there are a lot of those on the UES and UWS

@300 Mercer
My assumption was taxes for new construction would be variable to price paid on a $/ft (e.g. a % of the purchase price), so that condo would have higher taxes unless innately justifified? This unit is asking $1,650/ft which may be $1600/ft on an offer. I think comparable co-ops in that area have been looking for $1,500/ft. So was thinking "new construction", 10'ft ceilings, central air, condo/not co-op worth a premium. But the taxes did feel high, and I am not sure why or if that was correct.

@Aaron I 100% agree with you. Layout is not great for the square footage. One thing we have established in our search is a desired layout, and that is for a common area to have two different areas.. e.g. a long L has resonated with us -- with a big room and another common room around the corner (the common room can get a murphy bed for a flex 4, office etc.

@Yanks I agree with you. When I was looking at carrying costs, I did exclude principal. However, when you buy there are also 10% friction costs to sell on the back end (broker, flip etc.) + the buyers closing costs, so the cost of ownership is higher than just the mortgage interest (unless you bank on appreciation). I don't like being 10% in the hole on day one unless I will absolutely love what I am buying or know I am getting a great deal (which wasn't the case in anything that interested me, as noted folks want pre-COVID pricing). Regarding 50%, I found that vast majority inventory I was looking at was co-op and 50% down.

Mouse, What discount for being on a busy corner adjusted for convenience of subway?

Btw, it seems to be one of the fairer priced new development units.

I totally bumbled a great lease deal from December time frame.
Toured some 3BR today for rent and was told by multiple agents the landlords want to be at pre-COVID rents by this time next year and "make back what we gave up over the past year". New Yawk is back!!

What they want and what will happen are two very different things.

Mouse, upthread I gave you a list of possible rentals roughly three months ago, but I'm not sure that you were ready to move then.

The landlords are going to show those evil tenants by taking their ball and going home. Wait till next year! They are going to double rents just to get back at them.
https://www.businessinsider.com/new-york-city-rent-deals-landlords-holding-apartments-2021-3

The concept of trying to "make up" lost rent due to vacancy is a fool's errand. Self inflicted wounds from attempted market manipulation.