A Home Buyers’ Bonanza in Manhattan

MCR, note the highlighted 111 Murray building where the owner of the condo you formerly rented bought some investment units.

Doing the math on the 45W purchase is not pretty:

- $12M purchase in 2019 (a 2015 contract)
- $5.5M equity and $6.5M interest-only loan
- $350K annual interest
- $150K annual cc+taxes
- $250K annual rent, assuming some discount on $23K ask that rented in Dec
- $9M value tops, based on $9.3M sale of higher/larger 53W

So negative carry at $250K per year, with mark-to-market loss of $3M on $5.5M of equity. Toss in another $1M of transaction costs whenever that is accounted for.

This on top of fairly rich incentives to the co-brokers.

Let's note that this is a fairly specific segment of the market though, and that the "discounts" are only bringing price down to what some people would call "reality." (I'm watching 110 Charlton because I have a competing listing, and the last unit to go into contract there was at north of $1800/sf, which I do think is fair, but it's not exactly Loehmann's pricing.)

ali r.
{upstairs realty}

Hey nada, so anything getting relatively mathematically tempting for you?

FP, that to mean seems like an unrealistic view of “reality”. The discounted prices at which these apts will sell are leading to losses for developers. Note Barnett’s uncharacteristic admission (for a developer) that 3 of Extell’s 5 current sizable projects (I.e., excluding the dinky 11-unit one) will end up with losses, including some “big” losses. And I’m pretty sure the most favorable accounting in the world is being used to define “profit” vs “loss”, as RE investors are apt to do.

The mix of product developed was no doubt unrealistic with respect to what demand would actually support. However, the prices at which they can be developed in reality are not the (say) 25% discounted ones.

Stated another way, for all those armchair developers who think they can build what was previously known as $4000 ppsf tower for $2000 ppsf and sell it for $3000 ppsf, get out of your armchairs.

Unlike resales and lower end of new development, not sure ultra-luxury (>$10mm and or high $ per sq ft) has bottomed due to significant overbuilding. A lot of high-end product in sub-prime location like 111 Murray.

As another example of sub-prime ultra-luxury, any wants to live in Hudson yards as a location?

Keith: nah, not even close.

In the current environment, I use monthlies + 3% of purchase price. So for something like 45W, that’s $12.5K * 12 + $9M * 0.03 = $420K/yr as the “cost” for buying. Renting is $240K/yr, so it’d take a 75% increase in rents. Not holding my breath on that one.

Alternatively, if it were $3M then it’d just barely break even by my math: $12.5K * 12 + $3M * 0.03 = $240K/yr. So a 2/3rds drop in price from here. Holding my breath even less.

Lots of unknowns about the future (rents, interest rates and therefore adjustments to the 3%, monthlies), but it’s not even close for me.

Note that I don’t think the prices are unreasonably high, but rather that rents are unreasonably low.

Outside of Manhattan looks good too
https://licpost.com/long-island-city-condo-market-more-active-in-1q2021-than-during-amazon-period-analysis

NYYH, I do not know too much about LIC real estate. NY ultra luxury oversupply and price decline is getting old as it is a pretty well known fact and most buyers can’t afford it anyway despite the price decline. Start a new thread on LIC real estate if you are so inclined.

For example, would love to know what are most popular locations in LIC.

@Inonada - Ouch for our former landlord. I think you are right that it is not that prices are too high, but rather it is that rents are too low. Were Mr. MCR in charge, we would be doing exactly what you are doing. Mercifully he is too busy to pay attention and has just put NYC living situation into the "yes, dear" category.

The rent is too damn low! Where is Jimmy McMillan when you need him?