Starter Apartments ...

Loan market blows

20% down is mandatory and banks won't even return your call if your credit score is below 700. So regardless of income and savings, you just cant't get a loan. So, I'll just keep combing the pictures on NY Times

Ali, I think you know my view on this. The concept of a starter apartment is misguided. Unless owning is substantially cheaper than renting, and/or you are certain the market will go up, you're better off renting with a time horizon under 7-10 years. The huge transaction costs, timing risk, doing work on the apartment, hassle, etc. are just not worth it.

I would argue that you should market the apartment for someone who can live there a long time - a childless couple, empty-nesters, pied-a-tierre, a single who plans to stay that way, etc.

Can you send the link to the one on Perry and Greenwich?

I would say the following would be important:
1. Price (obviously)
2. The actual space
3. Board and how tough it may be. If I'm a new buyer, I am probably younger and don't have the longterm financials that many boards may be looking for. I don't want to have to ask my parents to be a guarantor either.
4. Making sure I have a mortgage contingency in the contract.

I don't think that many people who are first time buyers are considering buy v. rent prices or worried about subletting.

Just my opinion.... Good luck

babsie, why wouldn't first-time buyers consider buy vs. rent?

Starter apartment:
No co-op
Cheap
Easy to clean
Light ... and clean windows at the open house
No bad smells in the building common areas
No intrusive doorman judging your hookups

Ali, I'm in the market for a starter apartment. I am looking for (in order of importance)

1) a flexible layout (if I can't sell my starter apartment, there has to be some place to stash an eventual kid, should I decide to go that route, that wouldn't get social services crawling down my neck)
2) price - it must be about as cheap as renting over the next few years, and a reasonably sure bet that I'll be able to get out from under it without losing my shirt when the Imaginary Kid outgrows the stash space.
3) lenient sublet policy, in case the resale option doesn't work out.
4) pets. I have them, and wouldn't even look at a place that doesn't permit pets.
5) air and light.
6) elevator if above the 3rd floor.

RE: loan market, I am so nervous about all the bad news that I have not even made an attempt to research this. I'm a sideliner, although 2009 was when I was hoping/planning to make a move in the ownership direction before the economy went south.

I think you can assume that a first time buyer is going to be more swayed by good staging and curb appeal a repeat buyer.

Also, I'd focus more on the neighborhood than the kitchen.

wishhouse, I respectfully disagree on the kitchen. Many first-time buyers like cooking and if they are serious about buying will be making meals at home rather than eating out all the time, in order to save money.

As a first time buyer, I am most concerned about the space and how it fits my lifestyle. I personally prefer a large studio over a one-bedroom that is the same square footage as a comparable studio, just cut into small rooms.

The Board financial requirements are also important and I like to know those when I first look at an apartment.

Building financials are a real concern and I find that these are not readily discussed by brokers.

As for rent vs buy comparisons - of course, I look at the costs involved, but I also try to consider the value of being able to make the space my own as opposed to living in someone else's space. Truly an intangeable value, but a value just the same.

I had no problem pre-qualifying for a loan - 20% down, 30 year fixed, interest rate below 5%. I shopped loan packages and applied at the institution that had the best deal for me.

HI Ali, congrats on the listings, i am actually seeing in my experience that first time buyers are the ones who are actually pulling the trigger right now.
1. They do not need to sell anything to buy.
2. The generally are getting the most favorable loan terms as the prices are on the lower end.
3. They are able to negotiate substantially, and are more comfortable doing so because they do know that they are not buying at the top of the market.
4. There is something to be said for people who simply want to own to feel more empowered, and to be able to customize the home as they please.

However, yes the credit has to be exemplary, and most of these people are looking for the more flexible boards.
To give an example, I just signed contracts with some first time buyers who are a couple that recently married. They originally started to look in July for a 2 bed before the crisis really began, and just found a place that someone had defaulted on, where the original contract price, signed about a year ago, was about 2.1m, we negotiated down for them to 1,610 with the seller paying almost all closing costs, including transfer tax, mansion tax, etc... and it is a three bed with a terrace. This is a space that they know they can stay for a while and are willing to risk that the market could drop more but by the time they would upgrade they are confident they will retain their value.

So in short, you will find a buyer, but prepare your seller for the negotiating! Sorry i am longwinded tonight!

nycbrokerdax, now we're talking about something different. a 3-bedroom is not what is usually meant by a starter apartment, and (from what I understand), not at all what Ali is offering.

I agree, newbuyer. Starter apartment for me is studio or one bedroom. IMO, the 3 bed with terrace is not a relevant example.

newbuyer99, I know sorry I got off topic:) my point was actually that new buyers are buying, but like everyone, they are negotiating majorly. It was the only example I had from personal experience, as my new buyers happened to be in that range, but from speaking with other agents, and based on my companies data, I hear that the price range under 1 million is the only one moving at any real pace right now, and they are overwhelmingly first time buyers. Sorry for the confusion, I am on a caffeine high!

ali, lending guidelines have certainly tightened but its business as usual from what i see. there are definitely less lenders around. the most important thing is that the borrower's income is sufficient enough to carry monthly liabilities, fits LTV guidelines (90% up to 417k, 85% up to 625,500, 80% up to 1.5M, 75% up to 3M), and has good credit. certainly the self employed borrowers are having the most difficult time getting a mortgage nowadays. and of course now its so important that not only the borrower qualifies but the building they are purchasing qualifies by the lender (coop and condos).

Hi Ali,
I am looking for a starter apartment ( studio or one bedroom). the most important things for me are:
-price
-easy board or no board approval
-good sublet policy and of course the neighborhood. Zoe

here is the link to the apartment on perry and greenwich:

http://dgneary.com/BrokerWebsite3/code/sales_detail.asp?listing_id=543240,109849,29329,499496,602667,563994,617025,74913,569599,76300,617025,&index=0

this is a tough one. when i first saw the location and the layout, i thought, wow, that's not a completely unreasonable price. but then i saw the kicker: street level apartment. that sort of thing makes if very hard. i think about 80% of buyers (myself included) will not consider a street level apartment at any price. and i say this as someone who once happily lived in the parlor floor of a townhouse. those extra ten feet make a huge difference. there is just something about living right there on the street which is not appealing. the exception would be a garden apartment, for which the tradeoff is, well, a garden. this is not a garden apartment.

my first suggestion is to stage it, the pictures make it look pretty awful, particularly the ones of the living room with its teeny tiny windows. but i think this has to be characterized as a problem apartment--an apartment for someone who refuses to live in a studio and absolutely needs to live in the west village and can't afford anything better. but i don't know how many of those people there are. if that person doesn't exist, then the only thing you can compete on will be price.

ali,

here's the problem. your apartment is significantly bigger, but I just don't see how it competes with the comp that i found for it--this one bedroom on perry street that also has an open house today.

http://www.streeteasy.com/nyc/sale/226525-coop-290-west-11th-st-west-village-new-york

i hate to be such a bear on your apartment, but i think there is a problem here.

you also cannot assume a first time buyer is a 25 year old..first time buyers in manhattan could be empty nesters from the suburbs or long time renters who have been priced out of their rent stablized apartment.

front_porch : "I'll obviously get specific feedback as I show, but let me ask the general question: starter buyers, what are you looking for?"

Are you seriously asking this???????? For the love of God, aren't you a real estate broker? Your entire job is based on knowing what is appealing to home buyers. Are you really in a quandry as to this "general question"??

happyrenter, the "comp" you've shown is tiny. The entire apartment is not much bigger than the living room in Ali's apartment. And the kitchen is just against the wall in the living room, not its own separate space. Ali's apartment seems large enough to actually live in. Obviously street level is a negative, but I'd certainly prefer her apartment to the one you listed because of space.

@Happy renter, I like that 11th street comp. My Greenwich Street place has a bigger bedroom, a bigger LR, and a separate kitchen. It's $30K cheaper, which of course is fair because you're on street level. I do agree that the Greenwich buyer is going to be someone who has been looking at studios and is then pleasantly surprised that they get a bedroom, because I think there are a class of one-bedroom buyers for whom it will be too small.

Also, I get your point about staging, but the apartment had been on the market with furniture in it under another broker, and response was light, so I'm going to make a strong marketing thrust on price and neighborhood before I push on cosmetics. I could get the sellers to put $10K into dressing it up, but I'm making the bet that the buyer would rather have that money to customize.

@Slope11217, my job is to know what is appealing to home buyers. The market, however, changes daily, and I would be remiss if I didn't use every tool available to me -- including social media -- to find out what's in demand TODAY as opposed to LAST WEEK. I think "tricking" buyers by manipulating them psychologically is an old approach that doesn't work; I think now it's all about transparency and communicating with customers, which is why I'm here.

@nycbrokerdax, congrats on that deal. Your tips are very very helpful.

@everybody else, thank you. Come see me today at 731 Greenwich 12-1.

ali r.
{downtown broker}

I'm very negative on street-level apts because they are virtually impossible to sell unless the market is red-hot. 30k discount is not that much. On the UWS, apts have traded as much as 50% below similar apts in the same building if they are street-level. And this was back when times were good.

Ali,
Sorry to be critical, but the floor plan looks amateurish
http://img.streeteasy.com/nyc/image/31/3419331.gif

Good luck with the OH. Great area.

I'm with evnyc - for me, a flexible layout was important, as I'm of the age where the next 5-10 years are make or break in terms of having kids. A separate home office-to-nursery area was ideal.

An elevator if the unit was 3rd floor or above, not so important for me right now, but something that I think affects resale value.

No co-op: wanted to be able to rent as an investment property without any hassles.

Good finishes in kitchen/bathroom - I don't have enough money for the purchase AND a renovation, so it's got to be something I can live with for at least a few years.

Central heat/air - I'm can't see spending this kind of money to still have to have window A/C units.

"now we're talking about something different. a 3-bedroom is not what is usually meant by a starter apartment"

- I think we should clear terms here. "Starter apartment" associates with small and cheep, when "First time buyer" can be all over the spectrum, including "starter".

elena
(broker)

Apparently, according to the definitions offered by most people here, a starter apartment is the kind of place you would want to move out of sooner rather than later, if you could afford to. Considering what the relationship between rent and own is right now in most buildings, the .5% chance of building equity on your purchase in the near future, and the impossibility of "falling in love with" a starter apartment (to bend down to realtorspeak, kind of), why in hell could there be anybody looking for a starter apartment? If you put your DP in a 1 year CD at 2.5% you'll earn a bigger return than any equity, and you can rent something bigger for the same money. Right? Frankly, anybody looking for an apt. before mid-to-late 2009 would have to be: a) looking for a family sized place to stay in for 20 years, and willing to lowball hard before settling for any, b) convinced that interest rates are going to shoot up to 9% in no time and that such change won't be reflected in further declines for the market or c) a complete moron

good way to advertise Ali

@dwell,

the floorplan is amateurish because I hand-drew it, and my graphic designer hasn't delivered the "pro" copy yet. The nicer one should be up next week.

While we're on that topic, though, if anybody has freelance graphic designers (say, Quark or InDesign) they want to recommend, I'll have some more work coming up.

@bmw, :>.

@trompiloco, the obvious buyer of a half-million dollar one-bedroom is a young professional (starting out at a big law firm, say) who can get help from their parents for a down payment but not for 1-year CDs, so the generational wealth transfer is an option only if they buy, because the parents don't want their gift to be that liquid in the hands of such a young person. (This definition fits about half the people I went to college with; of course for Fair Housing reasons this is not the only category that I'm marketing to).

Once the down payment is invested, you're looking at $3K a month to carry a one-bedroom, which is about what one rents for, plus you get a tax savings from deducting part of the mortgage interest, plus you get a tax savings from deducting part of the maintenance. In addition, paying a mortgage is an automatic savings plan, so at the end of five years, you probably have around $60K in additional equity built up.

I realize that those numbers won't work for everyone, but they'll work for some people.

ali r.
{downtown broker}

excuse me, ali, that apartment does not rent for 3k/month. that apartment on the third floor rents for 3k/month. on the first floor a lot less.

You're overlooking a very likely market. Second home owner, not from Manhattan--income not dependent on Wall Street, a baby boomer(s) who invested very conservatively, had too much in money markets and muni bonds. A couple that fits that description bought my apartment--I grabbed them and accepted their bid immediately as I knew the board would love them, and they wouldn't run from their deposit if times got worse.

Have a feeling that if I were a young lawyer looking for a starter home I would still feel entitled to more amenities.

fp my comment would be that your most likely buyer would be either male or a couple. I doubt there are many single females comfortable with ground floor street facing apartment. BTW shouldn't there be bars on the street facing windows? Or are they well camoflaged?

Trompiloco, exactly the point I was trying to make. To be fair, I was not considering the intergenerational wealth transfer point.

If you're in your 20s and need your parents not only to help you with $$, but to discipline you into an "automatic savings plan", that's pretty pathetic in my book. But if that describes half of Ali's target buyers, then I can't blame her for marketing to them.

For Fair Housing reasons, it's illegal to market an apartment to a couple versus a single or a man versus a woman. While I understand that single women might have concerns about a first-floor apartment (I bought my first apartment when I was a single) I can't do anything about it in my marketing.

However, I can say it's a very brightly lit street, and it seems like anyone trying to break in would be very exposed. Empirically, the president of the co-op board lives next door, and has for decades, and he told me he has never had any trouble. Also, there are very (non-obtrusive) security bars on the windows.

Nyinmyblood, I would take a couple looking for a pied-a-terre gladly. I will emphasize that point in my writeup, thanks for the suggestion!

Newbuyer99, when I bought my first apartment in New York the down payment was $13,000. I asked my mom (who was not hurting) for the money and she told me to go jump in the lake -- so I freelanced it. That option is just not available to a first-time buyer now -- how can you moonlight $100K?

To everyone else, the professionally-drawn floorplan is up now. You wonder what brokers spend our money on? Designers aren't free, but they're worth it.

ali r.
{downtown broker}

Ali, that's exactly my point. If you can't afford the downpayment, you shouldn't be buying. That's the purpose of the downpayment - to weed out the people who haven't had the time, discipline, or ability to save for it.

I'm a first-time potential buyer (24) and what my 'list' of needs is must be 1-bedroom, have a decent sized kitchen, have laundry in the building, pets allowed and be move in ready. I personally, as I am sure other young buyers as well, don't have the spare time to start renovating a bathroom or kitchen. Low noise and good light are very important but views are not. Subletting rules are not important as I plan to be in the apartment 7-10 years and then move out of NYC.

I don't care about a doorman, condo vs. co-op, common spaces, or walk-up vs. elevator.

My ideal location would be West Village but on my budget (up to $500K) it's just not realistic, I would feel so uneasy about paying that much for 450 sq ft, which is why I will probably stay where I currently rent (BK Heights/Cobble Hill). I am on an open lease (and thus nothing to sell) so I'm in no hurry to buy, and I'm finding in general that there has been very little movement in the price of 1-bedrooms in good locations. I've also found that at a lot of open houses, the seller just has their place on the market to see if they can get their asking price, otherwise they aren't selling.

fisher, my West Village place is too small for you -- it has a perfectly "done" bathroom and kitchen but the kitchen is not big. The East Village location might be a better fit, I'll post when it's up.

ali r.
{downtown broker}

Two unique visitors at the OH last weekend, seven this weekend . . . maybe it was the better weather.

ali r.
{downtown broker}

I went to 2 open houses in BK Heights this past weekend, both 1 bedrooms, priced at $399K and $429K. Both have been on the market since last fall and "were taken off for the holidays" which I just take to mean they don't want streeteasy having it listed for a longer consecutive period. The $399K on Monroe Pl needed to be completely redone in every room top to bottom, not to mention it was the first unit you walked past in a 10 story building. There was another couple there from Pennsylvania who seemed very interested in the unit which I couldn't understand. The second unit on Henry Street needed walls to be completely redone as well as the bathroom, maintenance was almost $800/mo and there wasn't even laundry in the building. I went 20 minutes into the OH and was the 7th person to sign in. Clearly SOME people are interested in buying, but with the amount of work needed on some of these apartments, I cant imagine anyone paying 2007 move-in-ready-condition-prices in this economy. I'll continue to go to open houses every weekend but perhaps I'm just destined to be a renter.

Could you provide more information on this west vil unit?

when did $500k become a "starter apt"?

Julia, I'd say about 2004 or 2005 for one bedrooms. As long as the income is $200k/yr and relatively secure, that can be a starter purchase.

Income on a $519K list could go lower than that, I'd say. You're probably safe at $150K -- which is one young attorney or two young professionals in a variety of careers, which is why it's a "starter" apartment.

But julia, I feel your pain. I think I've told the story of how my first apartment (a studio) cost $65K. The run-up in prices has really hit first-time buyers hardest.

Interestingly enough, fishermb, everything that my husband and I see that we like for ourselves (we're tradeup buyers) is a wreck, and that's why we can afford it. We expect to have to do a kitchen and a bath and floors. Sorry that discounting hasn't hit BK.

jifjif, the W. Village place is well-done (separate update kitchen, completely tricked-out bath) except for the carpet, which the seller will replace. If you want to deal with exposing the wood floor, that could be your project.

More info here: www.731greenwich.com

ali r.
{downtown broker}

Ali - In your experience, what kind of discount should being an all-cash buyer warrant?

Fisher, I'm gonna come clean and say I don't know how to answer that, because I was just in the $2mm space, where cash buyers were the only buyers that there were.

So this is kinda stream-of-consciousness reasoning to get to a generalization:

If you are a seller, you want the greatest price achievable in the fastest time. If two buyers show up, and make identical bids on a condominium, and one is cash and one is financed (but solid), presumably the cash buyer can close 30 days faster, so the value of the cash bid is the opportunity cost of holding the unit vacant for 30 more days, which we'll call one months' rent. Rates of course are going to vary, so let's say on a one-bedroom condo, roughly $3K.

The co-op example is tougher. If two buyers show up and make identical bids on a co-operative, presumably the cash buyer is not "faster" because of the board process. So the only value the cash buyer offers the seller is the stronger prospect of board approval -- which is really hard to quantify because now we have to make up assumptions about the mortgage buyer and their job etc., and their prospects of getting through the board.

It's in my gut that I would advise a generic co-op seller that the lessening of that risk is worth roughly 2% -- I would probably present a financed bid of $1 mm and a cash bid of $980K as being equal -- but each seller is going to have a different risk tolerance, depending on their personality and circumstances. A couple who is divorcing might be happy to leave that $20K on the table for the certainty of being free of each other, while to a seller who is trying to trade up, that $20K might be a bathroom renovation in the new place.

ali r.
{downtown broker}

ali r., your analysis is well reasoned for a seller that is choosing among competing offers, but in the absence of a second offer, the logic falls apart. Given the current market, I think it may be better to look at the health of the mortgage market for a specific property, to gauge the value of a cash offer.

I see certain apartments on the market today at high prices in line with historical comps. But in a few months, when tighter lending requirements come into play, even smaller sized loans may become non-conforming, and thus more expensive because the apartments are in buildings where 35% of the units are owned by a sponsor. For a starter apartment, the buyer is typically obtaining a mortgage, so the projected cost of borrowing on the unit effects its future value, even if it is owned free and clear. If I were your seller, I wouldn't quickly dismiss a cash offer.

oh PMG, in this market my sellers aren't dismissing any offers! bring 'em!

The question, though was "discount" -- which I took to mean discount vs. a financed-offer.

Another way to look at it is "discount" versus list -- Jonathan Miller's numbers say that average close is 7.3% off list, and Core Group's numbers say that average contract price is 14% off list, so you could work from those and throw in a couple more percentage points for being cash.

Anecdotally, though, most sellers aren't accepting severe lowballs, even if they're cash. Obviously there's segmentation at play here too, but in the "starter" co-op market, there's some presumption that a buyer can still get a loan under $419K.

ali r.
{downtown broker}

Along with Julia, I find it humorous that 500K is referred to as a starter apartment.

Front_porch - I see your point about the career-makeup of the potential buyers, but there are lots of us out there who aren't atty's or i-bankers (and don't make $150K) a year. I'm pained to hear about your 65K studio. I thought it was bad that years ago my friend bought her starter studio in Lincoln Ctr area for ~$125K. I'm curious about those people, the one in the same circumstance I'm in - what are they doing, where do they buy, are they finding it difficult to secure financing right now?

wait till oldbuyer drops dead... his abused wife will be so happy to rid of his stench.. .she'll sell it below market to get out of dodge.... his $1MM alcove studio that is :)

WTF is a starter apt anyway.... is that like a starter wife.. .starter car... starter education... starter life... starter gang life? Funny how these RE borker love to get you on the 6% commission train ASAP.. it's like the starter credit cards given to college kids... here... look cool have your parents co-sign for it... everyone else is doing it...

Anyone buying in the next 2 years with hard earned money (not shake my ass Britney $) is gonna be in the hole for the next 20 years in terms of saving for retirement... it's the most highly leveraged over-valued asset at this moment... sideline....baby...sideline : )

"We expect to have to do a kitchen and a bath and floors"

Ali, who does your work?

W67 LOL. My starter apartment was a 2 bedroom, sold when my income declined and I downsized to an alcove studio that has been my home for many years. I will likely stay or rent the apartment for a long time to come as I perceive it to be a solid investment. I agree that the term "starter" is an odd term often used for "small" when referring to housing.

tandare, people in your circumstance generally rent. (When I ran the real estate section of the Post -- itself a job with a non-gigantic salary, I talked to a lot of people in this situation). To buy, they get money from their parents, and/or buy in Queens or Midwood or SoBro and/or rent in New York and buy weekend places two-three hours outside the city as their first homes.

Juice Man, I expect that I'll use whoever is approved by the building that we move into -- usually they have a short list of contractors that they like.

Other than that, my firm uses Roger Bailey for a lot of these kinds of jobs. He's not the cheapest, but he does good work. If you want to write me at ali [at] dgneary [dot] com and put "Streeteasy" in the subject line, I can give you his contact info.

ali r.
{downtown broker}

pmg :)

@front_porch - Yes not surprised to hear it. We're looking in a few neighborhoods in Qns, Bkyn and upper Manhattan. I like to inject a little reality to the board from time to time as it can seem that everyone here is in the market for a $1.9 million apartment. Knowing we can't possibly be the only people out there of moderate circumstances, is nice. I know so many advocate for remaining sideliners (w67thStreet) - but being able to renovate and perform general upkeep to our own needs and we truly need more space - very tempting. Renting what we need right now in areas we would want to live in costs about what buying would cost us give or take. As a side note, I imagine working at the Post must have been interesting...

The problem is crappy falling apart kitchen cabinets, mismatched fixtures and continually un-repaired damage -- they get old.

tandare... look I got a naggy wife too.. but I pull out a screwdriver and replace some squeaky items. FYI I know of a HS friend whose parents spent $50K upgrading their "rent" controlled" apartment... I guess if it's cheap enough vs. purchasing... get a multi-year lease and with the money you will be saving... put a few grand into cosmetic stuff... and if anything is really broken :) ... well just call oldbuyer at 2a.m. to come over and fix the heater/dishwasher... and pls.. .wait till the wee hours of the morning to call him... usually he's too busy checking his wife's dishwashing "job."

@w67thstreet - I am chuckling. Out loud.

Actually I'm the "wife" here. ;-) I guess I sound like the "husband"?

I've heard of people doing that and upgrading their rental, the thinking being: so long as you plan on staying there, why not have it the way you want? That said, I cannot imagine putting significant money into this place. Love the neighborhood, cute little apartment. Needs updating outside of a coat of paint. As handy as I am, that's about the extent I'm willing to do. Already we've done the repair-the-cabinets, repair the stove routine. I want a new, good fridge! If it were 5 years ago I might be more inclined, but by now we've outgrown the space and desperately need a bigger place. The fact that our landlord REMOVED the above-the-medicine-cabinet light fixture before we moved in (and left 3 noticeable holes in the wall) all because "it wasn't attractive" -- well you get an idea. And no, he never replaced it.

Why torture oldbuyer with my cupboards though?

b/c some people need to be tortured no matter the time :)

tandare... if you were my sister... I'd say just hang in there a little longer... the apt you need/deserve will become cheaper... and kids are resilient... they just need a lot of parental love and not a nice apt. They'll be happier you saved the money for their college much more than a broken cupboard... just give it 6 months... all the nice apts will shift down in price... hopefully when oldbuyer had to decide btwn Depends and cutting a deal w/ you... he'll do the only thing he can do... make his wife wash dishes for a living... Just kidding... he'll lower his rent :)

@w67thstreet - Thank you for the vote of confidence / good fate. It will be fantastic if you are right and that 6 months or so will bring some nice price changes. :-)

tandare, I finally couldn't take it any more and decided to commit to at least three years at my rental and I got a NEW refrigerator. I have decent space, good light, etc. but if I hadn't I think I would have moved to another rental and done the same thing. I should have done it earlier (I waited about 4 years, we'll probably wind up being here 8 when I thought it wouldn't be more than 3 but hell if I'm going to overpay for an apartment after waiting this long), but it has made me very happy, and the cost spread out over three years (including some other things like cabinets and kitchen hardware and lighting, etc.) still doesn't come close to what I would have paid if I had purchased. Good luck.

One reason I like my listing on Greenwich is that the rent/buy equation is pretty good on it; at a 40% tax rate the "after-tax" cost is about $1,900 -- for a small one-bedroom.

ali r.
{downtown broker}

Ali, the rent/buy calculations still don't make much sense for someone needing/wanting 1300 sf, with a decent-sized kitchen and a couple of bathrooms. For some people who have been priced out, that IS their starter apartment.

just a quick question for you guys since i am a first time buyer too. Is it relatively easier to put 80% down payment and take out a loan for the rest of 20% compared to put 20% down and loan the rest of 80%? i know the loan market is bad and my income is not that high. therefore, i doubt any bank will loan me 80%.

@aboutready, I live with my husband in 550 square feet, and have for years. I understand (fervently!) the desire for 1300 square feet, but to say 1300 sf is a starter apartment is to say a Mercedes is a starter car.

@kodo, it's easier to get a mortgage the lower the percentage you want to borrow. The technical term you're looking for is LTV, which stands for loan-to-value -- and yes, you will have a far easier time at 20% LTV than at 80%.

ali r.
{downtown broker}

I have a kid. And if 1300 sf is not doable purchasing, I think you've made a pretty good argument in favor of renting. Maybe w67th is right, if we quit buying the "starter" apartment, and waited until we could afford something that would last for longer, we would do better in the end.

In the past it was true you would start with a one bedroom, but if you did that in the last few years and you need to sell now to move on up you're screwed. And a lot of people went on with their lives and had kids while they waited to be able to afford something.

ali r., I think the feedback on this thread is helpful to your marketing. Now that appreciation is clearly not guaranteed, it is not a good idea to use the term "starter" apartment, because that implies you will grow out of it, and "trade up". Your apartment is more than adequate for a single or couple, or pied a terre, but no one with family on their minds. Chances are, in this economy, you won't get the young marrieds with an eye on future kids, even though they have the advantage of no former home to sell.

Then again, some of those young couples have never seen a down economy, let alone what we're in for.

The feedback on this thread has been great! I love you guys -- although I have envy of aboutready's 1300 sq. feet, even with a kid -- I think our next trade-up hopefully-we-have-a-kid apartment will be on the order of 900. Maybe we should take another look at Forest Hills . ..

And Pmg, I get you on the term "starter apartment" -- but for Fair Housing reasons an agent can't market to singles instead of couples, or to people without kids instead of people with them. One could argue that a small apartment would be a great apartment for a retiree . ..but I can't say that either. I can say it's a small apartment and all customers are welcome, and they can tell me what fits their lifestyles.

However, let's go after this marketing of primary homes as investments that took hold a few years ago. Except for the past few go-go years, one doesn't expect buyers to look for "guaranteed appreciation." In fact, most people buying small apartments don't want the market to rise -- a boom, as we have seen, just makes the rungs of the ladder move further apart from each other. If a studio is $500K and a one-bedroom is $1 mm, and prices rise 20%, owner now faces a $600K gap between levels instead of a $500K gap. That's the kind of math that leaves people stuck in studios.

Rather the expectation is that owner(s)' income will appreciate -- which is generally true if you believe in a life-cycle theory of careers -- middle-aged people tend to make more than young people do.

Of course this assumes that there's enough liquidity in the market for when you want to make the trade, but if you think there won't be any liquidity in the market in 2012, you're a renter anyway.

ali r.
{downtown broker}

This story in today's Post about $400K suburban houses might be of interest to readers of this thread too.

http://www.nypost.com/seven/01222009/realestate/yes_you_can__151286.htm

ali r.
{downtown broker}

Ali, you don't necessarily look for appreciation, but you DO look for a place that you can sell and break even after closing costs and inflation (including housing inflation regionally). And you do, or should, look for a place that allows you enough extra money monthly to save toward the down payment for a larger place. That should be the minimum, if you're buying something that you may grow out of. Unfortunately, most apartments, small or large, were too expensive for most people to meet that criteria, and incomes have NOT been rising relative to expenses (when our daughter was 4 private first grade tuition was roughly $17K, today it's about $35K, just a personal example). Middle-aged people often have more expenses than young people (including that uppity need for space, and those damn children with their orthodontia and college).

By the way Ali, we had a 950 sf two bedroom for 5 years. I did benefit from appreciation there, and moved to a larger apartment, which I later sold. It can be done (and you hear plenty of stories of people who are managing in even less) but it gets a bit tight, and if you have a girl you'll REALLY want (although not necessarily get) a second bathroom as she gets older.

Every time I read your laments aboutready, I feel some pain.
You sold your last place in Chelsea after buying it a relatively low price in 2000 or 2001 right?
Wasn't it about 1400 sqft? If you did buy in 2001 then you paid about 700k for it. So your mortgage payments were probably lower than your current rent in PCV with a place larger than yuor current apt. You then sold in 2004 because you thought prices were too high and now you want essentially the same place that you once had at $500 psf whereas this year people are predicting prices will go down to $700 psf (ignoring the 50% down posters for now).

Did you only sell because you thought prices were too high or did you want to move to the house in the burbs?

I have a friend who bought a 2500 sqft loft in tribeca in 1998 and they are raising a family there. They would never have thought to have sold and are obviously sitting pretty right now.

I guess I don't understand buying and selling an ideal sized, price, located apt if the plan is to stay in nyc.

The good news is that you will be able to buy back at a significant discount so I really hope you find something suitable. I have two young children and intend to raise them in nyc so I feel as if we have some similarities especially given our experience and time period of buying and selling in Manhattan.

Divvie, I bought the condo for $800K (1300 sf, but by current floorplans seemed larger), total monthly costs were $5600. PCV when I moved in was $2700. Sold for a number of reasons, apartment wasn't really what I wanted and I wanted to get out before bubble burst (little did I know the forces behind the bubble), daughter had started school on upper east side, needed a ton of sleep, commute was a bitch; and last, but certainly not least, my husband's salary took a major hit after 9/11 and I wasn't comfortable with the payments and didn't want to get stuck (little did I know his salary would go back up relatively quickly). We bought the place upstate for less than a studio in the city after his salary went back up. The condo lost all light due to a new development, and that was the best thing about it other than the location, so maybe it was a wise move, just not the best timing. Situations change, things aren't always forseeable, and I really hated having money be tight.

I don't know where you come up with my wanting to buy at $500 psf. I'm on record as saying that in my oh-so-humble opinion prices will revert to 2000 or 2003 levels, or $620 or $750 psf for my apartment. I may buy in the future, I may not. I have fixed up the rental, my daughter's stuff is much smaller, and the inclination to buy has receded. I will only do so if it makes sense to me economically, which goes against my own-at-all-costs upbringing. Ironically, my husband's salary has increased substantially in the last year, and I could now afford much more, but it just doesn't seem to mean that much to me any longer. I will confess that I was not so sanguine last year, and I'm not sure what caused the change of heart, but it's a welcome change.

Sorry, bad grammar and an incorrect assumption about your purchase price.

I meant that you want essentially the same place that you had once bought back in the past at $500 psf (my incorrect assumption about price) but you will have to pay $700 psf for it now.

BTW, renovated and new construction places in tribeca were going for less than %600 psf in early 2000. At the end of 2000 they had gone up admittedly but, Chelsea Merc premium prices notwithstanding, I find it surprising that Chelsea was higher than tribeca in 2000, unless you bought in the after the first quarter.

Anyway, I'm genuinely happy for you that you feel the way that you do right now - I did notice a change. Also I am an owner that happens to think that renting is fine under the right circumstances, as is paying for "upgrades" such as a new fridge, painting, even some reno work in a rental, LL permitting, because a home (especially with children) needs to meet your family's needs in ways over and above a simple cost comparison. If that means paying for something that the LL does not have to do then so be it unless moving somewhere else is a better option and is easy to do - kids again make the process harder.

Ali, I think there are two separate issues for you.

1) How do you market your apartment to comply with the laws
2) Who is the actual, likely, and logical buyer.

I think several on this thread are of the opinion that due to transaction costs, hassle, and riskiness of the investment, the answer to (2) is someone with a long-term time horizon, i.e. someone that is not expecting to grow out of your apartment anytime soon.

Hopefully, giving you some thoughts on (2) will help you come up with a strategy for (1).

Divvie, I bought late 2000, closed early 2001. That was one of my problems. Between the time of putting my coop on the market and closing (it took a little while, I was doing renovations during the selling process), prices skyrocketed. I saw prices rise, and it seemed to be weekly. I looked at literally dozens of apartments, and found this one only 6 weeks before moving out of the coop. We closed (barely, title almost didn't clear in time) and moved on the same day. In retrospect, I just should have rented then, but such is life.

Ali, back OT. One of the positive unintended consequences of this unprecedented run-up in prices, from a marketing perspective, is that buyers are more likely to be thinking long term. Your young first-time buyer may be a bit adrift, but a lot of your target market for an apartment such as this has been thinking about the possibilities and compromises for awhile. Many have been casually or not so casually looking, and have a much better idea of what would work.

We have our first offer on the Greenwich Street place, though we invite others.

Here's the bit about the apartment in the Daily News Home Section: http://www.nydailynews.com/real_estate/2009/01/22/2009-01-22_the_closer.html

ali r.
{downtown broker}

Observation: In general, the serious buyers are coming in with brokers.

ali r.
{downtown broker}

"Anyone buying in the next 2 years with hard earned money (not shake my ass Britney $) is gonna be in the hole for the next 20 years in terms of saving for retirement... it's the most highly leveraged over-valued asset at this moment... sideline....baby...sideline : )"

"They'll be happier you saved the money for their college much more than a broken cupboard... "

"Unless owning is substantially cheaper than renting, and/or you are certain the market will go up, you're better off renting with a time horizon under 7-10 years. The huge transaction costs, timing risk, doing work on the apartment, hassle, etc. are just not worth it."

w67th & newbuyer99 you are giving the best advice ever! sideliners are getting paid for not buying right now, meanwhile save for retirement and college (if you have kids).

I bought two apartments, and didn't use a broker either time. Selling, I did use one. That counts as serious, no?

PMG I agree with you, and I just sold in SoHo to some nice buyers who didn't have a broker but are going to use me to sell their old place -- nice people. :>

I'm just saying that so far I've seen maybe 25 unique vistiors on Greenwich Street, and of that sample, the ones who are coming in with brokers are closer to purchasing . . but it is just one sample at one price point.

ali r.
{downtown broker}

Observation: Brokers are not making as much money as they used to;
Observation: WE are in the worst Financial crisis in the last 100 years;
Observation: All the I-Banks that I've ever interviewed for and worked for are gone, KAPUT;
Observation: Fake boobs are hard.

admin... I just made $1million waiting out 3 years.. my perfect 6 or 7 on CPW is coming to me a lightening speed... even I am amazed at how quickly prices are being chopped :) but even more amazed at rentals... time to chk rentals at 15cpw