As prices of brownstones in “emerging” areas push past the $2,000,000 mark, some flippers are changing how they do business. Out are the low-end, Home Depot-style renovations with 12-inch tan floor tile, country-style wood cabinets, and fake granite counters. In are $30,000 appliance packages, rear walls of windows, and central air.
“As the market changed, the clientele changed. Everything demanded a much higher grade rehab, higher grade finishes, and higher grade bells and whistles. If you’re dealing with $2,000,000 houses, it’s gotta look like $2,000,000 house,” said developer Adam Cohen of Stuyvesant Group. His company has about 20 projects in various stages, including rehabs in Brooklyn and rentals in Harlem.
It was Stuyvesant Group that renovated the narrow but detailed Amzi Hill house at 22 Arlington that reset the record for a townhouse sale in Bed Stuy when it closed at $2,250,000 earlier this month. As noted, the buyer was Australian investment firm Dixon.
One of the agents on the deal, Ban Leow of Halstead, said he expects prices in the area to climb even higher soon, because a group of bigger and renovated properties are about to come on the market. This was a premium house in terms of its details and renovation, but was less than 16 feet wide. Other houses that have recently closed at high prices for what they were in Bed Stuy and Crown Heights were full size with tremendous details but unrenovated. Three of those properties were also purchased by Dixon, as reported.
In Fort Greene, where renovated townhouses generally fetch $3,000,000 and up, Stuyvesant Group is renovating a brownstone to standards more typically seen in high-end custom renovations, including radiant heat on all floors that can be controlled from an iPad, a high-efficiency boiler, and replacing the back wall with glass and steel.
In Bed Stuy or Crown Heights, that renovation would be too expensive, but developers are still taking a high end approach vs. several years ago. “We never did the cheap stuff, it was always custom cabinets, better tile and hardwood flooring,” said Cohen. “We used to give a standard package of stainless steel appliances, and maybe now it’s [a more expensive] appliance package. It used to be quartz counters, now it’s Carrara marble.”
At 22 Arlington, for example, a new kitchen in the rear of the parlor floor, pictured above, has an Italian marble backsplash and center island, Sub Zero refrigerator, Wolf range and vent hood, Bosch dishwasher, a microwave in a drawer and custom made radiator covers. Wall-mounted split A/C units were chosen instead of central air conditioning to avoid unsightly ductwork in the detail-laden house, though Stuyvesant Group does install central air in the houses it gut renovates, said Cohen.
They also repaired all the plasterwork that could be fixed. The arch above where the stove now sits “was cracked into nine different pieces, and we fixed it,” said Cohen. The interior doors are original to the house, but not necessarily in the same places, since the layout was reconfigured. In Fort Greene, there was nothing to save, since the house had a fire so it was a full gut job, but they purchased three vintage pier mirrors and restored the front door (since the house is landmarked). “We try to give it that brownstone look, we don’t want it to have that condo look,” as Cohen put it. “I feel like in this market, if you give buyers something good, they are happy to pay for it. They don’t want to pay for garbage.”
Stuyvesant Group is already in contract on two other nearly finished houses it never even put on the market but struck a deal with buyers who were among the bidders at 22 Arlington, he said.
Buyers are “looking for well-configured homes,” said Leow. A triplex over a garden rental is ideal. They don’t like small galley kitchens but prefer a “very nice open space with lots of countertops where a family can actually enjoy their home and cook for friends.” As for gut jobs vs. preserving original detail, “every buyer who buys a brownstone wants a house full of period details,” said Leow. “If there are details, it would be shameful if someone comes in and rips everything out and throws it in a Dumpster. But sometimes investors buy a shell and there is nothing to salvage.” In that case, buyers “would rather see a high end renovation that will work” for a family, he said.
Problem properties that developers were picking up for $250,000 to $350,000 at the height of the bust and selling for $500,000 to $625,000 once they were renovated are now about $800,000 just for a shell — maybe 5 percent more if they are close to Nostrand Avenue. “Today we would buy them for more than what we sold them for even after rehab,” said Cohen. Another thing that has changed is buyers were highly leveraged before and now they are putting down at least 50 percent cash if not 100 percent.
Already there is a house in Bed Stuy asking $2,650,000 at 242 Gates Avenue. It was renovated slowly over seven years by the owner, according to the listing.
Flippers in “prime” areas such as Cobble Hill and Park Slope have been doing more high end renovations for some time. Architect-turned-developer Alex Barrett was one of the first, with several developments in Carroll Gardens in historic town houses and other buildings. Town house flips in these areas are not as common as Bed Stuy, Crown Heights, and Bushwick, probably because prices are higher and there is far less distressed inventory requiring all-cash purchases.
Even on the low end, flippers are starting to get the message about original details, saving features such as mantels and pier mirrors even as they gut everything else in sight. Not all the trends are positive. The latest thing is to rip out all the walls, install lots of down lights, and expose the brick from waist level up to the ceiling.
Photo by Halstead