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November 17, 2008

HOTD: 306 Washington Avenue, Two Price Cuts Later

The price of 306 Washington Avenue in Clinton Hill has been in free-fall since we featured it as a House of the Day when it came on the market last summer at $2,300,000. It looks like it was a bit of an understatement when when we said that the "asking price might be a bit on the high side." In September, the price was trimmed to $2,100,000 and then another $200,000 was taken off last month to bring the current asking price to $1,900,000. The house was also included on this past weekend's multi-broker house tour. Think it has a shot at this price?
306 Washington Avenue [Douglas Elliman] GMAP P*Shark
House of the Day: 306 Washington Avenue [Brownstoner]

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Comments

still looks high if you have two rent stabilized units.

Posted by: wasder at November 17, 2008 1:19 PM

They are clearly not giving enough of a discount considering there are two rent-stabilized tenants. Either someone has to be totally comfortable with that, or be prepared to spend a lot of money to get rid of the tenants.

Even if money were no object, I'd feel pretty crappy dislodging two households.

Posted by: tinarina at November 17, 2008 1:21 PM

Problem is it's got three occupied units, two of which are rent stabilized, for a rent roll of about $3k. With 20% down this place will cost over $9k a month. SO the choice is either pay $6k a month for a duplex, or begin the arduous legal process of evicting the tenants to convert to one family. Either way, there's no easy way to up the rent roll to market rate, which is about double what it currently brings in. If it were delivered vacant, it would sell pretty close to this, I'd guess.

Posted by: Frederick Law Homestead at November 17, 2008 1:24 PM

no kidding. rent roll of $3021, and that's including one market rate tenant. i wonder which apt. is the market rate one.

Posted by: i disagree at November 17, 2008 1:26 PM

Someone is asking 1.9 million dollars for a house with two rent-stabilized tenants? But that's crazy. A rent stabilized tenant can easily ruin your life and wreck your health. And here there are two? Forget it.

Posted by: sam at November 17, 2008 1:30 PM

Rent-stabilized tenants???? Are you serious??? $1.9 million for a house with TWO rent-stabilized tenants, in Clinton Hill??? Dream on.

Posted by: BKLYN_73 at November 17, 2008 1:37 PM

Hi Brownstoner,
I am the listing agent and just wanted to clarify a couple things.
First of all, there are 2 units are stabalized, and a third that is free market and can come up at least $1100 right away (month to month with no lease). This would bring the income to $4200 very shortly after closing.
I challenge anyone to find a brownstone with this much original detail where you can live in a 1400 sqft owners duplex with a giant yard for a purchase price of $1.9 Million and income of $4200. Most builings in the $1.7-2M price range are not 4 families, they are 2 or 3 families- maybe double duplex 2 over 2 bedrooms, or 2 smaller 2 bedrooms in addition to owners duplex. Those units would not bring in much more the $4200 a month in income at full market rate. Anyone is welcome to compare the income here with similarly priced properties and see for themselves- we are not intending to price the building above the market.

For me, as a buyer- i would purchase a building where i have undervalued rents that will continue to go up every year or 2 years when tenants renew, and watch my income grow every year, than purchase a building at 1.8 or 1.9 with maxed out income and fewer units.

The net effective cost of living in the owners duplex after tax savings is approximately $4200 (with 25% down which is required on 4 family buildings). Id say thats a pretty great opportunity.

Posted by: christineblackburn at November 17, 2008 1:54 PM

christine, welcome. what are the rents on each of the three units? and why was the market-unit rent so low?

Posted by: z at November 17, 2008 1:59 PM

I work with Christine Blackburn and was in attendance at the open house tour on Sunday. Part of the reason we coordinated the tour was to help explain the various financial scenarios and options so that potential buyers could see the value. We had 50+ people and not one expressed that the property over-priced. In fact we were asked a couple of times if the $1.9M was just for the owner's duplex.

We are so confident about the pricing that we invited brokers of 12 other townhouses priced between $1.6 and $2.2M to open their doors also so that buyers could see all the inventory and weigh the pros and cons themselves.

Posted by: Julie Larson at November 17, 2008 2:04 PM

Just chiming in to say that I think it's cool when brokers, owners, and others who are related to a given story post here, and I hope people remain civil. :)

As a prospective buyer (though not in this price range), this is the kind of thing where seeing both sides of a debate is hugely valuable.

Posted by: cwbuecheler at November 17, 2008 2:08 PM

"I challenge anyone to find a brownstone with this much original detail where you can live in a 1400 sqft owners duplex with a giant yard for a purchase price of $1.9 Million and income of $4200."

Give me a few months.

"...undervalued rents that will continue to go up every year or 2 years when tenants renew, and watch my income grow every year..."

It's a pipe dream. Rent stabilized tenants never move. That's why they're there now. That's why this place isn't moving neither.

You're very HOT though! I know the face and bod that comes with that name.

Posted by: DOW8000SP800 at November 17, 2008 2:09 PM

Julie--thanks for writing here. Can you address people's concerns about the rent stabilized apartments?

Posted by: wasder at November 17, 2008 2:10 PM

I'm pretty sure the agents were "confident" in the pricing when it was a lot higher too.
They'll be confident when it goes down to 1.5 or 1.6 too.
I doubt if a lot of buyers are going to see the rental units as a big asset, especially since one would have to take the claim of potential extra income from the market rate unit with a big grain of salt.
Could be a lot of aggravation for a building and nabe that still has some price cuts to come.

Posted by: ontheparkway at November 17, 2008 2:11 PM

"I am the listing agent and just wanted to clarify a couple things.
First of all, there are 2 units are stabalized, and a third that is free market"

Christine, as a broker, wouldn't it be wise if you could spell "stabilized"?

Posted by: GHB at November 17, 2008 2:13 PM

i don't think this place is terribly priced at the moment (although market conditions may drive it lower). still, this:

"In fact we were asked a couple of times if the $1.9M was just for the owner's duplex."

is downright hilarious.

Posted by: z at November 17, 2008 2:14 PM

And rents are dropping too. There was an article about Manhattan being a renter's market now (but we got Hollywood now so I don't know about Brooklyn). I'll link it later unless someone else can. There's nothing like a vacant delivery.

Posted by: DOW8000SP800 at November 17, 2008 2:15 PM

"I challenge anyone to find a brownstone with this much original detail where you can live in a 1400 sqft owners duplex with a giant yard for a purchase price of $1.9 Million and income of $4200."

Many other neighborhoods.

I don't know those blocks very well. It doesn't look like an especially great location. But living on Stuyvesant Avenue south of Halsey is quite nice; especially with the A express right there.

I'll detail the numbers if you're interested.

Posted by: daveinbedstuy at November 17, 2008 2:21 PM

This is so ridiculous. To the brokers: do you really think buyers don't understand what is means to buy a building with rent-stabilized tenants? The units occupied by the rent-stabilized tenants might as well be non-existent. These tenants will never leave. If it were so easy to get rid of these renters, the owner would have done so in order to sell the house. The fact that you're actually trying to convince people that this is a steal is pretty embarrassing. I thought Prudential was a relatively serious firm.

Posted by: BKLYN_73 at November 17, 2008 2:22 PM

Be nice people. It's rare for a broker to post with transparency instead of anonymously.

Julie/Christine -- Would you disclose what the rents are for each of the apts so we can validate the potential rent roll. This is an attractive building in a good location but clearly the tenant situation causes some of us a little concern.

Thanks.

Posted by: Ozymandius at November 17, 2008 2:23 PM

"i would purchase a building where i have undervalued rents that will continue to go up every year or 2 years when tenants renew"

go up what, $50 per apartment? nice try, 2 million in the hood ain't happening...

Posted by: travy at November 17, 2008 2:25 PM

I like this block quite a bit and the house appears to be nice as well, but I don't see how the brokers think this math works out.

You buy at $1.9 million and have to put $500,000k down, leaving you with a mortgage of $1.4. Assuming you can get that mortgage, you will be paying approximately $9,000 a month just for the mortgage payment (and that's assuming a 6.5% interest rate, which seems generous as most of this will be a jumbo loan). Plus taxes and utilities of approximately $700 per month, assuming income of $4200, and assuming mortgage deductions for the rental expenses and your home mortgage tax deduction, you end up putting half a million down and paying around 5k a month to live in this duplex. (I'm not sure where $4200 comes from, but it does not seem to include tenant utilities and taxes). Plus you have very limited potential upside with the rent stabilized units.

You are far better off saving your half million dollars and paying 3000-4000 month to live in a comparable rental.

Posted by: cortnyc at November 17, 2008 2:46 PM

I thought rent stabilization only applied to buildings with six or more units. Could someone explain?

Posted by: Suburbandude at November 17, 2008 2:47 PM

Well, to each their own. But for 1.9 million one could buy a really nice home. One is not "forced" to buy something with two pre-existing rent regulated tenants with who knows what gripes and problems who will share your roof with you and your family.
I just think its nuts. Others may disagree. But it is typical of a broker to say something like "I defy you to find a house like this for only 1.9 million". All they are doing is trying to intimidate you into thinking you don't really have that many choices in "your price range" and inflate the price of perfectly ordinary real estate.

Posted by: sam at November 17, 2008 2:48 PM

Having one rental unit at market with nice tenants that pay the rent is one thing. Having two more rent stabilized tenants is 3X the work for virtually no more money.

Posted by: daveinbedstuy at November 17, 2008 2:52 PM

Right on sam! I include myself in the mix of people who would never buy a house with rent stabilized or controlled tenants without understanding that they might be there forever. I would ask the broker to tell me what she thinks the price would be without those tenants, and in that location. I doubt the discount she thinks she is offering is anywhere near acceptable to people who truly understand the implications of having those tenants. Also, she fails to mention their ages. If one is 62, or even close to that, they will be there forever, and there is nothing you can do about it. And one more thing, who buys an entire brownstone at that price and thinks living in 1400 square feet of it is all they will ever want to do? And If that really is the case, better to buy with market rate tenants only and get a decent return on your investment.

Posted by: homey at November 17, 2008 3:00 PM

Looks like Julie & Christine can't take the heat!!!!

Posted by: daveinbedstuy at November 17, 2008 3:00 PM

I also want to thank Julie/Christine for posting. . .even though i disagree a bit with their sales pitch on the house.

Posted by: ontheparkway at November 17, 2008 3:22 PM

"I would ask the broker to tell me what she thinks the price would be without those tenants, and in that location."

That, my friend, would be a damn good question.

Posted by: DOW8000SP800 at November 17, 2008 3:36 PM

This block is great. That is not the issue. It is a beautiful block, convenient to transport and very kid friendly. The issue is that the rent-stabilized apartments make it very difficult for the house to be what most buyers would expect at this pricepoint. Julie, Christine, your thoughts?

Posted by: wasder at November 17, 2008 3:47 PM

1,900,000 - 500,000 = 1,400,000

1,400,000 x 6.5% = 91,000

91,000/12 = 7583/month

7583

7583 is the cost of living in the house before income expenses and opportunity cost. You can no more say that the principal component of your mortgage is a cost of living in a house than you can say money you save into a 401K each month is an expense so I leave this out (if you think the price of the house will fall and your principal is not safe that is subjective).

After doing this calculation you can look at the other costs.

6000 for heating
2000 for water
2000 tax
10,000 total

10,000 = 833/month

7583 + 833 = 8416

The 500,000 deposit could safely earn 4%. Annually = 20,000
monthly = 1666.

8416 + 1666 = 10082

It would easily cost 4500 to rent the duplex in that location so the cost so far is 10082 – 4500 = 5582 per month.

You will also get the benefit of 2/5 of 91000 + 2000 as a tax deduction. You don't know the calculation exactly but for a high earner this could be worth as much as 1250 a month in tax savings.

So the cost of living in that house without receiving rent might be 5582 – 1250 = 4332

You would be paying this amount more than renting to hold a magnficant building (but rent stab) in a very prime location. If the three apartment can bring in more than this... you will have positive income.

Play around with the numbers if you like but that is the math. I'm sure most here can do it. I'll leave the subjective stuff ie rent stab hassles, its going to fall in value, you can rent for cheaper than 4500 in the area, wrong configuration etc to others. Its good to be clear on the math!

Posted by: Aussie at November 17, 2008 4:01 PM

Anyone who buys this house would evict the rent stabilized tenants - they aren't going to care about the meager income associated with them.

Because the current owner didn't do this already means the tenants are a problem. It will probably cost a good $200K to evict them, and would take several years.

I do hope the brokers mention to potential buyers that they can legally cancel rent stabilized leases if they plan to take over the entirety of the house. Trying to sell the income is probably a bad move, IMHO.

Posted by: Polemicist at November 17, 2008 4:08 PM

I agree with Polemicist but I think as renting is constantly being compared to owning we should have a formula for the comparison. I don't think it should include repayments of principal for example because at the and of your mortgage you get a house. Your house may be worth more or less than on day one( although over a 30year mortgage I think more). You only really paid the interest.

All the subjective stuff should be argued as well but its nice to put some certainty where you can. Happy for anyone to tear the calculation apart.

Posted by: Aussie at November 17, 2008 4:18 PM

$200,000 to evict two rent-regulated tenants? How did you come up with that number? If the individuals are 62 or close to it, they are you senior partners in the house. Forget it. No force on earth will move them. If they are willing to take a $100,000 buy out then you luck out. but how likely is it that they both will agree to a buy out? And how much time and energy and legal fees will it entail? Your only hope is that they are very elderly and frail and may not be able to climb the stairs for too much longer and will take a buy-out or die while the process grinds its way through to closure. Otherwise the courts are on their side and you will not be able to budge them. If the seller could have gotten rid of them, he would have.

Posted by: sam at November 17, 2008 4:21 PM

The calculations look fine aussie. Depending upon how onerous the rent stabilized tenants are my point was that the you're doing 3X the amount of work managing three tenants and really only getting paid for one of them. For a new homeowner, managing a rental unit can seem like a daunting task. It oftentimes is. But three of them is far worse if you've got a normal 9-5 job as well.

Posted by: daveinbedstuy at November 17, 2008 4:26 PM

"Rent stabilized tenants never move"

Not true! I did--when I bought my place.

You can also legally take over the rent stabilized units for your own use. It involves some paperwork but you don't have to pay off the tenants.

Posted by: Ppark at November 17, 2008 4:39 PM

G'day Dave. Yep I know. I manage 3 tenants ... going home to a blocked toilet tonight. It doesn't bother me that much but I interviewed a super on the w'end which will make my wife happier.

Two apts typically bring in more than a large duplex twice the size... but I agree it is more work. How is B?

Posted by: Aussie at November 17, 2008 4:54 PM

Sorry to say that B is dead aussie. Too many problems with the locations that cost too much money in upgrades plus a few of us don't want to risk our capital at the moment.

On a positive note, the owner of Saraghina; the soon-to-open pizza place on Halsey & Lewis was open last Thursday for some free pizza tasting. I can't remember where in NYC I have ever had such great pizza. Probably two more months though with permiting, inspections and licensing crap. That food is going to be out of this world

Posted by: daveinbedstuy at November 17, 2008 4:58 PM

Oh shit! That is too bad mate.

Not suggesting them for you but there are a lot of vacant commercial spaces around Clinton Hill at the moment. They have always been there, but they stand out now because there are "For Rent" signs on all of them. It looks like someone went through the areas and convinced owners not to leave space vacant. Several on Gates, Green, even at the beginning of Putnam and tons on Fulton.

Posted by: Aussie at November 17, 2008 5:10 PM

"You can also legally take over the rent stabilized units for your own use. It involves some paperwork but you don't have to pay off the tenants."

That's a rather optimistic view.

- http://www.brownstoner.com/brownstoner/archives/2007/08/tenants_fight_e.php

- http://curbed.com/archives/2008/06/04/lengthy_east_village_mansion_battle_ends_almost.php

Posted by: SnarkSlope at November 17, 2008 5:11 PM

No aussie...it was all about doing it in Bed Stuy where there's a real need. The pullback in the consumer isn't encouraging either. It's mostly that I and one of the other main investors have decided that we can't/won't risk our capital now.

Posted by: daveinbedstuy at November 17, 2008 5:17 PM

extremely optimistic!
so many posters are in denial about the city's rent-protection law.

Posted by: sam at November 17, 2008 5:18 PM

i would never EVER buy a home with rent stabilized tenants, even assuming i could afford to and wanted to move into all 5 floors. didn't brownstoner post on a family in prospect heights who tried to do this? i've read that they're still in litigation with one tenant (claiming "hardship"), have been subjected to protests *in front of their home* and attracted the unwanted and fomenting attentions of people like tish james, etc. i don't necessarily feel sorry for them - caveat emptor and all that. point is, it's just such a huge risk and a surefire headache either way that it would have to have tremendous upside or be the most amazing house in the neighborhood. this just doesn't strike me as that kind of house, but good luck to all involved!

Posted by: i disagree at November 17, 2008 5:19 PM

Of course i cant answer everything brought up here but just one note- the owner is entitles to increases on stabilized units every time they renew either to a 2 year or 1 year lease. Higher increses on a 2 year. So your income will, in fact, grow with every lease renewal.
Anybody who is actually in the market and needs more details on the property is welcome to call me at (718) 486-4452.
A lot of you guys doing calculations are not factoring in tax savings which is how we got our numbers. i can also forward anybody a financial breakdown from Countrywide.
For you guys who want exact rent info please call me as i dont feel that it is appropriate to discuss apartments where people are still living on a blog post.

Thanks-

Posted by: christineblackburn at November 17, 2008 5:32 PM

Aussie - I think you're vastly underestimating the costs.

1. A $1.4MM jumbo commercial mortgage (4 family and up) is going to cost a LOT more than 6.5% in this environment. I've seen jumbos priced at closer to 10% these days.

2. $2,000 for taxes is quite low. The norm is closer to $4,000/5,000 (I pay almost $7,000).

3. Need to add insurance costs, which are now pushing $4,000 per year.

4. Also need to add a pretty big "miscellaneous" bill, especially with rent-stab. tenants.

5. And the big tax savings - well, the dreaded AMT gets rid of all of those.

Posted by: slim at November 17, 2008 5:45 PM

Something else that a lot of you are not factoring or are underestimating is the tax which is currently over $7000 a year (or $600/month) and will be going up to nearly $8000 next year. The city treats 4 family very differently than they do 3 or 2 families. And with the city strapped for cash you can bet that they will try to up the tax on 4 families again like they tried to do 4 years ago.

Posted by: Left Hook at November 17, 2008 5:56 PM

slim, AMT doesn't kill mortgage deduction. . . agree with the rest

Posted by: ontheparkway at November 17, 2008 6:01 PM

REPLY TO SLIM

Aussie - I think you're vastly underestimating the costs.

1. A $1.4MM jumbo commercial mortgage (4 family and up) is going to cost a LOT more than 6.5% in this environment. I've seen jumbos priced at closer to 10% these days. WITH A 25% DEPOSIT? ... THAT ISN'T TRUE YOU COULD CONVINCE ME OF 7%.

2. $2,000 for taxes is quite low. The norm is closer to $4,000/5,000 (I pay almost $7,000). OK IF YOU SAY SO ITS FACTUAL SO WE COULD JUST ASK.

3. Need to add insurance costs, which are now pushing $4,000 per year. YEP YOU ARE CORRECT I PAY $2500 BUT I GUESS THAT WILL GO UP. WONT CHANGE THE PICTURE MUCH.

4. Also need to add a pretty big "miscellaneous" bill, especially with rent-stab. tenants. HOW MUCH? MY TENNANTS REALLY ONLY COST ME SOMETHING WHEN THEY MOVE OUT. MY HOUSE IS IN GOOD CONDITION BUT THIS ONE ALSO LOOKS GOOD.

5. And the big tax savings - well, the dreaded AMT gets rid of all of those. YES i AGREE IT DOES FOR MANY PEOPLE.

MY POINT THOUGH IS THAT THE CALCULATION NEEDS TO BE DONE.

Posted by: Aussie at November 17, 2008 6:19 PM

sam et al: "A rent stabilized tenant can easily ruin your life and wreck your health" "get rid of tenants" "crazy to buy...".

Look guys, we know: You think rent-stab tenants are vermin to be exterminated. OK. You'd never buy a place like this. Please don't. You would not be a decent landlord anyway.

But there are others who can view it as a business proposition (tho' not at that price) and maybe even treat their tenants well.

Posted by: cmu at November 17, 2008 6:31 PM

Aussie - you're just wrong on the interest rate number for a Jumbo in this day and age. AAA CMBS new issuance at trading at 850 over LIBOR currently. If you originated a jumbo loan at 7% today, it would be worth 85 cents out the door. If you can even get one with 25% down, it would cost close to 10% (remember, you can't sell these loans into Fannie or Freddie, as they're too big, so they just have to sit on a bank's balance sheet).

Not arguing you should/shouldn't do the calc - just stating that you're using the wrong numbers. This price is just too high for this market with those rent stab. tenants in there.

Posted by: slim at November 17, 2008 6:43 PM

You don't have to guess about the property tax. Just look it up on property shark. It is $7136 this year and will be $7858 next year.

Posted by: Left Hook at November 17, 2008 7:30 PM

It positively warms the cockles of my heart to hear you all rattle on about throwing people out of the homes they've lived in for (probably) decades.

Posted by: Heather at November 17, 2008 7:49 PM

I bought a house with a rent stabilized tenant over three years ago and while they pay negligible rent that barely covers the outlays I got a discount on the house of some $400,000 because of them. We have almost 5000 sq ft of livable and habitable space but only 4200 in 'habitable space'. In three years the only extra cost we've had (over and above utilities etc) is a broken apartment door lock. The tenant is a mother (90+) and daughter (50+) and their family have lived in (and once owned) the house since the early 1900's.

While we could try and evict them 1) we wouldn't because to me it's bad karma (remember we got that discount going in) and b) as someone above pointed out as one tenant is over 62 there's no point trying. But in the three years we've rented I would say that the market rent tenant has required more landlord work than the rent stabilized one.

If you're are in your property for the long hall then it is worth not discounting properties with rent stabilized tenants. As long as you do due diligence it isn't necessarily a bad decision and given that they scare most people away deals can be done.

We live in 3300+ sq ft and rent out two apartments of 880 + each and got in cheaply.

To me the biggest challenge with this property is four families are getting harder and harder to finance but it is worth doing the numbers to see if can work.

Posted by: 99luftballons at November 17, 2008 8:19 PM

One thing you could do is buy a tenement building nearby and move the rent stabilized tenants into your tenement building once you buy the townhouse. Of course you have to give them similarly sized, equally priced, rent stabilized apartments. Although if the tenant refuses to move, you would have to take them to court to force them to move.

I've never done this personally, but I've considered it. You might be able to pay a landlord in the area to "take on" the rent stabilized tenants; Doubtful, perhaps, but you never know.

Personally I would never want to live in the same building with my tenants. Separation between work and home is too damn important.

Posted by: IronBalls at November 17, 2008 8:23 PM

I just read 99luftballons post and have to reply.

It's very uncommon over three years to only once have to fix anything in a tenant's apartment. Stuff usually comes up constantly -- noise issues, garbage issues, leaks, smell complaints, you name it.

Sure you might get lucky like 99luftballons did, but she's the exception not the rule.

Posted by: IronBalls at November 17, 2008 8:29 PM

which is why you do due diligence - yes we might have been lucky but we also interviewed the tenant before buying. Caveat emptor indeed but we tried to mitigate that as much as possible through due diligence.

All I am saying that it is worth looking at properties like this if you are likely to be in them for the long haul and not dismiss them outright.

(and that's a he not a she! ;-) )

Posted by: 99luftballons at November 17, 2008 8:38 PM

Ironballs, I sincerely hope you are not a landlord, you would give us all a bad name.

I've had tenants for over 20 years. Other than plumbing stoppages, appliance problems, and other issues (which have happened with the SIMILAR frequency in my unit,) I can honestly say there's been only ONE incident that is "tenant related." In 20 years.

Maybe I just treat them as human beings unlike the rest of the tenant-haters on this thread.

99lb, your post almost made me weep that there are actualy good landlords around. "karma" is such an unusual word outside my almost-native California!

Posted by: cmu at November 17, 2008 8:52 PM

cmu has hit the nail on the head.
There are certain inalianable truths in NYC housing court, namely:

Landlord: oppressor: bad
renters: victims: good

take it from someone who's been there: it's a nightmare. And I was dealing with affluent white tenants. If you're white and your tenants are minorites, just sign over the title to them, save yourself legal fees.

Posted by: sam at November 17, 2008 10:11 PM

Slick said; AAA CMBS new issuance at trading at 850 over LIBOR currently. If you originated a jumbo loan at 7% today, it would be worth 85 cents out the door. If you can even get one with 25% down, it would cost close to 10%

So you think that Jumbo mortgages are only funded through CMBS issuance and therefore jumbo mortgage rates are 10%. That is not correct I'm afraid.

Posted by: Aussie at November 17, 2008 10:50 PM

No shot. This is a super-duper jumbo mortgage. You would have to put 20% down. There are two rent stabilized tenants. And let's not forget the lovely mansion tax. Instead of supporting two strangers for the rest of their lives, why not just give your money away? I'll take some. I really would love to sample some of what these home sellers are smoking.

Posted by: i_heart_brooklyn at November 17, 2008 11:51 PM

CMU,

Of course I'm a landlord, and I didn't say a thing that gives us a bad name.
All my tenants have to do is send an email and the problem is taken care of ASAP.

The bottom line like other posters have mentioned is that the two rent stabbers obviously won't take reasonable buyouts or the building would be delivered vacant.

I'm all for buying mismanaged multi-family properties cheap that are full of rent stabilized apartments. With a long enough time frame and a little luck, it can be a path to making big money.

Unfortunately, this building is priced much too high for an investor to expect a decent return as the above posters have explained. Also, who the hell wants to live their life having to subsidize the upstair tenants and possibly their children after them? Remember, children of rent stabilized tenants can take over the apartments merely by living in them for two years. If you buy this house, it's possible that in your lifetime you'll never take full possession it.

Unless the price is cut in half or close to it one word sums up this property: NEXT!

Posted by: IronBalls at November 18, 2008 12:38 AM

Much more reasonable, IB. But you're still assuming that the only people who want to buy his property are those wanting to "take it over" eventually. If the price were right (and I did say that) it could be a straightforward business deal after calculating ROI.

What bugs me is the automatic assumption that tenants need to be "gotten rid of" when you buy a property. It's almost universal in these comments. Besides the unfairness of it (the tenant had no say over the sale of his abode,) it's just shortsighted and shows, yes, an attitude towards people that's meanspirited and untrustful.

If a tenant (for argument's sake, not r/c or r/s) is in place, why assume that he's any worse than one you will find yourself? Do due diligence, of course, but why oust them if they're ok? I've taken over buildings with tenants and not had problems. I will not attribute it to luck.

Posted by: cmu at November 18, 2008 9:19 AM

CMU,

Yeah, I know what you mean. Sadly, prices are so high, most buyers can't help feeling robbed after paying big bucks and having to be stuck with low rent tenants.

But for this property, it's pretty clear considering the substantial asking price that most buyers would attempt to evict the tenants and turn the entire house into their own home.

It takes a certain kind of cold hearted individual to go through with this kind of a buying and evicting agenda. Statistically, I don't think it happens very often, and I've never done it myself.

I've certainly paid lots of rent regulated tenants to move, but one thing I've found is that if the person doesn't have other options already, they usually won't take a buyout. And if they have no job and live off welfare or social security alone, it's impossible.

Where else can a tenant live in NYC dirt cheap with the guaranteed right to have his lease renewed?

Posted by: IronBalls at November 18, 2008 11:58 AM

Aussie - you just don't get it. But, that's OK. CMBS stands for Commercial Mortgage Backed Securities - NO resi loans are funded through CMBS. It was just used as an example of where funding costs are these days.

No private label RMBS (residential mortgage back securities) securitizations are being done these days - the ONLY loans that are getting funded are ones that can fit into a Fannie or Freddie deal - and if the deal doesn't fit into a Fannie or Freddie deal (which commercial JUMBOs don't), be prepared to pay through the nose - if you can even get a bank to lend you the money.

Posted by: slim at November 18, 2008 12:55 PM

« Condo of the Day: The Ansonia, Apt. 4D Streetlevel: Novo's Retail Tenant Appears »

November 17, 2008

HOTD: 306 Washington Avenue, Two Price Cuts Later

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