House of the Day: $150 a Foot in Nowhere-land
We’re having a hard time getting our arms around this one. The 1920’s 8-family grabbed our attention with its very low price per square foot: We didn’t know there were finished buildings anywhere in NYC selling for $150 a square foot these days. Then we realized that it’s out in the middle of friggin’ nowhere…
We’re having a hard time getting our arms around this one. The 1920’s 8-family grabbed our attention with its very low price per square foot: We didn’t know there were finished buildings anywhere in NYC selling for $150 a square foot these days. Then we realized that it’s out in the middle of friggin’ nowhere Williamsburg. We’ve also got no interior shots to judge by, though the exterior of the 6,000-square-foot building looks to be in sound shape. So what’s the deal: Is there an industrial waste site in the backyard? Rodents? Or, gasp, rent control tenants? Or is this the going rate in the Brooklyn boonies? Perplexed, we decided to do a little math. At an asking price of $895,000, we’d estimate your total monthly costs (mortgage, taxes, maintenance) would be less than $5,000. So if you could get more than an average of $600 a month per apartment, you’d be in the black, right? If you could get $1,000 a month per apartment, you’d be looking at a 15-20% yield on your equity. What are we missing here and does anyone know anything about this broker, Barak Realty?
955 Grand Street [Barak Realty] GMAP
http://nymetro.com/nymetro/food/features/14694/#
It’s very hard to kick out rent regulated tenants. It terms of time, court costs, and the added irritation of dealing with who knows how many unpleasant people, it’s never a good strategy in NYC unless you’re getting the building dirt cheap. 800k for a boondocks 8 unit is not dirt cheap.
I’ve owned low rent real estate in the past and it sucks. Obiously, if the market skyrockets like it has in NYC, you can make money selling, but trying to make money operating a building like that is idiotic.
couldn’t you buy it and kick everyone out if you were going to use it as your primary residence, like that family in the EV.
Never pay more than ten times the rent roll.
Please bear in mind that this is an 8-family which is valued completetly differently from the 1-4 family property class.
They list current income of $74k and expenses of $17k. In reality the expenses are closer to $30k (they’ve underestimated insurance – $5k, fuel – $10-12k and don’t have anything for management expenses, vacancy, or repairs) So at the end of the day you have about $44,000/year to pay your mortgage.
For a commercial property you have to put down at least 25% leaving a mortgage of $671k @ 6% = mortgage payment of a little over $4,000/month which is a few hundred short of the income you will have after your expenses.
Furthermore, a bank will want to see that the income after expenses is at least 115% of the mortgage payment so you would need to put down a little over 40% to meet their minimum standards or about $360k. Figure you’ll need $400k including closing costs.
After putting down your $400k you’ll have a few hundred a month as “profit” which is a paltry return on your investment. So you need to figure out a way to raise those rents to make this one worthwhile. However, these apts. are subject to rent regulation so you can only do this if you get the people to move out. They might do this but you might have to pay them.
Long story short, someone might be able to make money on this property at this price but it will take a lot of work and you really need to know what you are doing. The current return if buying all cash on this property is about 5% which is low but could work long term for someone who would rather park their money in RE instead of a bond fund.
The other option someone would have would be to buy it and move into as many units as they can, therefore kicking the rent regulated tenants out. After three years they can move out and it’s possible to boost the rents up to a market rate.
If you look at the listing rent roll is $74,000 a year (assuming no vacancies and everyone pays)- and expenses (not including mortgage is 17,500).
And of course there are rent controlled/or at least ‘rent stab’ tenants. Its an 8-unit bldg.
Not to say whether this is good or bad price. Probably pretty good for investor.