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…
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]
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?
“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.
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.
$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.
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.
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.
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!
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?
“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.