House of the Day: 145 Bergen Street
From what we hear, the market for nice houses in Boerum Hill is still pretty tight. And compared to some houses in the area that have been on the market recently, the $2,000,000 asking price for 145 Bergen is not particularly high. That said, there are too many question marks with this place to feel…
From what we hear, the market for nice houses in Boerum Hill is still pretty tight. And compared to some houses in the area that have been on the market recently, the $2,000,000 asking price for 145 Bergen is not particularly high. That said, there are too many question marks with this place to feel optimistic about its chances of selling at this price. The house had its last major makeover back in 1968 and, given the fact that it’s a four-family rental, it’s unlikely that the interiors are in great shape. (The lack of photos lends credence to that theory.) Has anyone been inside this place?
145 Bergen Street [Craigslist] GMAP P*Shark
Johnife, the 7%, I assume, is pre-inflation, so the actual number is around 10%. As for taxes, you don’t pay 41% on long-term capital gains, you pay 15%, and you don’t pay it every year, you only pay it at the end, when you sell. In other words, you take $2 million, put it into an index fund, and sell it 30 years later, paying 15% on the roughly 10% annualized gains. I don’t have Excel in front of me, but while you’re not going to get anywhere near $40 million, I’d be shocked if it weren’t close to $25 million.
The important thing about the comparison is that stocks are now around their historical norm in terms of P/Es, etc., so it’s reasonable to expect a historically typical gain over the next 30 years — that is, around 10% annually (including inflation), 7% inflation-adjusted. NYC real estate, by contrast, is at an all-time peak, which means that gains over the next decade at least can be expected to be well below the historical norm, and are most likely to be negative.
Look, there is no investment case for buying NYC real estate today. That doesn’t mean it’s not worth it, if you hate renting, or you need a really big place for your family. But if you buy today, you’re going to see a smaller return than if you did something else with your money. And you’re likely going to be looking at no gain to losses over the foreseeable future. Pointing today to the last five years as evidence that NYC real estate is a guaranteed thing is exactly like someone in Feb. 2000 pointing to the performance of the Nasdaq over the previous five years and saying that if putting money into tech stocks was a surefire way to get rich. You can’t buy at the top and get wealthy. And this is, for the foreseeable future, the top.
Oh, and by the way, i just checked at the RE agent’s office on the way home from work and there’s a flyer that categorically states that there is no rent control or stabilization on any of the apartments in the house.
Okay, I just spent a few minutes on an online spreadsheet checking the “$2 million @7% compound = $40 million after 30 years” statement. It’s bullshit. If one assumes that you pay NO income tax on the yearly interest income, you get to $15,224,510 in year 30. If one assumes 41% in Fed and State taxes on each years interest income, you get to $6,920,125. Just another symptom of the disregard of financial facts that got us into this financial crisis in the first place. The mind boggling thing is that people just accept the numbers and base subsequent arguments on them. No wonder the banks were able to sucker all those borrowers in!
6:47 — with my $40m, I’ll be able to buy 4 brownstones and lay out a horizontal apartment. Or move to a really nice beach in Greece and hunt for shells in my dotage, if the dollar hasn’t collapsed completely.
5:56 – would Warren Buffett be any less rich if he was a renter? there are other ways of “making” money than by investing in real estate. either way, you are paying some montly cost and it either ties you down or it doesn’t.
here is an interesting comparison. The CREF fund started in 1952, and it has returned 10.34% per year since then. http://www.tiaa-cref.org/performance/retirement/profiles/1001.html
That means it doubles about every 7 years. So a 10k investment in 1952 would be about $3.8m today.
That’s about the same as you’d have gotten by investing in Prime Park Slope in 1952, if you made it through the bad years.
“I don’t think I’ll have any problem paying your rent, which should be up to about 8k by then. ”
6:22 ok deal. I’ll be your landlord, but the rent numbers need to be tweeked. I need about 15k a floor. I also need you to eat your noodles and stay in shape. I do not want to hear peep from your old ass about the walk up and your damn knees. And i will not install one of those old people chair lift thingys in my home. It will ruin the integrity of my Brownstone.
johnife — how long do you think the plebes (and condo owners) are going to let you get away with less than .1% taxes on your $20m brownstone?
6:22,
I think many of the posts here have oversimplified the financial aspects of buying versus renting and I would not presume to express an opinion on the relative merits in this market without spending a goodly few hours in spreadsheet hell. I do know, however, that any post that presumes $20,000 p.a. in real estate taxes on a Brooklyn brownstone is to be viewed with great skepticism.