I’m buying a co-op. Over the next few months, I hope to chronicle the experience of buying a home in the New York market.
I live in a large studio apartment in Lower Manhattan. It actually looks like a 1 BR, as it has a “home office” (with a door that shuts) that I use as a bedroom. Legally, it isn’t a bedroom, because it has no windows. But as the leasing agent put it when I rented the place in 1999, “They’re not going to bang down your door in the middle of the night to see where you’re sleeping.”
A windowless bedroom isn’t such a bad thing. It is very quiet, and if you ever want to get sleep at an odd hour, the sunlight will never get in the way. It also means that if you oversleep, there’s no visual clue to whether it’s daytime or nighttime.
Lower Manhattan has been kind to me. With several subway lines within a few blocks of my apartment, I can be almost anywhere south of Central Park in under a half-hour. Amenities have improved considerably, as the Financial District continues its transition to a 24×7 neighborhood. For the amount of space I have, the rent has been reasonable by Manhattan standards, and it was quite good for the first few years after 9/11.
Despite all of that, I always considered this apartment a stepping stone to something larger that I would own, rather than rent. I didn’t expect to make that step for another couple of years. Then came the news that my apartment building is going condo, and it got me thinking.
The “insider price” for my 843 sq. ft. studio is $740,000. If you don’t live in New York, or haven’t researched the market, it will be hard to believe that that’s a good price. But it really is. For a unit that size, in good condition, in a doorman building near the subway, in a nice Manhattan neighborhood, you aren’t going to do much better. In many neighborhoods, you would pay a lot more.
However, buying a condo in Manhattan is a bit like buying a car: the instant you drive it off the lot, you’ve lost at least 10% of the value. For the car, it’s because of depreciation. For the condo, it’s because of steep closing costs on both sides of the transaction. Unlike a car, the condo eventually recoups that lost value. But unless the market is super-heated (which it isn’t right now), you have to hold on a few years. Practically every block downtown has at least one condo conversion, so I suspect that high inventory will put a damper on price appreciation.
I didn’t have to buy my apartment if I wanted to stay there. The condo conversion has a “no eviction” clause, which basically means I can live there forever, as long as I’m willing to pay market rent. The law also prohibits “unconscionable” rent increases, although it does permit very steep increases that are at the high end of “conscionable.”
With the very likely prospect of yet another rent increase this summer (when my lease is up), and very possibly a new and less friendly landlord (if I decline to buy the unit, and the sponsor sells it to another investor), I thought it was time to investigate my prospects elsewhere.
To be continued…