6 tips to help decide to buy a NYC apartment or not
Keep in mind that these tips are just a guide. Obviously, in this market where the inventory is very low, some of these factors will become marginalized. But when making a large purchase like a Manhattan apartment, entering into it with your eyes wide open can only yield better results. I chose not to include obvious factors like views, condition of the apartment and overall affordability. These will be addressed in another series.
- Building Financials- Generally speaking Manhattan buildings deal with their capital improvements and repairs in one of three ways: a-They raise the maintenance b- They assess c- They budget and pay out of the reserves. Obviously, this 3rd category of building is one that you would love to find but given the dearth of property for sale, it may not be feasible to limit yourself. However, after your CPA or your attorney takes a look at the building financials, you can get an idea of what the history of the building is with regards to maintenance or improvements. Also, your attorney will be able to advise you if there are any major projects planned. You can also find this out by talking to the seller’s agent who may have first hand knowledge. The $2000 maintenance you have right now may very well be headed to $3000 or higher shortly, depending on what’s planned so this should help to distinguish between a well managed building and a building that is constantly running a deficit. Keep in mind even though you may be able to pay the higher maintenance figure, the increased maintenance will be a drag on appreciation. Take a look at Battery Park City as an example.
- Are there any negative issues that in the seller’s market are overlooked but in a normal market will be an impediment to selling? My first NYC apartment was on the first floor of a doorman building and inventory back in 2004 was also tight so I was happy to grab it before others. However, in 2010 when I was selling, everyone was complaining about it being on the first floor. When the market is hot people scoop up 1st floor apartments and walkups but when the market changes, these are hard apartments to sell. Also, an apartment with a negative view is a major drawback. Even though, you may not mind looking out the window at the dumpster in the alley, the next purchaser probably will
- Amenities- You may or may not want a doorman but generally a doorman building will fetch at least 5% more than a similar apartment. Other amenities like a gym, laundry room, and roof deck all add value. I would also included in the amenities the pet policy. You might not want a little furry friend making a mess on your Brazilian wood floors, but one of the most searched items online is pets allowed. So limiting pets may limit buyers down the road all things considered.
- Rental policy- While you may think that you will leave in that 400 sqft studio for your entire life, there’s a chance that you will outgrow it or even you might get a job transfer. If you buy at the top of the market 2014- present, it might be unrealistic to expect that you can flip your aparment for a profit so having the ability to rent it out for a few years can be helpful in case that transfer to Sao Paulo comes through. Also, lesser known fact is that rental policies like pet policies can be changed.
- Building financing issues- Are there any pending lawsuits or does any one entitiy(Sponsor?) still hold at least 10% of the apartments? Are they a high proportion of rental units in the building? Any of these factors can restrict financing options which will impact you and also future purchasers as well.
- New construction- Obviously if you are buying a Related or Extell product, you are probably pretty secure in your purchase but are you planning to buy from an unknown developer. There are plenty of cases where after buildings were built, there were issues. So caveat emptor here with an unknown developer. What looks good new doesn’t always stand the test of time. Do your reserach on the developer.