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Co-op Boards

 
We recently sat down with two agents who were speaking about millennials and co-op boards. Basically the smart co-op boards are becoming more lenient as many millennials don’t want to deal with a hassle of going through this.
 
What do you think? Are millennials avoiding co-op boards altogether? Are millennials on co-op boards happening and becoming more lenient?
 
The millennials I have worked with want diversity in their lives. Co-ops by their very nature want consistency... sameness.
 
Co-ops are often not even on the table...even if that means millennials have to go to their second or third choice neighborhoods to get what they want.
 
Co-ops may have some hope... As millennials age and have kids they may want to be around other young families for play dates or mommy relax and unwind with wine sessions.


Interview 1

How do middle class New Yorkers go about saving for a down payment in one of the most expensive cities in the country?
 
ALEX
 
I worked with three "millennial" couples last year to buy.
 
One couple bought a condo in Clinton Hill, another a condo in Park Slope, another a co-op in Clinton Hill.
 
I think that might be an interesting angle. "Millennials buying in BK"
 
I had another couple who both work for the UN who actually had two accepted offers elsewhere and backed out because of "concerns" about neighborhood/right apartment.
 
They literally kept seeing what were "better" apartments and the one we got was a crazy bidding war for a listing saved 300+ times on Streeteasy.
 
Third time's the charm!


Interview 2

1. What would you recommend a borrower should do when they have to jump ship with their lender after being under contract and find another one?
 
2. What are red flags to look out for before you hire someone that could result in bumps down the road?
 
Experienced buyer brokers always have a list of back-up lenders "on call" for their clients. Interestingly, these back-up lenders often lend at the same or better rates. It happens to me a few times a year where I get asked to help in this capacity.
 
For buyers on their own, always have a back-up plan.
 
Red flags are banks who do mortgages only as a courtesy (Chase) as opposed to a revenue stream (BofA and Wells Fargo).


Interview 3

Are there real estate ideas or strategies that are appropriate for aggressive investors seeking high returns?
 
The vast majority (over 90%) of investors are obsessed about cap rates and cash-on-cash returns...i.e. cash flow only. They all use the rule of 72 to determine when they will get a 100% return on their money. The negative with this line of
thinking is: there is no consideration about the appreciation of the property.
 
The more sophisticated investor will think in decades (not quarters or years) and can reap a much more substantial reward. With this line of thinking, no other city in the US can offer a greater reward than New York.
 
Here are some real life examples:
 
- Clients bought a 1,350sf 2-bed, 2-bath condo in the West Village for $685,000 in 1999 and did only maintenance over that time. It has been renting between $8,000-$10,000 for the last 10 years. I can sell it today “as-is” with 20-year old finishes for $3,000,000
 
- A Client bought an 800sf 2-bedroom, 1-bath in 1990 for $5,000. She rented it for $2,500 for the last 10 years. She just sold it for $695,000
 
- Today I met a person who bought an apt for $54,000 in 1977. I can sell it today for $1,800,000
 
With NYC a world capital in finance, fashion, marketing, entertainment, education and now high-tech (even w/o Amazon), the city is expected to gain another 1,000,000 people in the next 10 years. As such, property appreciation will continue. (Interestingly NYU Stern business school researched NYC property over 400 years and it appreciated on average 7% annually over that time.)
 
The 90%-ers will say it's very risky to bet only on appreciation (or the come). They would laugh at current 4-5% cap rates offered in NYC. However, they do not laugh when their investments that instantly gave them 8-15% cap rates show no appreciation in value or cap rates. The 90%-era look for cashflow. The 10%-ers build true wealth with what is perceived by many as risky investments.


Interview 4

We're all aware of the usual suspects — affordability, schools, proximity to transit — but what are other things that are important to buyers and renters?
 
- is there a nearby place to return packages, likes UPS or FedEx?
 
- does that train down the block suspend service at night/on weekends?
 
- is there an urgent care or pharmacy nearby
 
- does the grocery (or liquor) store deliver?
 
ALEX
 
"I have clients that constantly ask where the local Soul Cycle is. They are fanatics! But I understand why. It's about staying fit and finding something you love doing. I have a listing at 450 West 17th Street #1506, an epic junior 1BR with incredible views. I made sure to note there is a Soul Cycle around the corner."
 
"Grubhub or Seamless accessibility is a must. Clients want access to whatever food they want to eat at whatever hour they want to eat it. Think about it, these are hard working professionals, working long stressful hours, a lot of them are ordering and having access to great open late options is a must."
 
"My client was training for a triathlon and he had been going to a YMCA in Bed-stuy where they had a pool. Access to swimming was vital for him and when I mentioned a YMCA location with pool on Atlantic Ave basically at the nexus of Cobble Hill Boerum Hill & Brooklyn Heights. He ended up finding a place within a 10 minute walk. And now he loves it."


Interview 5

1. What was the final straw where you knew (or told your client) to walk away?
 
2. What are some red flags people should look out for?
 
Here are my thoughts...
 
Walk-away:
 
First and foremost, always get a professional inspector/engineer to inspect the property before you sign a contract. If the seller or seller’s broker won’t let you...walk away.
 
If there are substantial issues found from the report and the seller is unwilling to address them...walk away.
 
If you are buying a condo or co-op and the managing agent won’t let you see the meeting minutes, condo docs or answer a standard questionnaire...walk away. There could be something wrong with the building.
 
If the property has a funny smell (musty, cigarette smoke, etc)...walk away. If will be hard to get it out or it could be a sign of a big expense problem.
 
If you are receiving “undue pressure” from the seller’s broker, walk away. They could be hiding something.
 
Finally, if your intuition says “something isn’t right”...walk away. Trust your instincts.
 
Caution:
 
If there is a lawsuit with the property (mainly new condos and its developer)...strong caution. Most banks won’t do mortgages in buildings with lawsuits.
 
If your bank won’t lend in the building or property...caution. See if other banks will lend.
 
If the property does not own the land (a land-lease)...strong caution. When is comes time to resell, many buyer’s attorneys tell them not to buy.
 
Final note: A wealthy property owner told me once...”I made my fortune, not on the deals I made, but rather, the deals I walked away from. By trusting my intuition, I saved myself from headaches and bankruptcy. There is always another deal out there.“


Interview 6

1. Do millennials have it harder?
 
Martin: Overall no. Provided you have a good job and credit you can get a mortgage. The 2000's was a decade that ANYONE could get a mortgage. So looking back only to that decade...yes it is harder now.
 
2. Why (or why not) do they feel like things are tougher for them?
 
Martin: Generally speaking, millennials like to live in urban areas. Urban areas are more expensive than suburbs or remote parts of the country. With higher prices, a higher down payment.
 
3. What sort of aspects of the housing market have changed to make their lives more difficult, as opposed to other generations?
 
Martin: the biggest changes are:

  • Tighter lending guidelines compared to the 2000s
  • A more dynamic job market. The days of working for a company 30 or even 10 years is long gone. Banks are still looking for that ideal.

4. What ways do millennials clearly have it harder?
 
Martin: See answer 3
 
5. What ways do they clearly have it easier?
 
Martin: With parents now willing to give their "inheritance" while alive, many millennials get the down payment of their first home as a gift from their parents. Banks are very comfortable with "gifting".


Interview 7

STORY ONE:
 
I am seeking experts to share their best tips for millennials - what are the things they should be doing now to be financially secure down the line? I know this isn’t directly real estate related but I think we can argue a tip related to real estate?
 
For each tip, please explain WHY this is something millennials should be doing, and the impact this will have down the line.
 
STORY TWO:
 
Home Depot's stock price has risen 3% in the past month, on the heels of solid company financials reporting. Homebuilders seem bullish, the economy is robust, and consumer sentiment is strong. What does this all mean for Home Depot going forward? --- Need stock market experts to comment on Home Depot for this story. How do you view HD right now? What's your view on the homebuilding sector and why? What's your view on Home Depot's financial picture? What are the big challenges facing the company? Where do you see HD stock going and why?
 
Now I think I had one agent comment about this before for the home sector. If you have any thoughts, I’d love to hear them.
 
STORY THREE:
 
What are things seniors/retirement-aged folks can do to maximize the comfort of their home while minimizing costs? As folks age, maintaining the house gets tougher, but hiring people to do it is costly, esp. on fixed incomes.
 
Martin's Answer: As a Gen-X real estate broker, I have a few suggestions for Millenials regarding real estate. First, buy something as soon as possible. While high-tech start-ups get most of the press on being rich overnight with IPOs, the vast majority of wealth in this country is created through real estate. At a minimum, real estate appreciates with inflation but generally increases at a much higher rate. Your first purchase does not have to be "the perfect dream home". A buyer's first property is usually only held for 4-6 years then sold. Usually, most (if not at all) of the equity gained in the property will go tax-free and can be rolled into a larger property. The second property is held for another 4-6 years, sold and the third property is the dream home. Second, don't buy in a frontier neighborhood or an established one. Rather, buy in one that is in between since this where rapid appreciation happens. I had several clients follow those two rules with the following results: 1st property bought for 250k, sold for 500k five years later, 2nd property bought for 600k and sold for 1.2M five years later, 3rd property bought for 2M with 1M from equity. This equity was literally earned by clients, eating, sleeping, and having sex in it!
 
Martin's Answer: With the economy good, homeowners have extra money to spend and are choosing to do so on their homes (where they hopefully spend most of there time). There are, however, some differences in this cycle. First, homeowners acknowledge that improving their homes will not translate into a higher value dollar for dollar or multiple. The era of flipping is over. It is for enjoyment. Second, the digital disruption has entered the home. Nest, Sonos, Siri, Alexa, and Google can make homes smart. This makes homes both more safe and a lot more fun! Sync LED strip lights to music, and record a home dance party on several cameras in your living room while the oven is warming appetizers and the washing machine is cleaning your swimsuits from a day your pool. All via your phone. Wow! Crazy!
 
Martin's Answer: Many baby boomers are rightsizing their homes for what they truly need. I have helped several clients in Manhattan sell their 3-4 bedroom condos and co-ops for 1-2 bedroom properties. They had the fantasy that the entire family would come for the Thanksgiving Day Parade or New Year's in Times Square. However pragmatic logistics never really work out with grown children and their kid's hectic schedules. As a result, the property is underused (or not at all). Similarly, do you really need the 6-bedroom lakehouse? Maybe a 2-bedroom condo on the lake that has a pool. You get to see the grandkids one-on-one as opposed to a big group.
 
Speaking of condos...a better choice than homes to keep upkeep costs down but watch out for the HOA fees. It may be nice to say you have a golf course, tennis courts, Olympic-size pool, hot tub for 20 and a clubhouse that serves 3-meals a day, 7 days a week but will you use all of it? Be in a condo community that has the amenities you will actually use not brag about.
 
Finally, be patient and buy a property that you have little or no work to do for the foreseeable future.
 
A "simple bath redo" or "small leak in the roof" can be the tip of the iceberg.


Interview 8

Furthermore, the editor wants to speak to a real estate expert Monday about the LLC tracking and how it’s gotten harder for HNW individuals to stay under the radar when purchasing in NYC over the years. This includes using fake names with their brokers when going to see an open house, filing LLC purchases with their attorney as a authorized signature, brokers helping their HNW clients mask their identities in anyway possible, etc.
 
He also wants examples (on the background or off record as well) like this agent gave: I once had a very glam townhouse listing on Waverly Street. Tons of celebs looked at it and the first thing they would do is check out the back yard to see who and where they could be spied on from.
 
Martin's response: Besides the way mentioned above, many HNW individuals will have the EAs or designers see a property on thier behalf before seeing it. The EA or designer gives thier name but not who they work for. When they view the property, they will report back to their client. Non-disclosures are signed before showings. Having said that, HNW individuals like NYC for being able to be incognito. They can walk the streets unrecognized among the mass of people and be safe (back in thier home country they may need an armed motorcade). The old "baseball cap and sunglasses" still go a long way in New York. That is one of the city's draws, hiding in plain site.
 
Martin's response: As a member of Compass's Sports and Entertainment, I am constantly working with high profile clients. Surprisingly, many do NOT want a doorman building with all the staff that comes with it. The new "in" is owning an unassuming on the outside (but prisitne on the inside) townhouse in a traditional neighborhood. Over the past few years I have help client buy and sell in Park Slope, Forte Greene, Williamsburg, Gowanus, Ditmas Park South and Cobble Hill...all in Brooklyn.


Interview 9

1. Is there one specific apartment layout you like best and why?
 
Martin: My favorite layouts are ones that separate the public spaces (living, dining, library, kitchen) from the private spaces (bedrooms, home office, media room). This allows parents (or one homeowner) to entertain while the kids (other homeowner) can do their own thing. I also like a proper foyer...a place for someone to collect themself before entering the rest of the apt or leaving. Some of my pet peeves layouts are entering the apartment with the kitchen directly in front of you or split bedrooms where there is no delineation of public and private space.
 
2. Is the layout of an apartment one of the first things to consider when looking for a place?
 
Martin: With a degree in architectural engineering, layout and flow is very important to me. I always look at layouts before photos.
 
3. Why do you find it important, why not?
 
Martin: Great layouts are important. It is one thing to re-tile a bath or put in new kitchen cabinets. It is another to “re-imagine” a space. The cost difference is in multiples.
 
4. Do your clients have specific requests when it comes to the layout of an apartment? Has a client ever rejected an apartment, just because of the layout OR has a client fallen in love with a specific layout?
 
Martin: As buyers hone in their search and know what the want, the layout is the “gatekeeper” in seeing a property. If the layout doesn’t work, why even see it?
 
4. Please list a few apartment layouts and explain their advantages, disadvantages and possibly, types of people they're best for.
 
(For example: Railroad apartment - advantage: more privacy since bedrooms are normally on opposite ends; disadvantage: often seems smaller than it is; good for: roommates, a couple with one child.)
 
Martin: In general good layouts have:
 
- Division of public and private spaces
 
- Outdoor space (if any, is connected to the public spaces)
 
- Bedrooms have easy access to bathrooms.
 
- Lots is Windows
 
- Tall ceilings
 
- Good flow
 
Bad layouts:
 
- Long hallways to nowhere
 
- Combined apartments that have cut-up spaces
 
- “extra” bedrooms off a living room or kitchen
 
- Awkward window placement (a bad reuse of the building).
 
Split Decision:
 
- Half of buyer’s like separation of rooms living room/dining room/closed kitchen (to hide dirty dishes as cooking smells)
 
- Half is buyers like “open concept” living so people can interact/entertain while cooking, etc.
 
5. Is there anything else you'd like to say about this topic?
 
- Some people like duplexes (feels like a home) some like simplexes (stairs are a waste of space).
 
- Tall ceilings are the trend with double height in a major room. I.e. the living room.


Interview 10

STORY ONE:
 
Hello! Looking for ideas on making smaller spaces more functional, appear bigger, brighter, etc. and still home-y., with a focus on KITCHENS I'd also like most of the suggestions to apply to design elements that are selected during the build process i.e. appliances, cabinet colors & materials, flooring choices, etc.
 
NEED: design savvy agent or designer.
 
Martin's response: For small spaces, the kitchen needs to be "right sized". It cannot be a glorified hotplate warming station with a mini-bar fridge nor a kitchen found in a 3-bedroom home. The most successful kitchens I have seen appear as a "gentleman's bar" but, in fact, is a fully functional kitchen. Appliances hidden behind wood panels is key. A 3/4 fridge, a single dishwasher drawer (to save space) an electrical or induction stove (which can me additional counter space when not in use). Interestingly, dark color palates with mood lighting work best. It makes the space feel like a tucked away room even if it is part of the living room.
 
STORY TWO:
 
For this piece, we're seeking realtors to weigh in on the things agents see in homes that maybe homeowners don't, including what renovations are usually fruitless, what parts of the home are most important to maintain, etc.
 
NEED: agents only.
 
Martin: This is a great story. The biggest things homeowner don't see is their own clutter and strong design choices that have limited appeal. Painting the living room in Hermes Orange? Not so great. Packing a room full of furniture and knick-knacks to show how much it can hold? Not good. The biggest waste of money is expensive tiling in bathrooms and kitchens. At the end of the day, basic subway tile is tried and true without alienating buyers. Other big no's are hot-tubs or bathtubs with jets. It comes across as unsanitary and cheesy. For outdoors, don't buy expensive plants/trees for landscaping. Landscaping is the most underappreciated value to a property and buyers are not willing to pay for it.
 
STORY THREE:
 
I'm working on a story on American homeowners spending thousands of dollars to put their homes on the market, and I'm looking for anecdotal sources who can speak on the hidden costs they've come across while selling homes, eg. painting, repairs, etc. I'm also looking for business owners who are tapping into the market, promising to cut costs for sellers, like broker's fees. Please reach out if you have anyone in mind.
 
NEED: client preferred but if you have a story you can speak on behalf of a client please let us know.
 
Martin: The biggest hidden cost is decluttering and putting things into storage for the sale. Also styling and staging. I include this complimentary with my broker fee as it can cost tens of thousands of dollars.
 
STORY FOUR:
 
I'm looking for a recent female home buyer who saved a down payment while paying off their student debt (or refinancing it). I'd like to speak with the buyer and her financial adviser, if there was one. I'd also like to talk to a lender on the available options.
 
NEED: prefer female homebuyer but if you have an example you can speak on behalf of your clients, please let me know.


Interview 11

1. One or more specific rules investors should adhere to when investing in real estate overseas.
 
2. Why this is an important rule to know and how it can help investors choose and manage their overseas real estate portfolio wisely.

  • Know the rules of foreign land ownership in another country. Each country is different. Know if there are any restrictions as to the type and location of the property you can buy.
  • Start small. While there may be great comparative value in foreign countries start small. So if you make a mistake (and mistakes happen) your loss won't be dramatic. After buying something small you can always upgrade to something larger in the future.
  • Pay all cash. There are laws as to how much you can mortgage, banking rules and potentially high-interest rates. Pay all cash. It will also get you a better deal.
  • Know the Air BnB and VRBO laws where you intend to do short term rentals. I have clients who bought in Paris and wanted to rent it out when they do not use it. Now it is illegal and they cannot.
  • Understand there will be a lack of transparency. There is no MLS system in other countries. As such, you will have to see properties with different brokers. Trying to verify comparative comps will be difficult, if not impossible. Make sure you are with someone you trust.
  • Know the language where you will buy. If you cannot communicate with the local population, you will pay more. It's just human nature to charge "foreigners" more than "locals".
  • Have a team in place to maintain the property. Often condos are the easiest to start with since a management team is in place.


Interview 12

What are some things homebuyers should NOT skimp on when buying a home?
 
Martin: The first things that come to mind are location and space. You can always move walls or change finishes but you cannot move the property or expand it without significant cost. At the end of the day, this is your home. As such, it should be your ultimate personal luxury product (even if it's in the making). Living in a better location will save you 20 minutes (each way) in commuting will add up to thousands of hours you can have back in your life. If you really need a 3-bedroom, get one in less pristine condition as opposed to trying to make the perfect 2-bedroom work. Secondary considerations are layout and landscaping. Moving walls is and re-imaging kitchen and baths are much more expensive than simply replacing tiles and finishes. Landscaping is often the forgotten child of real estate. Why? Because it is expensive and most people can't wrap their heads around spending thousands of dollars for plants and flowers. Buy a home that has a landscape that you like. Happy to discuss more if need be.


Interview 13

I need experts to weigh on in things that seem like they're a good deal because they're low in cost, but end up not being worth the investment. These could be anything, from homes to cars to college educations, or anything else that you can think of!
 
1. Explain WHY it's not worth it, and
 
2. What a better alternative use of that money would be. (i.e. Is it worth it to spring for a home in a good neighborhood or a newer car?)
 
Here are some Real Estate investments that are not worth it...
 
Properties that need a complete renovation aka "bring your architect". Often these properties have a lower buy number than renovated, move-in condition ones. An example is a property selling for $700,000 when neighboring finished ones sell for $1,000,000. A newbie buyer would look only at the cosmetic work and say" I can put $100,000 into the property to bring it up to the $1,000,000 and save $200,000. However, it is not as easy as it seems:

  • You often need an architect to create and file plans (which can take months) and get city approval (which can take months). In other words, it often takes 6 months of design and approval before work can begin. Construction can take another 6-12 months. During that time you cannot live there (since its a construction site) but you still have to pay for heat, water, taxes, and a mortgage. Meanwhile, you have to rent an apartment for a year. As such, there are double housing costs.
  • Words to fear from a contractor: "We won't know what that amount of work to do until we open up the walls and ceiling". Again, what may seem like a simple job... opening up a doorway may mean to add reinforced beams to support the second floor. ouch. Whatever a contractor quotes, add 20-30% for unknowns, change orders, etc.

Hotel-Condos. The concept is you "own" a hotel room. When you are there, you pay only the maintenance fees. When you are away, the room goes into the hotel pool and booked nightly. After maintenance and management fees are deducted you get the balance of the profits. The devil is the details.

  • Many of these Hotel-Condos do not let you say over a period of days, 90, 180.
  • Do not assume the rooms are rented 100% of the time. Some are as low as 50%
  • Maintenance and Management fees can exorbitant and goes up yearly. Leaving little or no profits for the owner.


Interview 14

Once the kids have moved out or after retirement, downsizing may seem like a logical next step. But there are plenty of pitfalls to avoid and downsizing may not be the best financial move for everyone. What are some missteps to avoid?
 
What is one thing I need to explain in an eloquent way is the land lease. How long is the land lease for? What can I say about land lease properties that won’t deter buyers? Do you explain something to buyers when they come through for an open house?
 
First, I don’t believe in downsizing. I believe in right-sizing. The overall square footage may be less but some areas may be larger and some smaller or less (I.e. bedrooms and bathrooms).
 
First, how many people will be occupying the space 80% of the time? From there you can decide on the public, private and hobby spaces. If it’s just two people (and the holiday celebrations have moved to the grown children’s homes) all you need is an open concept living area with a kitchen. Likewise, if you have only the occasional grown children and grandchild visit (instead of going to their home or multi-generational vacations) 2 bedrooms should be enough. Areas that can expand are hobby areas. If quilting is something you do, a third bedroom won’t be big enough. You need a finished basement. Likewise if you tinker with old cars or do woodworking, you may need a 3-4 car garage instead of a 2 car garage.
 
Land leases are quite common (in fact standard) in London as well as some Asian countries like VietNam. A land lease allows annuities for the landowner (Lords and Dukes in London, the government in Viet Nam) without selling the asset.
 
The lease on 575 Park Avenue dates back to 1925, has been extended several times and the current terms are through 2046 (27 years from now). It will be extended again and there is a court precedent that land leases on co-ops need to be renewed at fair value. So fear not of the concept "take your building off my land". Unfortunately, law firms that are not New York City-based nor "white shoe" do not understand the nuance and elegance of a land lease. As such, they fear what they do not know and pass this unfounded fear to their clients...i.e. run for hills! Regrettably, these attorneys have cheated their clients out of the home of their dreams and had them settle for some nondescript cookie-cutter condo.
 
For what it's worth, the vast majority of the maintenance at 575 Park Ave goes towards the staff (union and full benefits for a living wage), not the land-lease.


Interview 15

What is one thing I need to explain in an eloquent way is the land lease. How long is the land lease for? What can I say about land lease properties that won’t deter buyers? Do you explain something to buyers when they come through for an open house?
 
Land leases are quite common (in fact standard) in London as well as some Asian countries like VietNam. A land lease allows annuities for the landowner (Lords and Dukes in London, the government in Viet Nam) without selling the asset.
 
The lease on 575 Park Avenue dates back to 1925, has been extended several times and the current terms are through 2046 (27 years from now). It will be extended again and there is a court precedent that land leases on co-ops need to be renewed at fair value. So fear not of the concept "take your building off my land". Unfortunately, law firms that are not New York City-based nor "white shoe" do not understand the nuance and elegance of a land lease. As such, they fear what they do not know and pass this unfounded fear to their clients...i.e. run for hills! Regrettably, these attorneys have cheated their clients out of the home of their dreams and had them settle for some nondescript cookie-cutter condo.
 
For what it's worth, the vast majority of the maintenance at 575 Park Ave goes towards the staff (union and full benefits for a living wage), not the land-lease.


Interview 16

I'm assembling a list of unusual investment opportunities most people never think about. They can be off-the-beaten-path stocks, but they DON'T have to be stocks at all. They just have to be legitimate, and at least reasonably accessible. (Legos, trading cards, real estate, art, etc are all possibilities.) Also, I need a little written color and explanation about what makes that opportunity so compelling.
 
An usual and great investment idea is to buy a multi-unit townhouse and rent out each bedroom month-to-month, furnished (including towels and linens). It is called co-living. It’s a modern take on the SRO or the We Work of residential spaces. It is designed for someone on a job assignment in a city, attending school or visiting family foe an extended period of time. For example, a 2-bedroom apartment would be fully furnished and the kitchen fully stocked with eating and cookware. Included in the rent is heat, a/c, weekly cleaning, linens and towels. The average net effective rent is 30% higher after subtracting the additional costs. Having people stay for 30 day increments bypasses most of the anti Airbnb laws popping up across the country.
 
Question: best or worst place to invest in NY?
 
Answer: The hottest neighborhood I’ve seen recently is Prospect Lefferts Garden in Brooklyn. I was recently involved in a bidding war. Going back to 2010, I have seen prices triple! The home my clients were bidding on would easily sell for over double after the current owners have been there just 7 years. That’s a spectacular growth on investment. The reason? So many new bars and restaurants have popped up over the past couple of years — catering to the influx of new residents and increasing quality of life. Being close to Prospect Park (and its many attractions) and having access to the express trains (the B and the Q) make it also quite convenient. There’s also new development happening as well, new condos being built, a big sign that major players are also getting involved in the neighborhood. If there’s only place I could send my investor clients, it’s for sure “PLG,” which I think is arguably the best place to buy today.


Interview 17

Our main question: How important is finding a home in a particular neighborhood (whether it's a rental or a sale) to your client? How flexible are they with location, would they be willing to venture out into surrounding areas if the apartment itself fits their needs?
 
Please send over your thoughts on...
 
a) The general consensus across all your clients - how important is the location to them?
 
Martin: With the exception of parents wanting to be in a specific school district, buyers are more flexible on neighborhoods than ever. This not only means buyers are willing to look “all dowtown” but also downtown, uptown and Brooklyn. With the gentrification of New York City over the last 30 years, cutie-pie shops, delightful restaurants and well manicured parks are everywhere.
 
b) Particular client anecdotes: Did you have clients who were dead set on a neighborhood and didn't even steer away from it when there was no inventory?
 
Martin: Really only school district parents and people caught up in old rules. I.e. I’ll only live below 14th Street or below 86th. Often buyers cling to these rules because a friend told them what to do. Regrettably, their friend’s advice is really doing them a disservice and costing them money and quality of life.
 
c) The other direction: Did you have clients who were willing to look all over the place and you helped them hone in on a neighborhood?
 
Martin: See the answer in letter d.
 
d) In your professional opinion, how important is the location in real estate these days? Would you generally advise your clients to narrow their search or are you an advocate of being more flexible regarding location?
 
Martin: I tell my buyers to pick their top 3-5 neighborhoods and spend a Sunday of open houses in each. Interestingly, just after one afternoon most buyers narrow the field down to 1-2. Ultimately it’s about a feel of a neighborhood more than anything else. From there we focus on the property type. Sometimes a property type becomes the most important. When that happens we open up to other neighborhoods.


Interview 18

ALEX
 
(1) How would you define a studio?
 
A studio apartment is a single large room; a self contained unit that houses everything in the single room space except the bathroom. Residents usually set up different areas of the room for varied uses. For example, a corner of the room may be designed as a sleeping area, a corner may be designed as a dining area, and the space in between may be designed as the “living room space.” Residents may use of partial walls or dividers to separate the spaces.
 
The distinct difference between a one bedroom apartment and a studio apartment is that the one bedroom apartment features separate spaces for the bedroom area, living room area, and the kitchen area. The only similarity between both of them is that they feature a separate space for the bathroom.
 
Something inbetween would be an alcove studio, which usually means there is an extra little nook for a “bedroom space” but it doesn’t usually have a door unless the owner has installed a partition.
 
(2) What would you say is the common buyer profile for each and how does it vary between the two?
 
Studio buyers are usually single and are OK with a single room space.
 
Most couples however would not want to be in a studio space. Relationship fights alone demand a second space aka a bedroom so that two parties can be in separate space to cool off! Having worked with many couples, I can tell you from experience that a studio is a non-starter. They’d rather rent a 1BR and then wait to buy.
 
Most studio buyers are younger, have smaller downpayments saved, and don’t mind getting a “starter” apartment.
 
A 1BR buyer could be a single person, a couple, a couple who want to have a baby, or even a couple who already have a baby. Sometimes 1BRs can be divided into a smaller 2BR so this possibility can work well for those couples who might need a separate space for an office or nursery.
 
Most buyers always prefer more space, so unless limited by budget, they will seek out a 1BR over a studio. This is not a hard and fast rule per se. If a studio had an amazing renovation, or a private roof deck or terrace, or was very large with big windows, or the right location — a buyer may accept the tradeoff of no bedroom space for a feature they really want.
 
(3) Typically, how much more is a 1-bedroom worth than a studio?
 
It’s tough to gauge generally across the board as each property is unique and each neighborhood and offering different. But overall, I would say 1BRs have a 25% premium over studios as they cater to more buyers. More demand always means higher price.


Interview 19

What should buyers be looking for in an urban investment property?
 
In this market, there are two types of buyers that I recommend buying in urban areas (besides the obvious group that lives and works in one). They are second/vacation home buyers and investors. Here are details on each:

  • Second/Vacation Home Buyers: When someone says "second home or vacation home," most people think of a cottage on a lake, a condo on the ocean or a ski lodge. But what if you already live in that environment or a suburb that offers nearly all those amenities? Empty nesters and Millennials alike enjoy all benefits a city has...art, culture, restaurants, shopping, events. If you visit a city 3-4 times a year spending a long-weekend to 10+ days each time, it may be more cost effective to buy something than stay in a hotel. There are added benefits such as no need to bring luggage since your clothes are there and if you want friends or family members to join you, no need to get another hotel room. Worse case, they can sleep on a pull-out couch. However, the best benefit is wealth accumulation with property appreciation. Trends for the top 20 US cities project significant growth over the next decade as millennials enjoy urban environments.
  • Investors: The big rage to invest this last cycle was single-family and multi-family homes in third-tier markets. As competition has increased with other investors and institutional investing, cap rates have decreased dramatically over the last few years. The potential downside of investing in these types of properties is limited appreciation (if any at all) since growth will be nominal to stagnant (even negative growth in some markets). Why not be ahead of the curve and invest in a top 20 US urban market. As mentioned above, all projected growth. Sure the cap rates may be lower now but the appreciation will far outweigh any short term gain.


Interview 20

1) What are important questions to ask a homeowner whose house you are purchasing?
 
2) What should you find out from them before purchasing?
 
3) What are important questions to ask a homeowner whose house you are purchasing?
 
Martin: While a buyer usually cannot talk to a seller directly, they can ask via thier real estate agent. Here are some questions...
 
1. Before making an offer, tell the sellers you plan to get a home inspection. Ask if there is anything they are aware of so there would be no surprises/renegotiations after the inspection.
 
2. Ask if they were planning any remodeling projects. If so, do they have any estimates. Chances are they were going to to something similar to what you were thinking of. Written estimates will give you a pragmatic guide to costs.
 
3. Questions that are not relevant:
 
- How Long has the House been on the market. Just because it has been on a long time, it doesn’t mean it negotiable. It usually means the seller is not motivated to accept the market realities.
 
- Why are they selling. Their reason for selling is usually not related to thier motivation. I.e. relocation (maybe they have to list it to keep up appearances for the new job) or estate sale (maybe an heir is emotionally attached and doesn’t want to sell).
 
2) What should you find out from them before purchasing?
 
Martin: Ask them to make a list of their favorite cafe’s, stores, restaurants. The hidden treasures may save you years of “discovering”.


Interview 21

According to a recent Realtor.com report, the week of September 22 is the best time of the year to buy. Realtor.com's analysts even go as far as to call it the "Black Friday" of homebuying. 41 of America's 53 real estate markets have reported this particular time period as the best time of the year to buy, as the results show.
 
While Realtor.com analyzed all 53 markets in the US, we're particularly interested in the NYC market and would like to know if you've noticed the following in previous years as well:
 
1. As summer winds down and kids start school again, many families are putting their home search on hold. Buyer competition is down 22.3 percent in New York. Have you seen less traffic at open houses and less offers on a listing during this particular week in previous years?
 
Martin: As a Manhattan and Brooklyn broker, we have a slightly different selling schedule. Most of our buyers are away for the summer and resume their home search in the fall. I have had more accepted offers in September (to-date) than all of June, July and August.
 
2. There are 5.8% more listings available online during the week of September 22 as compared to an average week. Have you seen more inventory on the market during this period?
 
Martin: Again for Manhattan and Brooklyn, more listing comes on in Fall as buyers resume their search. It makes no sense to put something on in late August when everyone is away.
 
3. Realtor.com's Senior Economist George Ratiu stated, "With dramatically less competition, persistent buyers will feel the scales tip in their favor as eager sellers begin to cut their prices in an effort to entice a sale." Would you agree with this statement? Why, why not?
 
Martin: I agree. This is the best time to be a buyer in a decade. The caveat...it can change in a New York Minute. Buyers, buy now...while you may not be able to time the very bottom, whatever you buy now...you will look like a financial genius 5-10 years from now.
 
4. How else would you describe the market during this time of the fall? Have you seen any other changes that tip the scale in a buyer's favor during the week of September 22?
 
Martin: Expect lower interest rates.

Interview 22

Story: A basic explainer article that would focus on townhouses compared to apartments.
 
What the writer would love to know:
 
1.) Pros and cons of townhouses.
 
- The pros of a townhouse are you have full control (and privacy) compared to a co-op and condo, which you would have to answer to a board. Another huge benefit is you can rent out part (or all) of the townhouse to help cover your mortgage and real estate taxes. I know many townhouse owners who live practically for free. The biggest con is you are responsible for everything...garbage, shoveling snow, fixing repairs, etc. Having said that, often the is a "block super" who can do most of those things and service contracts will mitigate midnight calls from tenants regarding leaks or no heat.
 
2.) Why someone should buy one over the other?
 
- It depends if you want to put "sweat equity" into the appreciation of your property...even if it's just acting as a property manager. If so, a townhouse is the way to go. You will generally make more money over time compared to a condo or co-op. On the other hand, if your profession takes up all you money-making time and want your home to be a reprieve and sanctuary, then a condo or co-op with staff is the best choice. You will still get appreciation over time. Just not as much.
 
3.) Are they cheaper than other options, like apartments and condos?
 
- Generally, if your budget is under $5,000,0000, you will be put in a less established neighborhood or location than if you were buying a condo or co-op. Again, do you want prestige and perhaps convenience or do you want accelerated appreciation and buzzing energy?
 
4) What’s an average TH size.
 
- Townhouses can range from 2,000sf-10,000sf+. However, the most common sizes are 2,500-4,000.
 
5) Why are they becoming so popular.
 
- They have always been popular with a subsect of buyers....usually self-made or someone who wants privacy. Townhouses have reached a broader audience with the appeal of rental income and as a neighborhood has become safer...no need for a doorman, etc. Finally, I think everyone is pretty much over boards of condos and co-ops telling them what they can and cannot do.


Interview 23

Apartment Therapy is working on an urgent story and needs a response by EOD. Question:
 
What Is a Buyers Agent?
 
Specifically I'd love more insight on: Buyer agent commission percentage (what's normal?), how to differentiate between a buyers agent and sellers agent, and do you NEED a buyers agent? (If not, why? What are the alternatives?)
 
Wherever there is a multiple listing service (MLS), all the agents who take buyers out to see properties are technically sub-agents of the seller. In other words, they are representing the seller not the buyer. MLS is in the vast majority of the country.
 
If you want an agent to solely represent you, the buyer, you will sign a buyer's agent agreement with a real estate agent. The agreement will have a set commission...say 3% of the purchase price. The buyer's agent will first collect what was offered in the sub-agency agreement...say 2.5% of the purchase price and then collect the difference from you (the buyer). A sub-agent will only collect what is offered in the MLS so having a buyer's agent may cost you more.
 
On a pragmatic side, sub-agents want to do their best to get repeat business and referrals from you (the buyer) so you may not necessarily get better service or a deal with a buyer's agent. Having said that, if you hire the #1 broker in the area to represent you, it may be worth the extra fee as they would really now all the ins and outs of the market.
 
Some parts of the country do not have an MLS, such as Manhattan and parts of Brooklyn. As such, there is no sub-agency on co-brokerage. As such, the agent with the buyer truly represents the buyer and there is no additional cost to the buyer as the seller pays both commissions.


Interview 24

One of the most common ways to start the new year is making resolutions. Typically, these resolutions focus on eating less and living more but what if this year, you focused on a concrete, achievable goal like preparing for buying a home in the new year? This article gives some examples of actionable goals, like setting a savings goal, fix your credit, and get your documents in order. Based on this, we have some questions:
 
  1. If you had to make a list of five things that you should start doing now in order to be able to buy a home in 2020, what would they be and why?
  2. What are the most common questions or concerns you get from first-time homebuyers?
  3. Can you recommend some helpful tips and/or things to avoid for buying in the new year?
First time home buyer will need to put down 3%-20% of the purchase price and factor another 1%-3% in closing costs.
 
A New Years resolution should be how to come up with this amount in 12-24 months (with 12 months ideal). For example...if you want to buy a $200,000 home in the suburbs...expect to need $12,000 at a minimum. To come up with $500-$1,000/month in savings there are three ways to do it:
 
- Cut back expenses. Move out of a luxury rental and trade down your car. The “status trade-down” It is only temporary. Owning a home is worth it.
 
- Earn extra money. We are in the gig economy after all. What do you like to do? Be a handyman, delivery person, telemarket from home in the evenings.
 
- A combination of the two. What? Cut back and work more!?!?!? Yep. That’s how to get ahead.
 
 
 

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