WSJ Editor Moves In After Renovation

For those of you who are looking for what it really costs to renovate a townhouse – Julia Angwin, an editor at the Wall Street Journal, has been blogging the renovation of her brownstone that’s an avenue and a half from ours – just down 123rd Street, west of Manhattan Avenue. Well, she’s “done” and has moved in…

Her blog is one of the few that discusses cost. She and her husband bought the place for $800K in February of 2010 – just a month before we bought our place. Their townhouse is 16′ x 60′ x 4 stories – so 3,840 sq. ft. That means she paid $208/sq. ft. That may seem a little high, but theirs was not a shell – just a place in need of major renovation.

Their renovations were estimated to cost $350K, but wound up costing $420K ($109/sq. ft.) They went 20% over budget in part because they jumped right into renovations with very little planning. They hadn’t planned on replacing the roof (only patching it). They hadn’t planned for a back deck, etc.

Stairs in Julia Angwin's house before renovationSo they say they spent $1.22M in total. Let’s call it $1.25M since I’m sure there were at least some costs that weren’t reported. That means their total investment was $325/sq. ft. which is very close to what I estimate our cost will be when we’re done – the difference is they’re moving in after 13 months and we’ll move in after 21 months (if things go smoothly).

One thing that should be noted is that they’re not really done yet. They still need to get a new C of O. Without a new C of O they can’t legally rent the basement apartment. Apparently, the process of getting a C of O can be a bit tortuous. I wish them the best, but there are things I don’t quite understand about what I see online concerning their renovations. For example, I’m a little confused about their sprinkler situation. Their Alt-1 filing says there were no sprinklers in the building, but I see them in the “before” pictures – so not sure what the story is with that. I think I see flush sprinkler heads in some of the after pictures – but I’m not 100% sure whether they’re there or not. The Alt-1 doesn’t mention sprinkler work. I’m guessing because they were spending less than half the value of the building on renovations they got in under more lenient rules. I just hope they don’t encounter major problems with their C of O inspection.

Anyway, here are some before and after pictures… I love the picture of the stairs (above and right)… I actually really love the blue wallpaper and how it combines with the maroon and green in the picture. Not sure I’d want to live with it, but it photographs beautifully. There were actually quite a few interesting colors in the house before renovation. On other blogs people have criticized her for stripping the soul out of the place. Personally, I think it just needs a little color – most everything is now white. Here’s an after shot of the stairs. Unfortunately (IMHO) they removed the wainscoting…

The stairs after renovation

Here’s some of the rooms before renovations… Some of them make me want to shoot an art film… The rooms are beautiful in some respects, though I wouldn’t want to live in them – just pretty in pictures…

Here’s the future kitchen before…

Green room before renovation

And the kitchen after…

Julia Angwin's kitchen

And another before shot…

Bedroom before renovation

Here’s what will be the ground floor rental (looking forward)…

Messy room before renovation

And the rental after renovation (looking back)…

Rental unit's kitchen

The fireplaces were something they took a lot of heat for in blog comments. They were concerned their kids would get lead poisoning from them, so they took all of them out and only left one in their master bedroom.

Fireplace after renovation

The master bath was another problem area. The glass hasn’t been installed around the shower so it looks a little bare right now, but the problem was the bathtub. The contractor didn’t leave enough space for the deep soaking tub they wanted, so they got a shallow tub which is useless – it’s not much good as a bathtub and they don’t need two showers in one bathroom.

Master bathroom with shallow tub

So that’s the type of renovation you can pull off in 13 months with a total investment of $1.25M. That gives you a 2,600 sq. ft., 4 bedroom owners triplex and an 870 sq. ft., 1(+) bedroom rental unit (minus space for stairs).

And as far as the payoff… CONSERVATIVELY her place is now worth $1.6M ($417/sq. ft.) so with $1.25M invested they just netted $350K (on paper), but it could very well be worth more – they’ve got an excellent location – very close to express trains and to Columbia University.

What Things Are Selling for Around Mt. Morris Park

Yesterday and today have been busy days… Yesterday the bank’s surveyor came by and we had to get him into the back yard (easier said than done). Today we had two appointments – one with the bank’s appraiser who is tasked with figuring out the future value of the house after renovations. And the second appointment was with a DOB building inspector to get our stop work order lifted.

In preparation for the appraiser I shelled out $70 for a Property Shark membership and stayed up late last night looking at the numbers. Banks have reputations for getting the least expensive appraiser – often ones who have no experience with Manhattan real estate. Even people who understand Manhattan real estate can get tripped up with Harlem townhouses – you have ones selling for $300,000 and others for $2 million and the official square footage is sometimes right and sometimes completely wrong. I figured I’d give the appraiser my own list of comps to reduce their chance of getting it wrong and messing up our mortgage. So here’s what I found…

Square Feet $/Sq. Ft.
Address Date Price Official Actual Official Actual Class
168 W 123 03-Mar-10 $530,000 3,600 4,500 $147 $118 C4
136 W 123 19-Nov-10 $595,000 2,652 3,640 $224 $163 C0
139 W 123 30-Nov-10 $540,000 3,120 4,160 $173 $130 S5
124 W 123 19-Jan-11 $309,000 2,115 3,264 $146 $95 C3
124 W 123 1-Mar-11 $535,730 2,115 3,264 $253 $164 C3
239 W 123 15-Sep-10 $495,000 2,499 3,400 $198 $146 C5
115 W 120 13-Aug-10 $1,975,000 3,000 4,480 $658 $441 B9
148 W 120 05-Nov-10 $1,525,000 3,380 3,468 $451 $440 B9
246 Lenox 09-Dec-10 $1,150,000 5,368 7,040 $214 $163 C5
260 W 121 20-Sep-10 $1,100,000 2,808 3,600 $392 $306 C5
22 W 123 16-Dec-10 $395,000 2,484 3,200 $159 $123 C5
18 W 123 28-Oct-10 $600,000 2,484 3,200 $242 $188 C5
208 Lenox 08-Dec-10 $825,000 3,882 4,482 $213 $184 C5
183 Lenox 19-Aug-10 $795,049 4,162 6,555 $191 $121 C5
108 W 119 27-Aug-10 $960,234 3,969 4,392 $242 $219 C0
120 W 127 08-Oct-10 $300,000 2,697 4,284 $111 $70 C5
118 W 127 08-Oct-10 $300,000 2,697 4,352 $111 $69 C5
19 W 120 30-Jul-10 $1,800,000 4,680 4,400 $385 $409 B9
140 W 118 23-Nov-10 $1,180,000 3,808 3,808 $310 $310 B9
57 W 119 14-Sep-10 $1,750,000 3,536 3,536 $495 $495 B3
64 W 119 06-Jan-11 $1,500,000 2,700 3,536 $556 $424 C0
146 W 130 28-Sep-10 $889,500 3,861 4,680 $230 $190 C0
140 W 130 17-Nov-10 $490,000 3,332 3,910 $147 $25 C5
99 Morningside 28-Dec-10 $975,000 4,226 5,850 $231 $167 C2
11 E 127 23-Dec-10 $1,175,000 4,380 3,201 $268 $367 C0
152 W 132 24-Jan-11 $510,000 2,199 2,880 $232 $177 C3
2087 5th 23-Dec-10 $ 2,075,000 4,960 6,600 $418 $314 C2
233 W 113 19-Jan-11 $1,350,000 2,464 3,200 $548 $422 B3

There were more columns on my spreadsheet, but they didn’t all fit. The places are ordered by distance from our place. There are a few things to note…

First, the ones that are struck through are foreclosures – their amounts aren’t real sales amounts, they’re the amounts that were due on the mortgages. There may be foreclosures that aren’t struck through – I didn’t check extensively.

The next thing to note is the ‘building class’ column. Class B buildings are 1 and 2 family. “C0” buildings are 3 family. C2 is 5 or 6 family. C4s (like ours) are old law tenements. And C5s are rooming houses. (C4 and C5 are collectively SROs). The one S5 was an old union lodge.

You would think that 3 family homes would sell well since there’s lots of rental income to offset expenses, but taxes on them are still low, but that’s not the case. As you can see Class B buildings (2 family) consistently have much higher prices (I’ve colored them dark red). A while back Harlem Bespoke made a big of a deal that the $2 million ceiling had been broken with the sale of 2087 5th Avenue, but it’s a 5 or 6 family building. That’s more of a rental building than a typical townhouse, so I wouldn’t say the ceiling has been broken at all – it’s still very much in tact.

The other thing to note is that shells can still be picked up for under $150/sq. ft. and after rehab they’re worth about $450/sq. ft. If you do a nice, but not extravagant job rehab will cost about $200/sq. ft., so you’ll net $100/sq. ft. in profit (on paper at least). If you can put up with 2 years of chaos, shells are still an excellent investment.

As it turns out I didn’t really need to do the cheat sheet for the appraiser. When I showed him what I had done he pointed to the Class B prices and said he had seen those and that was the ballpark he was considering going into our meeting. So it looks like we’re safe on our appraisal. The bank needs us to appraise at or above $1.35M and it looks like he’ll put our future value somewhere between $1.5M and $2.0M.

Mount Morris Park Harlem Townhouse Sales Early 2010

I’ve been meaning to do a series of blog posts on the state of townhouse sales so far in 2010 by neighborhood. Here’s the first in that series – covering the neighborhood that’s near and dear to us – Mount Morris Park…

Generally I find there are two groups of townhouses – 1) ones that need $500K+/- in renovations, and 2) ones that don’t (at least not right away).

On the high end…

Address Date Price $/sq. ft. Notes
226 Lenox 02/10/10 $1.25M 253 20′ wide, 5 story, former mortuary, needs work
22 West 120 03/31/10 $1.65M 543 Steel and concrete minimalist interior
4 W 123 06/01/10 $1.65M 647 17′ wide, single family, 2,547 square foot (probably not including ground floor), some great details but needed work
5 W 121 07/08/10 $1.55M 353 20′ wide, three family, 4,393 square foot
19 W 120 08/12/10 $1.8M 370 20′ wide two-family w/ original details, 4,865 square feet
115 W 120 08/20/10 $1.975M 412 20′ wide, 4 story, two family, approx 4,800 square feet

The very first one, 226 Lenox was a bit of a special case – it’s probably at the high end of the ones needing around $500K in renovation. Among the others you can see the trend is generally up (slightly). The standard price seemed to be $1.65M (no matter what the size, oddly), but now that’s been broken and prices are just under $2M.

On the low end…

Address Date Price $/sq. ft. Notes
21 W 120 03/01/10 $425K 95 20′ wide, 4,472 square-foot fully occupied SRO
168 W 123 03/03/10 $530K 147 (117) Our place. 15′ wide, 5 story, totally gutted shell with fire damage, SRO with a certificate of no harassment
162 W 120 03/04/10 $500K 123 17′ wide, 4 story limestone, 4,058 square feet
104 W 120 04/30/10 $550K 194
20 W 120 05/25/10 $700K 127
128 West 123 06/30/10 $415K 196 4 story brick townhouse with mansard roof
183 Lenox 08/25/09 $795K 192 19′ wide, SRO w/storefront, 4,139 square foot

The first thing to notice is that this is still a great time to buy a townhouse shell in Harlem. There’s over a million dollar difference between the price of shells and the high end places, but you can renovate a shell into a high end townhouse for about $600-$800K, so you’re likely to net between $300K and $500K on the renovation.

Price per square foot is tricky with shells. Taking our place as an example – officially it’s 4 stories and 3605 sq. ft. However, in actuality it’s 5 stories and 4500 sq. ft. Oddly, I thought the number of stories would get fixed as we went through the DOB plan approval process, but I saw the plan examiner look right at the plans and call it a 4 story building. However, they are now billing it as having 4,500 sq. ft. – at least that much is getting corrected. What this means is as you look at townhouses you need to calculate the real square footage and determine your own price per square foot.

The bottom line is, like the upper end, there is an upward trend in prices for shells. Not counting the fully occupied SRO (which you wouldn’t want to touch with a 10′ pole unless you wanted to be a landlord, not a home owner), our place was pretty much the low price on a price per square foot basis at $117/sq. ft. The others since that time have been more money on a price per square foot basis (which is how you really need to price buildings like these). Assuming the recent ones are 4 story buildings misclassified as 3 story buildings – that means the actual price per square foot for shells is now in the mid-$140s.

Surprisingly High Comp For A Harlem Townhouse Shell

11 West 119th Street, Harlem townhouse shellHarlem Bespoke just pointed out that 11 West 119th Street sold recently – for $400,000! That might seem like a low price, but actually it’s a surprisingly high price. The building is 14′ x 38′ on a shallow 65′ lot. 14′ x 38′ x 4 stories = approx. 2,128 sq. ft. So the cost per square foot was $188/sq. ft. By contrast we bought ours a few blocks away for $118/sq. ft. If 11 West 119th had sold for our price per square foot the price would have been $250,000. The final asking price was $450K. I’m not sure why the buyer only got $50K off final asking when most people buying similar properties tend to get $150-200K off asking. (For example, we got $265K off what they were asking when we started bidding).

During our search we went through the one 2 doors down – 7 West 119th Street. It was fully renovated with some high end finishes (Sub Zero fridge, but just “better than rental” cabinetry). It wound up selling for $1.0983M. It’s hard to figure out the square footage of #7. Officially it’s 2,794 sq. ft. so it officially sold for $393/sq. ft. However, the City has it’s length at 47′ when all it’s sibling neighbors are officially 38′. I don’t remember it being pushed out in the back and the permit they pulled said no enlargement was proposed. It’s on a lot with a diagonal back line – one side it’s 54′ deep, the other it’s 58′ deep. I remember the back yard basically being a small deck, but it the short side was definitely more than 7′ feet long. So I really think the square footage of #7 is smaller and more inline with it’s neighbors. On top of everything else they did a double height living room so it was probably under 2,000 of real square feet. If it were 2,000 sq. ft. then the price per square foot would have been $549/sq. ft. which is way over what the other comps support. By comparison the incredible one on Strivers’ Row went for $505/sq. ft.

11 West 119th is a SMALL townhouse that shouldn’t be made into more than a single family home (#7 was made into a 2 family with a tiny studio apartment and I think it was a mistake). It’s not not in a historic district (though it is literally adjacent to a one). It’s steps from East Harlem where values are somewhat lower. It’s across the street from (relatively nice) public housing. So I’m not seeing how the property commanded $188/sq. ft. But with both #7 and #11 selling way over what the comps support — apparently they’re smoking really good over at that end of West 119th Street!  😉

No matter – this is a great comp for those of us who own townhouses. Be happy! And for the new owners of #7 and #11 West 119th Street – the values will go up in the coming years and they’ll still make money when they sell.

But honestly – if you’re looking to buy a Harlem townhouse shell – get a damn good real estate broker and a subscription to Property Shark that includes comps and really get to know what things are actually selling for (as opposed to what they’re listed for). A Property Shark membership is WAY cheaper than overpaying for real estate.

Looking For A Shell In Harlem? Check out 243 West 120th Street

After we took the first look at the place we wound up buying, we noticed 243 West 120th Street and had our broker get us in even though it wasn’t officially on the market. I really liked this building. We bid on it, but our bid wasn’t accepted. It’s now officially back on the market and the price has been reduced to $795K. If you’re looking for a shell I think it’s one of the most interesting townhouses on the market – and possibly one of the best investment properties – if you can get it for the right price.

There are two big things the building has going for it. First, location – it’s practically in the heart of all the redevelopment and buzz that’s happening in South Harlem. Walk across St. Nicholas Avenue and you’re in the middle of everything that’s hot and trendy in Harlem – Nectar wine bar, Moca Lounge, etc. And it’s also close to the A,B,C and D trains at 125 – so it’s just 1 stop from 59th Street.

The second thing the building has going for it are its development possibilities. You can (and probably should) invest a $1 million in this building, and when you’re done it’ll be worth more than you put into it (if you’re smart about how you spend the money). Because most of the lot is within 100 feet of St. Nicholas Ave, it has a FAR just under 6 (which means you can expand the building far bigger than you can other townhouses that have a 3.44 FAR), and it’s got a C1-4 commercial overlay, so you can have the option of a commercial tenant on the ground floor (but it has to be one that services the immediate neighborhood).

It’s currently a 4 story building. If I were buying the building I’d push the back wall back to maximize square footage and add two partial floors on top. I’d configure it with three units. Because the building is only 17 feet wide you don’t really want to make it more than 3 family. The basement would be one unit with the possibility of a commercial tenant. The parlor floor could be a two bedroom apartment, and the top two existing floors plus the two floors I’d add would be a large quadraplex. You could step back each of the additional floors and allow for outdoor terraces making the quadraplex an incredible space with tremendous outdoor space…

243 West 120th Street facade

In the picture above you can see that there is an alley along the west side of the building. There are a number of existing windows in that wall. The rules about lot line windows apply, but it’s a great to have windows in your bathrooms and a wall you can exhaust vents out of.

243 West 120th Street stoop

As you can see the façade and the stoop need a lot of work. But as you move inside the original floors and a some original details are still intact…

243 West 120th Street hallway and stairs243 West 120th Street original details243 West 120th Street hallway243 West 120th Street top floor

243 West 120th Street rotten ceiling

(click on any image to see a bigger version of it)

I have to say going through the building was a bit unsettling. There were clothes and sleeping bags left over from when homeless used to live in the building. The staircase was a bit rickety, and there was a dead cat in the basement. But all of those things are easy to fix.

While you can buy this building and not expand it beyond it’s current 3,400 sq. ft. it’s best if you plan on making the building substantially larger. The construction will be pretty expensive given that you’ll want to add two floors and push the rear wall back, and you may need to reinforce the foundation to support the additional floors and you might want to lower the floor in the cellar – none of which comes cheap. But given the area, you can spend the money and have it come back to you.

In terms of price it’s currently at $795K. Townhouses typically sell for around $200K off their asking prices, so I’d guess it’ll sell for around $600K, maybe a bit higher. $600K would be $176/sq. ft. which is high for a shell, but the location and development possibilities explain why it’s at the high end for a shell. Even if you spent $200/sq. ft. renovating it (no expansion) you’d still be under $400/sq. ft. which is supported by the comps. If you want to expand the building I think you’ll find that cost effective as well.

I should also say something about the tax situation. The taxes are quite high – $9,664/year. Most townhouses pay about 1/3rd that amount. The current owner sorta messed up. He should have pulled a permit to convert it to 2-3 family, started construction, and gotten Department of Finance to reclassify the building and bring the taxes down. This is actually a good example of what I was talking about in the previous post – you don’t want to convert this building to 4 (+) family because the taxes will remain high and the additional rental income may not cover the higher taxes. 2 or 3 family makes a lot more sense in this case. If you can get it reclassified as 2 or 3 family, then the assessed value will drop to $10,200 (6% of the market value of $170K), which is far lower than the current transitional assessed value of $72,990. The taxes on $10,200 would be $1,745 – nearly $8K less than what’s being paid now. DOF will up the market value because you’re doing work on the building, but you’ll still pay substantially less than what’s being paid now.

It’s probably worth mentioning that we bid $575K on it back in November 2009 and it was rejected – we were told we weren’t even close. I would have gone up to $600K and possibly a bit higher if we had access to the money, but the ‘no’ was so resounding we never went back with another bid. It wouldn’t surprise me if the owner currently feels a bit firm at $795K, so it could take some negotiation to get the price you want…

Whether you get this building or another I recommend you have a real estate broker who’s an aggressive negotiator. Norman Horowitz (the listing agent) is a good guy, but I wouldn’t go to him directly since you will be wanting to negotiate a significant amount off the asking price. If you’re looking for a tough negotiator who really works for her clients, we recommend Maria McCallister of Barak Realty – she’s proven herself to us in both the sale of our apartment and the purchase of our townhouse.