Looking For A Townhouse To Renovate For Under $1.5M?

A lot of the clients who come to me want to be able to renovate a place for under $1.5M. That’s not all that easy to find… The renovated places are usually over $1.5M, and then there are all the places with crappy renovations that are asking $1.1M or more. You MIGHT be able to improve one of those places and keep it under $1.5M, but to really do a nice renovation it’ll wind up costing more.

Yesterday I went through a place that I think fits the bill for people who want a great place for under $1.5M. In fact I think you might be able to do a really nice reno of it for around $1.3 to 1.4M total investment.

problem ceiling

As you can see in the picture above, it needs work, but it’s got a lot of potential and it’s priced right. I’m not allowed to say which townhouse it is (that would be advertising another agent’s listing – which is prohibited), but I can say it’s not below 125th Street (which a lot of people want), but it is on a charming street in/near a prime neighborhood.

old electric meter

All in all it’s a very doable reno project. It’s got good bones and isn’t nearly as big of a project as our place was.

The one issue is that it does not have a Certificate of No Harassment, but it’s been vacant for years and you could ask that the CoNH be a condition of sale (it could be applied for while you’re working out all the other issues for your 203(k) rehab loan).

There’s another place nearby that looks worse, and might be a bit more work, but also has lots of potential. It’s priced about $1M below renovated comps nearby – so there’s room to do a renovation and still make some money.

If you’re interested in seeing either of these places, let me know…  jay@beatingupwind.com

UPDATE: A week after the first open house, there’s already a contract out on the house mentioned above. I knew it was a good deal 🙂

Sylvan Terrace – Uptown’s Affordable Townhouses

Yesterday I went through one of the Sylvan Terrace townhouses with a client. They’re some of the smallest, and hence most affordable, townhouses you’ll find – and they’re really charming…

Sylvan TerraceSylvan Terrace is comprised of 20 wood frame houses built in 1882. Today they’re all Landmarked and in good to great condition. The narrow cobblestone street makes you feel like you’re on the movie set for a period movie.

Honestly I don’t know quite how they came to be. They’re said to be carriage houses for the Jumel Mansion (which is at the end of the street), but that doesn’t quite make sense. The Jumel Mansion is Manhattan’s oldest building – built in 1765 – before the War For American Independence. Why would someone build carriage houses 116 years later at a time when the street grid was being established? (Sylvan Terrace is a bit off the grid.)

Whatever the history, they’re completely charming, but they are tiny… Most of the ones on the north side of the street are 1,500 sq. ft (20′ x 25′ x 3 stories), while most of the ones on the south side are 1425 sq. ft. (19.5′ x 25′ x 3 stories) including the walls and stairs. Useable square footage is smaller yet – I’d guess it’s about 1,200 sq. ft.

Essentially you have one large room on each of the two lower floors and two adequate size bedrooms on the top floor (though I saw one that carved a 3rd small, double decked, kids playroom out of the top floor). Ceilings are quite high – especially on the top floor in the front.

While they’re small, they have sales prices that match their small size. Here’s a rundown of what places on Sylvan Terrace have sold for…

#14 – 9/25/2003 – $700K

#16 – 10/24/2003 – $321,600

#19 – 3/30/2004 – $590K

#12 – 12/31/2004 – $610K

#13 – 4/7/2005 – $482K

#15 – 10/5/2005 – $725K

#13 – 10/5/2006 – $1.05M

#15 – 2/23/2007 – unknown price

#14 – 12/17/2007 – $970K

#16 – 12/27/2007 – $990K

#5 – 3/11/2008 – estate – transferred within family

#18 – 4/3/2008 – $437K

The take-away is that the max price for one of these places at the height of the market was $1.05M and there have been no sales since the crash.

I’m not allowed to discuss other agents’ active listings, but I can talk about inactive listings 🙂  #2 – a larger, apparently nicely renovated end unit with more windows and better light – went on the market in November 2009 for $1.1M. It was finally taken off the market a few months ago. It’s final asking price was $800K. So it’s fair to say that the current market value of a nicely renovated Sylvan Terrace townhouse is below $800K.

sylvan terrace north side

The other item which should be mentioned is that, unlike most of the townhouses I discuss here, these houses are mortgageable with conventional mortgages. Most are legal 1 families, a few are legal 2 families.

When you think about the price you’d pay for a 1,200 sq. ft. 2 bedroom condo or coop, Sylvan Terrace could be a good deal – and you get a proper house in a charming little neighborhood with a small back yard (for barbecuing, etc.), and from what I hear the neighbors are nice and fairly close-knit. There’s also a subway stop 1 block away (the C train).

Feel free to contact me if you think Sylvan Terrace might be right for you…

How SROs With No C of NHs Get Rehab Loans

The other day we went through an SRO-restricted townhouse which did not have a certificate of no harassment. In talking to the broker afterwards the broker insisted financing SROs without certificates of no harassment wasn’t a problem – that they did it all the time. She even cited two that were closed this year including one that was uninhabitable. When I pressed the broker on details the answer was vague but insistent (and even a little condescending).

So I called someone I know who’s a bit of an expert on financing townhouses and SROs and we talked through what might be happening. His take on it is exactly what I expected…

An naïve buyer shows up at one of the broker’s open houses, they’re told the house a legal 1 to 4 family, and hence mortgageable. [The paperwork I was given when I went through the SRO said it was a legal single family, but the broker had conveniently “forgotten” to put their logo on the document so misinformation couldn’t be traced back to them.] My mortgage expert and I suspect the following then happens… The buyer is gently guided through the process of buying the townhouse. The broker sends them to particular real estate lawyer, a particular architect, and a particular mortgage broker. The lawyer doesn’t tell the buyer the problems with the house or if he does he downplays them, the architect doesn’t mention potential problems with DOB, and the mortgage broker picks some unsuspecting bank in say the midwest who has no clue what an SRO is and what limitations that puts on the property. A 203(k) mortgage is then obtained, the sale is closed and everyone gets their commissions.

Unlike the loan we got, 203(k)s do not require approved plans at closing. After they’ve bought the place, the buyer goes to DOB to get their plans approved and is told they need a certificate of no harassment since their building is SRO restricted. The worst case scenario at that point is they have to wait 3 years to apply for the certificate, then construction takes another year. Meanwhile they have an uninhabitable building so they’re paying rent on top of say a $6,000 mortgage for a building they can’t use. They can’t afford the payments, so the bank forecloses and they lose the money they put into the building and their credit is ruined.

I’m not saying the worst case scenario is typical, but my mortgage expert friend has seen things like that happen. Banks who write a lot of rehab mortgages in the New York area insist on a certificate of no harassment to close the loan – they don’t want their loans going bad.

Unfortunately that’s typical of the dirty side of Harlem real estate and it doesn’t just hurt the buyers and the banks (and tax payers who’ve insured the loan). It hurts our neighborhoods since buildings don’t get fixed up – they sit there and deteriorate and reduce our quality of life and are a drag on our property values.

If you’re looking for a Harlem townhouse there are a few things you can do to protect yourself.

  1. Work with a buyer’s broker who has experience in the Harlem market – like me 😉
  2. Deal directly with a local bank who has lots of experience doing rehab loans in Harlem. If you can’t get the loan past them, you may be exposing yourself to risk.
  3. Get your own real estate lawyer and make sure they understand issues surrounding NYC SROs really well. Don’t do anything that your lawyer says you shouldn’t do.
  4. Check the SRO status even if the building is 1 to 4 family. Check with both DOB and HPD.
  5. Try to get approved plans before closing. At a minimum file the plans and see what DOB will require for approval.
  6. If at all possible, buy the building in cash. At least then if you have to hold the building while you wait for a C of NH, you won’t be making mortgage payments (and you can get a loan that doesn’t require PMI).

For an all cash buyer it can still make sense to buy an SROs without certificates of no harassment IF they buyer understands what they’re getting into and they’re prepared to wait for the certificate. OR if they’re able to bring the building to an acceptable point under “repairs and maintenance” and they can do those repairs all cash. In fact all cash buyers are the only people who should be buying these buildings.

There’s a lot of gray area between the worse case scenario and the best case scenario. The building could be rentable and the rents could cover the mortgage while the owner waits for the certificate. Or the building could be habitable and the owner could pay a handsome mortgage to live humbly while they wait for the certificate. But sometimes the worst really does happen. Rehabbing a townhouse is hard enough – you don’t need to add to the stress by picking the wrong building.

Every now and then I encounter a buyer who is cavalierly working directly with every listing broker they can find. They don’t seem to understand that parts of Harlem real estate are a still a bit like the wild west and bad things can happen to good people (even people who think they know what they’re doing). Things are much better than they were back in the day, but when you’re looking to buy in Harlem it helps to have a team of people watching your back.

Harlem’s Charming Townhouse Wrecks

I went through another incredible townhouse the other day… It has such incredible potential, but it’s also an enormous wreck. On the plus side are tons of original detail including this wonderful stained glass window…

Stained glass window over entry in Harlem townhouseBut the house was suffering from major water damage…

severe water damage in Harlem townhouseLuckily, despite how horrible the picture above is, the house isn’t too far gone provided someone renovates it in the next year or so… Fortunately it’s priced well and has a great location, so I’m pretty confident it will get a new owner in the not-too-distant future. If they do a historically-sensitive renovation it will be really incredible place.

Looking For A Townhouse In Great Original Condition?

original detailEvery now and then I come across a place that’s just special. This weekend I went through one of those places. I can’t mention the address or give too much detail, because as a licensed agent I’m not allowed to advertise other agents’ listings, but if you’re in the market for a great old house with no issues (other than being old), then contact me – jay@beatingupwind.com and I can tell you more about it.

This place is a nice, big, wide legal 3 family with a C of O from the 1940s. The use and configuration still conforms to the C of O since the same family has owned it for the past 60 years and they didn’t chop it up. It’s two floor through 2 bedroom apartments over a duplex. That means it is not an SRO and has no Certificate of No Harassment issues. It also seems to be clean from HPD’s perspective.The block is also completely charming and quiet with some architecturally interesting buildings.

On the downside the ground floor apparently needs a gut renovation (I wasn’t able to see it) and the two kitchens I saw appear to be from the 1970s. The bathrooms appear to be from the ’30s/’40s. Despite the age of the kitchens/bathrooms everything was in remarkably good condition… Just a bit “retro”.

The other potential downside is that it’s in a neighborhood that doesn’t have a lot of services. It’s not a hip/bustling area – it’s a sleepy bedroom community. That may actually be an advantage if you want a peaceful quiet place to live and don’t mind Fresh Direct. Not being in a hot neighborhood means the price is lower. The same townhouse in Mount Morris Park or South Harlem would probably go for 50% more money.

I think the owners are more or less being realistic on price (asking is $295/sq. ft.) – so it’s a place you could actually get. On top of that, being 3 family can be a huge help since the rental income makes it easier to qualify for the mortgage (assuming they let you count the rental income).