Friday, April 20, 2012

South Slope at East New York Prices: 359 12th Street

359 12th Street is a huge 8-Family in South Slope at East New York prices - for its rental tenants. This meaty 28' x 60' building has 2BR apartments that are all rent stabilized and rent controlled, with nobody paying more than $1,250/month for a 2BR, some paying as low as $875/month, and one paying a paltry $80/month. That's right, a 2BR in South Slope for less than your cable bill!

You won't find it on the NYTimes or StreetEasy, and you might not need to. Nobody's in any rush to purchase a 2.7% cap for $1.6M - or are they? This place is easy to shoot down as a terrible investment. Everybody can punch numbers into a calculator and see that it doesn't make money as is. This isn't Walmart shopping for "Everyday Low Prices". This isn't a Certificate of Deposit at the bank where you pick the one with the highest percentage return and best terms. This is real estate, people! Nobody's going to hand you a $20 bill for three $5's. You have to develop property and reposition it to make money. You have to have some angle on what you're going to do with it to add or extract its value. Anybody can scoff at a currently non-performing asset; it takes a select visionary few to unlock the genie in a bottle that is property such as this. We were screaming from the mountain tops for someone to beat the $1.6M cash offer that another huge 8-Family at 234 St. James Place had at the end of the summer. That represented at least a 7.2% cap, with the potential for 10% or 12% cap easily. But with investors lurking in every corner, few lay-ups that simple will ever come up again. What you CAN do, however, is recognize the pattern and respond accordingly. But we can't give the whole game plan away here now, can we?

Pro's: size, curb appeal, upside potential

Con's: rent control and rent stabilization holding back rent roll, sizable expenses, no such thing as a free lunch

Ideally: if you don't have an angle on what you can bring to the real estate game, you might as well find the highest performing CD, lock that money up at 1%, and call it a day

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