Buy & Hold 8-Family Closed Last Week Over Asking Price: 245 Martense Street

Maybe you were too chicken to venture out to Church Avenue on the 2/5 trains when this gem was asking $859K in 2012, but we weren't.  We'd been hoofing it out to Church Ave since 2003.  Picked up for $869K just before the clock struck 2013, 245 Martense Street hit the open market this year for $2.4M, and closed last week way over asking price at $2.72M.  This 8-Family cash cow features original details, new upgrades, lots of free market apartments and stabilized apartments in line with or exceeding market rents.  No wonder it was perfect for buyers looking for solid return, capital preservation, and/or 1031 action.  No wonder this place made it to the top of Loopnet's most popular listings in Brooklyn on the open market...

Pre-market, the biggest commercial brokers told us to take offers we had in the $2.3-$2.4M range, saying they'd charge us 6 figures in commission and not net us anymore money.  But the building, affectionately known as "The Old Man", wouldn't stop there.

Sleep on Brooklyn at your own peril, but they still won't believe it until it happens a dozen more times.  Nobody thought $2,000+ 2BR's were coming to Lefferts, but we knew any deal around the corner from the 2/5 with legit BR's all over the place was poised to tick up, rent regulated or not.  We tried to tolja' back in June it was going down over ask; now it has.  And the hunt begins for the next project.

"But where is the next hot neighborhood in Brooklyn??" they always ask us.

Oh, silly!  It's not that simple.  It never has been.  You can overpay in any neighborhood, good or bad.  You can also underpay in any neighborhood, good or bad.  The trajectory of each building is case-by-case and not told by its zip code alone.  But they don't hear us though.

As even the Park Slope-mobile parks over in Crown Heights...

And Park Slope cats get houses boudgier than Fort Greene's people, on a block where investors are bidding $2M+ for a tear down frame house...

And $3M sales (not asking prices) are popping up in Bed-Stuy, where $900K scared people just 3-4 years ago.  And the word "gentrification" is even starting to sound too subtle...

Wu-Tang's "Cash Rule Everything Around Me" feels as poignant as ever.  Or just a good punchline...

We'll keep trying to breakdown the nuanced trends that conk trained eyes over the head, while Brooklyn keeps singing, "If you don't know me by now..."

From 10-Cap to 3-Bagger in 2.5 Years: 245 Martense Street

In contract this week on the edge of Prospect Lefferts Garden & Flatbush, it's the 8-Family buy & hold dream at 245 Martense Street.  Once a 10-cap back in 2012 for $869K, this property hit the market in February this year asking $2.4M.  Now a contract's been executed over $2.7M.  When you buy a 10-cap, turn it into a 15+ cap, and sell it at sub-5 cap, you're talking about 300% appreciation.  And when you're financing the asset with 25% down in the first place, your cash on cash return is even sicker.  When we tried to tolja' this was one of the most interesting buildings in the world...

Who knew it'd sell below a 5-cap?  As offers came in from $2.05M-$2.5M between January and March, getting any higher than that started to feel almost greedy...

But the market speaks, and the market kept taking it up higher.  Like wayyyy up!  By the time a proctology exam from a DHCR doctor revealed a few benign polyps, walking the top buyers a bit off of their $2.75M offer, the glass was already more than $320K full, not $30K empty.

Even last year the gross income and average rent per unit were on a steep curve that doubled the value of the building in a year & a half...

"They said it wouldn't last, we had to prove them wrong..." and average rents posted another double-digit percentage increase in the following year.  It's not rocket science.  When you make sensible improvements that take this...

To this...

... you're going to see some improvements in your rent roll.  Along with a new roof, new boiler, new hot water heater, new electrical, brick repointing, and significant renovation and restoration to most of the units, this baby was born to run.

Debbie Downers, Negative Nancys, Critical Cathys, Pollyannas, Goldilocks and other doubters will tell you things like, "We prefer more prime neighborhoods," or "Watch out for rent stabilization," or complain about how much they net off even the finest cap rate.

Is it so hard to focus on the parts that actually matter most?  On its best day as a 15+ cap, which is already more than anyone could ask for, this building nets just over $5K/month.  And that's with burdens like over $1,000/month in property taxes, which no one likes to pay.  But besides the cash flow, the appreciation's where it's at!  From day of purchase to executing contract this week, the building appreciated over $2,000 per day!  In the year and a half from purchase to contract last week on 1134 Bergen Street, a building that net "only $2,000" on its best months, the appreciation was almost $1,000/day.  But they don't hear us though.

The newest boogie man spooking nay-sayers these days is the stormy cloud of rent regulations stepping up even further with DeBlasio & team making hay of the hot button issue.  Which we always take with a huge grain of salt, because everyone in the industry has been trying to spook everyone else about "and with rates going up..." for the past 5+ years, while the 20+ year chart on interest rates looks like this...

But that doesn't stop the rent regulation headlines from piling up, and the spooky rumors & chatter from circulating amongst the lips of people who have no idea what they're talking about.

Maximum increases on 1 & 2 year renewals for rent stabilized apartments were recently lowered, a move that ostensibly favors tenants and freaks out landlords.  However, the numbers that matter most stayed the same and even increased.  So getting folks to prioritize what's really happening gets lost in the headlines.

Likewise, there's still plenty of money to be made for landlords at rental rates that are still a value compared to market, but you won't hear anyone else speaking anywhere nearly that resonably about the issue when it's so much more fun to play two divisive sides.  245 Martense is a shining example of hitting that happy medium.

With bidders ranging from 1031 buyers to Europeans more concerned with capital preservation than unsustainable growth, a great deal for buyers and sellers finally crystallized this week on "emerging Brooklyn's" 8-Family darling.

Platinum Member 8-Family Returns to Market: 245 Martense Street

On HomeCanvasr.com since last June, this healthy 8-Family off of Nostrand Avenue, a block from the 2/5 trains at the southern tip of Lefferts and Flatbush, has fielded multiple cash offers over $2M before hitting the open market this week with an asking price of $2.4M.  In this market, it's hard to blame anyone for vying for top dollar.  245 Martense Street has all the makings of a buy & hold investor's dream.  Set up as front & back 2BR apartments, easily used as 3BR's by many tenants, this 25' wide building has unattached sides allowing for windows galore.  And windows mean bedrooms, and rental price per bedroom is the most important metric in town for valuing buy & hold properties.  The key for rental income in NYC is bedrooms - especially those large enough to accommodate a full-sized bed, couch, and desk.  With the old charms of original brick, tile, parquet floors, pocket doors, decorative ceiling beams - all from the 1910's; mixed with a new roof, new boiler, new hot water heaters, new intercom, new electrical service, new kitchens, new baths - all from the 2010's... this building's got the best of both centuries!

You may remember this bad boy from when it was a Platinum Member 10-cap barely over 2 years ago, back when half y'all couldn't pronounce "Nostrand", let alone "Martense".  The building has come a long way since then, along with the rest of Brooklyn.  And over the years we've had our hand in some of the interior renovations that transformed apartments into product that tenants fell in love with.  From the time we felt like the Kool-Aid Man breaking through a wall to make a proper 2nd bedroom:

To the time we took the reno to the next level with little touches that made all the difference...

Some people have called this 2nd tier product in a 3rd tier neighborhood, and they're not too far off.  The tremendous value proposition for dozens of tenants still remains.  Even at the top rents in the building, whether used as a 2 or 3BR, the $700-$1,050/BR levels are still a very attractive alternative to tenants for this caliber of product this close to the train.  Tenants coming from Williamsburg, Bed-Stuy, Prospect Heights, and Ditmas have found these apartments the perfect fit.  And they're still very competitive with $1,200+/BR pricing in Crown Heights.  The building is fully rented at the moment and can be delivered with as many as 2 vacancies.  Most of the units are free market, half of them are renovated, and the 2 remaining stabilized units have legal rents higher than market rent.  Rent is on time, paperless, and easier than Apple Pay - automatically deducted from tenants' accounts at the beginning of the month.  This is a totally turnkey buy & hold operation with the next leg up plainly in sight.  If an 8-Family in a better location can trade for $2.3M and an as-is 1.8% cap, what is 245 Martense worth at a 5% cap or better?

If an 8-Family nearby can trade off-market for $1.6M not even grossing $120K, what it is 245 Martense worth grossing $175K or more?

Only time & the market will tell.  This building, affectionately named "The Old Man", doesn't really have much explaining to do on its valuation.

Pro's:  flagship buy & hold operation for its size & location, totally turnkey with straightforward value add left to be done, unique size & windows, full of major and minor capital improvements building-wide and in half the apartments, all the heavy lifting's been done

Con's:  not everyone's hip to the location, asking price has bubbled up, the most picky investors want more units, higher cap, more value add or a better location

Ideally:  this property's exceeded projections for over 2 years, why stop now?

8-Family Closed in Lefferts Last Week: 2031 Bedford Avenue

When deals trade off-market at a great price, it just goes to show that it doesn't always take a broker to get the best number.  2031 Bedford Avenue is an 8-Family in Lefferts, on the corner of Bedford & Clarkson.  Ever since it was listed with a big broker for $1.5M a while back, we had our eye on it, very curious to see what kind of number they might land for an 8-Family in this neighborhood.  A corner piece that's almost 50' wide, but barely even 40' deep, you gross just over 7,000 sqft.  Very reminiscent of a 10-cap Platinum Member pick up around the corner a few years ago.  2031 Bedford Avenue has a ton of updates to the building, but only 2 of the units gut renovated, which leaves 6 units with plenty of room to run on the rent roll...

Updated kitchens & baths, parquet floors in great shape, all in 2BR apartments none of which have touched $900/BR yet.  With the conversion to gas, insulation, plumbing, and roof work done already, the remaining work to the apartments is the kind of stuff you see back on the rent roll right away.  Currently grossing almost $120K/year, the building closed last week for $1.6M.  Netting even more for the owners with no big broker commission on the scene.  Pro-forma rents over $160K were thrown around on the set-up from when it was listed, and we're sure the market could bear it.  No wonder 8-Family buildings around the corner grossing almost 50% higher expect to trade for almost 50% more.  These buildings do have some pretty steep taxes, over $16K/year on this one.  But the rental income potential is powerful when you're sitting on 16BR's in a building where tenants are fleeing from $1,200+/BR prices in Crown Heights and elsewhere.  So the right buyer is willing to pay under a 5-cap to get exposure to that upside potential.



Pro's:  corner piece, buy & hold dream, near trains, tons of "weatherization program" renovations, 2 units renovated, huge rental income upside potential in the remaining unrenovated units, work left to be done is high ROI stuff

Con's:  the spread between the legal rents and market rents is significant, taxes are high, aggressive cap rate and GRM for the neighborhood

Ideally:  an off-market deal at a price that worked for buyer & seller

HomeCanvasr.com Lead Hits the Open Market: 45 Sterling Street

Available on HomeCanvasr.com since August 2014, this great little limestone in Lefferts just hit the open market with an open house this weekend.  With an asking price of $1.499M and a bunch of renovations the owner touted to us this morning, the expectation is that 45 Sterling Street will go over asking price.  Which has been happening a lot in Lefferts at this price range.  But the market will tell the story, not us.  The listing only has one interior pic so far...

But when we first saw the house this summer, we were surprised at its condition even then, and original details...

The listing says more of the post-reno photos are coming soon.  This is a great little 1 or 2-Family on a nice block, at the very opening corner of Lefferts.

The backyard is walled-in a bit, but we actually like it.  With 4-story fixer-uppers in Bed-Stuy and Crown Heights commanding this price and higher, it's nice to see a quaint little house like this with nice upgrades at a price that's beats condos in BoCoCa, and even some condos in Bed-Stuy.  When the fixer-uppers in Lefferts this size command over $1.3M, a finished product with all the work already done for $1.5M-$1.6M ain't too shabby.


Pro's:  curb appeal, original details, block, "smart home" upgrades, price in line with market

Con's:  not all the pics are in yet, competition will be more fierce now that it's not a secret anymore, back yard isn't for everyone, sticker shock if you've been living under a rock for the past 1-2 years

Ideally:  a condo alternative with all the work already done for ya

Another Lefferts House Breaks $2M: 118 Rutland Road

If your panties were in a bunch over the past year when Prospect Lefferts Garden townhouse records were being broken at $1.825M on 36 Rutland Road and 55 Rutland Road, then brace yourself for flagships trading over $2M in this "emerging neighborhood" in brownstone Brooklyn.  It's happened before this year on Midwood Street, but that didn't stop the peanut gallery from snarking out on the original $2.995M asking price for 118 Rutland Road this year.

One astute observer pointed out, "The only way they get anywhere near that price is if they lift it up and drop it on to the other side of Prospect Park, say on a nice named street between 7th & 8th Avenue."

Hmmm... well, all "if grandma had balls, she'd be grampa" scenarios aside, the house dropped to $2.5M in a month and closed for $2.4M last month with some $500K down.  Sure, $3M was ambitious, but setting the debate that high (even momentarily) is one of the best ways to get people to bid higher.  Even if it's all smoke and mirrors.  But it isn't ALL smoke & mirrors.  Why does this house go for well over $2M these days?  Because if this house were on the other side of the park, it'd probably go for $4M or higher, not $3M.  Name a house as nice as 118 Rutland Road in Park Slope that a couple with $500K could've picked up for $2.4M or less this year.  Please note, this isn't "touting", these are just the facts.  Perhaps you missed the record breaking Park Slope closing for $10.8M last week, which certainly put more panties in bunches, even though $10M is a number that the Upper West Side can hit in its sleep.  As you may know, the same dudes who did Central Park did Prospect Park back in the day.  So does Park Slope really deserve to continue to trade at a fraction of the UWS forever?  Does Lefferts really deserve to trade at a fraction of Park Slope forever?  These prices don't happen in a vacuum, people.  Nor do they only happen in a bubble.  There's a whole food chain going on out there.

We're much too young to remember the day when Moses came down from the heavens with tablets from God that said Park Slope is the only place in Brooklyn worth living.

It is a divine law that lots of insanely affluent people still subscribe to.  But that law dwindles in the face of economics that push those ballers further and further east & south into Brooklyn for better product, as an even high level of baller supplants them in Park Slope.  All of which doesn't stop us from getting calls last week from folks with $700K in the bank and proposed purchase prices under $3M who swear Brooklyn Heights is the only place worth living for them.  Folks who say that they might consider settling for Park Slope, in the face of townhomes similar to or worse than 118 Rutland Road commanding $4M-$7M when located in Brooklyn Heights.  The economic persecution of the rich continues through the Pharaoh known as the market, and the peanut gallery is singing, "Let my people go."

The good news is, when you're breaking records for top dollar, at least you get best of breed top product.  118 Rutland Road is a 25' wide corner house with sick details and a private garage.  Albeit a single-fam with no rental income, it rented a few years ago with an asking price of over $6,000/month.  And yes, that's a 2.25% cap rate if you're keeping score at home, but nobody's buying these houses for a cap rate, they're buying them as their home.  And what a home it is!

There's two sides of every coin, and it's all a matter of context.  Is this a "soft market" 'cause a house went for 20% under its initial asking price?  Or is this a crazy market 'cause this house just broke a record?  It's about how you look at it.  Yes, sometimes you list for $3M and get $2.4M with $500K down, like 118 Rutland.  And other times you list for $2.65M and get $3M cash, like 242 Gates Avenue.  And all in neighborhoods that the majority of affluent folks consider "the hood".

And on 118 Rutland, even when they're asking $3M, the $6,000/month rental pictures were better...

Billed as an 8 bedroom, 2.5 bath mansion, over $600/sqft is almost unheard in this part of town.  But so is 25' wide and a driveway.  Special houses trade for special numbers, if you haven't noticed.  No wonder we flipped out and bent over backwards for a 30' wide house with a driveway and a carriage house in Crown Heights at 669 St. Marks Avenue for almost a million less than this.

And don't forget, a celeb's corner house with parking in Boerum Hill is currently in contract for over $7M, but less than $10M over there on Dean Street.

So try to keep this 118 Rutland Road closing in context a little, even though we know you won't.  Another house nearby with sick detail and a driveway is coming up for just under $2M soon.  But you don't know that 'cause it's not on the open market yet.  Patience, grasshopper...


Pro's:  25' wide corner mansion with a porch & parking, sick original details and some modern upgrades, would cost much more anywhere "better" than this, $500K down is getting people condos in other neighbs

Con's:  certainly ain't cheap, $6,000 rental pics did a better job than the $3M sales pics, broke a record, no rental income on a single fam, not where people think they wanna be or what they think they should be paying

Ideally:  another top notch house sells for a top notch price.  Whether you think it's just a market or it's a moral dilemma, it is what it is.  You wouldn't believe what's selling for this same price in an even better neighborhood, right under everyone's nose.

Closings of Note: The 4 Horsemen

With real estate headlines that include 86% price leaps in one year for townhomes in "emerging" Brooklyn neighborhoods, putting the "median sale price" at $1.85M, you can only imagine that the Chicken Littles are certain this is the next sign of the apocalypse.  Readers of such pieces continue to list their first wave explanations for how this pricing could be possible.  That's right, while we still get e-mails just this week from folks looking to purchase a house no further than 9th Street and east of 3rd Avenue in "Park Slope/Gowanus" for $1.5M with financing, the median sale price of homes in less-coveted areas from Bed-Stuy, Crown Heights, Lefferts, and Bushwick (let's call them the 4 horseman!) is supposedly $1.85M.  But instead of averages and medians in reports from Corcoran, or individual buyers pulling a number out of thin air for their favorite neighborhood, let's take a walk through some of these areas and see what the case-by-case numbers are really like...

Whoa!  No wonder it's hard to find a house north of 9th Street that's under $1.5M, even the jokers at this local brokerage managed to get $2.5M for this tiny house on 16th Street.  Asking $2.195M, this renovated 2-Fam at 346 16th Street had a cute yard, central A/C, and a Home Expo interior.  Just 3 stories, not 4, but close to the park.  A buyer from the Upper East Side zoomed by the asking price and closed last month for $2.5M.

The coveted stretch of South Elliot in Fort Greene is precisely one block long, so it's no wonder houses there are hard to come by.  This estate sale at 23 South Elliott closed last month to a buyer from the West Village for $2.2M.  It takes a lot of cash to pull it off, and a lot of cash to finish the renovation, but this is a relative steal for the area.

But Clinton Hill can play over $2M too!  The peanut gallery reluctantly acknowledged that 22 Lefferts Place was a "relative value" at its asking price of $1.9M, and some expected it to go for more.  Alas, Manhattan buyers closed on it in August for $2.125M.

But Prospect Lefferts Garden can play over $2M too!  94 Midwood Street, a "mere" single family, stunning, with a lot of yard, driveway and garages!  Closed for $2.25M last month.

Speaking of Manhattan buyers, Park Slope's 145 Berkeley Place sells to some last month for $3.45M.  Corcoran.com says they have 5 more just like this, and Platinum Members are scoping out a handful of homes just like this pre-market in this pricepoint on these blocks in Park Slope and Prospect Heights that you won't find on Corcoran.com.

Over in Crown Heights, Platinum Members got the early lead back in May on this neat little 2-Family at 858 Lincoln Place from a local broker.  A buyer from Prospect Heights closed on it last month for $1.2M.  A great purchase compared to what the big brokers are getting on this very block.  And a far cry from a "median sale price of $1.85M".

Case in point, 814 Lincoln Place listed for $1.35M this summer and a buyer from Manhattan closed last month for $1.5M.  It wasn't long ago that more finished 4-stories in this row like 852 Park Place were going for $1.5M.  At the broker's open for 814, Platinum Members complained to us about the extremely short yard and said, "The house is great, 'but'....  There's always a 'but'..."  Even the NYTimes knows about "buts":

Trust that we here at BKTTF are no strangers to "buts".  Maybe a $1.5M sale like this on east of Nostrand in Crown Heights is why that $1.5M "Park Slope/Gowanus" search is so elusive.  Or why people can rarely this kind of pricing on Franklin Avenue.

Also in Crown Heights, 681 Franklin Avenue is a mixed-use building that sold for $1.4M last month.  Now this 3BR/1 bath rental wants $3,800/month.

$1.5M in "Park Slope/Gowanus"??  Try over $1.5M in Lefferts!  181 Fenimore Street is a cute 3-story barrel front that listed for $1.495M and closed for $1.545M last month to buyers from the East Village.  And these folks are no dummies either; we're talking Harvard Business School, y'all!  You think those are the fools rushing into some real estate bubble?  Or are they just buying the dopest house in Brooklyn that their budget and search could yield?  It's funny when renters in Brooklyn Heights think they can't go past 9th Street in Park Slope, but folks from Manhattan are cool with Lefferts.  Oh, when will you myopic upper class ever learn?  They call us telling them the truth a "schtick" - we call it "the truth".

$1.5M in "Park Slope/Gowanus"??  Try the Clinton Hill/Bed-Stuy border!  419A Classon Avenue listed for $1.5M and closed last month for $1.45M.  Super generic, and not what most people have in mind.  But then again, it is a better pricepoint than neighbors who spent $1.85M-$2M+ for narrower finished houses.

$1.5M in  "Park Slope/Gowanus"??  Try $1.5M mortgage on a $1.875M purchase in Lefferts, made by buyers coming from Park Slope!  This 3-story single-family at 190 Maple Street closed last month.  Sure cleans up nice, but that's a big number, and no rental income.  This is where Corcoran must be pulling their "median" sale price of $1.85M for these areas, no?

Or, for more of a deal, slide further towards Flatbush to 1 Parkside Court where a fixer-upper closed for right around a million.  On Platinum Member radar for over a year, the aggressive flippers got to it before we could, cleaned it out, brought it to the retail market, and made a pretty penny for their risk and effort.

$1.5M in "Park Slope/Gowanus"??  Try Ditmas, where Manhattan buyers took down 229 Stratford Road last month.  Platinum Members renting in Brooklyn with high-brow businesses in Manhattan asked us just yesterday if buyers from Manhattan are really part of the Brooklyn real estate story.  The sales don't lie.

Speaking of Mahattan buyers... listed for $2.95M, closed for $3.5M last month, 305 Cumberland Street is a frame house with the sickest, most stylish renovation.  Views ripped from the headlines of an interior design magazine, this is how you ball out in Brooklyn.  It didn't quite sell for what Jenna's house sold for a few years ago, but this is the stuff Brooklyn real estate porn is made of... especially for a frame house.  And while the price will shock most, there are $5M apartments in Manhattan jealous of these interiors.  But don't despair.  Fort Greene isn't the only place where stunning renovations get a 3-handle on them.  We can't wait to show you this month who's bringing that number east of Classon Avenue with style.

Who's selling you a house in Park Slope/Gowanus for $1.5M when Bed-Stuy gets $1.85M?  290 Jefferson Avenue closed in August for full asking price to buyers from the Upper West Side.  Noticing a pattern, anyone?