Another Crown Heights Building Breaks $2M: 80 New York Avenue

We already saw killer end-user townhomes this week in Lefferts and Bed-Stuy going over $2M, now let's take a look at what's fetching over $2M in Crown Heights.  80 New York Avenue is a massive 10,000+ square foot corner 8-Family property, a 25' x 105' building, with windows and upside for days.  It came out asking $2.6M this year and closes this month for $2.3M.  We told would-be buyers & so-called "investors" that this building - the sister play to the smaller, cheaper 70 New York Avenue across the street - is one of the best buy & hold opportunities in all of Brooklyn.  But if it's not a 6-cap right out the gates, these novice buyers don't wanna touch it.  Only problem is, for every 6-cap in town, there's a dozen or more buyers who'd be happy to take it at a 5-cap.  And buildings in better parts of Brooklyn just a mile or two west trade as low as 4-caps.  So, while nobody's in a rush to give an investor their twenty dollar bill in exchange for three 5's in this market, savvy buyers are paying up for bedrooms, windows, and upside...

We can already hear them clamoring, "But this is an 8-Family building, you can't compare it to a 1-4 Family townhouse."  Ahhh, but can't we?  This is obviously not an apples to apples comparison to the townhomes in these "emerging neighborhoods" commanding over $2M, but comparing a few features of the two does illustrate why these buy & holds are so attractive.  The as-is earnings of 80 New York Avenue make it sound extremely frothy no matter how you slice it.  The building sold for 24 times rent roll.  That's a big difference from the 10-12 GRM buyers still think they can shop for in this market.  Also, the as-is cap rate is a paltry 1.8%.  Even buyers in prime Manhattan can scoff at that.  The property grosses less than $95K/year.  Heck, our 3-Family limestone around the corner that's less than half the size already grosses more than that.  And, finally, 80 New York Avenue is full of rent stabilized tenants.  Not all rent stabilization is created equal, but these are the nuances that send the novices running for the hills.

The key to 80 New York Avenue is its upside.  Not sure if you're tried to rent a decent 3BR apartment in Brooklyn recently, but the price per bedroom metric is as high as its ever been.  And the most rapid rental growth is seen in "fringes" like Crown Heights.  The NYTimes covered how hard $1,000/BR was for recent grads to find "rooms" divided by curtains in the East Village:

 
NYTimes even gave a whole interactive diagram on how to evenly divide rent among 3 uneven rooms:

This is how strategic individuals paying $750-$1,500/month for a room in a 3-bedroom share have to be, but some fancy-pants investors don't even apply this much strategy to investments that gross them over $20K/month.  At a modest $825/BR, this building grosses more than that.

80 New York Avenue's 3-5 year trajectory compares favorably to the townhomes and ground-up developments sites that trade for around the same price.  When semi-finished & finished end-user townhomes between 3,000-4,000 sqft that won't gross over $100K/year in the near future are breaking records between $2M-$2.5M, then 10,000+ sqft buildings with eight 3BR apartments that could easily gross over $250K/year sound like a bargain for the same price.  8-cap here we come!

Or, if you speak price per square foot, we're talking about pretty cute corner bones for under $220/sqft in a neighborhood where last year's $425/sqft is over $550/sqft today in townhomes, and even higher on condos.  Heck, dirt around the corner at 906 Prospect Place sold for $3.5M, or ~$150/buildable square foot.  So buying corner bones at $220/sqft is really attractive when it costs barely more than the dirt:

While 80 NY Ave is by no means as amazing as 1502 Bedford Avenue, which closed for $2.075 in January 2013, gutted, and refinanced for $4.5M later that year...

...we're in a different market since even then.  However, the game plan on these "emerging" corner 8-Fam's is pretty much the same.  With 8-Family Bed-Stuy beauties the size of 70 & 80 NY Ave or larger going for $2.5M-$4.5M on and off market, these more affordable Crown Heights apartment buildings sandwiched between beautiful brownstone & limestone blocks just off of Nostrand Avenue make for a relative value and buy & hold winners in the near-term.  Tomorrow we'll take a peek right around the corner at what $2M+ looks like in townhomes in Crown Heights.



Pro's:  huge corner 8-Fam with 3BR apartments, decent curb appeal, full of windows, barely more than a top notch townhouse costs, under $250/sqft, all about the upside

Con's:  as-is rent roll is way below market with stabilization, purchase couldn't be low-balled, over $2M is certainly a lot of money in general, lots of work & repositioning to be done, won't happen overnight, had to be cash or non-contingent to win the deal

Ideally:  a true winner for a savvy buyer.  Medium-sized fish should have been taking a stab at the big fish potential return on this one.

Another Bed-Stuy House Breaks $2M: 160 Bainbridge Street

This just in, Bed-Stuy is up 55,000% in the past 120 years!  A house once conveyed for $4,000 in the 1890's was back on the market this year and crushing those old-timey numbers from 1894!
 

Back before Halloween, we tried to tolja' that some big contracts were brewing on townhomes in Brooklyn.  And yesterday we took a look at a really special one in an "emerging" neighborhood breezing past $2M in Lefferts Garden.  Today we look at another house that got over $2M in Bed-Stuy.  160 Bainbridge Street has been sell-curious for a while now.  We first saw the house over a year ago, and were sure it was a flagship stunner from day one.  Wood detail for days, all in great shape...

The house sure cleans up nice in pictures, and there are few upgrades, but it's not 100% mint either.  A few generic upgrades (although a great improvement over 40-60 year old deferred maintenance) and a few minor details like greenish paint and Home Expo looking jacuzzi take the presentation of the house down just a few notches for that right out the box end-user buyer.  But we're splitting hairs over A+ & A- at this point.

Prices have escalated so quickly that the seller's previous "F.U." number from last year had become market value by this year.  Listed for $1.99M in July, the house closed last month for $2.2M to a buyer from Park Slope with just over a million down.  And is it any surprise?  This house can keep up with any in Park Slope in terms of curb appeal and quality.  The developer who built it in 1892 started his career in Williamsburg (not known for its great architecture) on frame houses, then did lots of development in the "Eastern District" of Bed-Stuy & Lefferts in brick, limestone, and brownstone.  He passed away at his home on Fenimore Street in Lefferts in 1908.  Only generations later did you ballers deem these eastern neighborhoods quarantined ghettos forever.  Back then, you could cop these houses with $500 down on $4,000, now they'd rent for more than that in a month.  Times sure have changed.

So to recap, you think Park Slope is the only place in Brooklyn worth living, and this buyer from Park Slope just jumped ship for the Utica stop in Stuyvesant Heights in Bed-Stuy because....??  Maybe because this is a $3M+ house in Park Slope and they didn't want a mortgage over $7,000/month?  Maybe they couldn't afford over $2.2M and this is simply one of the best places in Brooklyn to spend it?  Or what boogie-man do you believe in??  Is this a lending bubble 'cause rates are so low?  Did cash-buyer hedge funds like Dixon run the prices up on you?  Or is this just supply and demand?  Where's a better $2.2M in town?

Perhaps this is why an even slicker renovation in west Bed-Stuy at 101 Hancock Street listed for $2.45M and is bound to wrap up over asking price soon...

If you missed why Bed-Stuy's flagships can command over $2M, you probably didn't know that Clinton Hill's flagships can command over $3M, like 384 Vanderbilt Avenue and 102 Gates.

And over in Park Slope, they're dropping almost $2M on condos like 272 St. Marks Avenue, #1R:

That condo closed last month to buyers from the West Village for $1.85M with some $500K down.  So that's the trickle-down economics of Brooklyn these days.  Buyers leave the West Village for a condo in Park Slope for $1.85M with $500K down, while another leaves Park Slope for a townhouse in Bed-Stuy for $2.2M with $1M down.  Call it a bubble if you wanna, but the money simply has nowhere else to go!


Pro's:  full-sized 2-Family with amazing details & killer curb appeal on a great block, flagship property, express train nearby

Con's:  certainly a lot of money, a few subpar upgrades, not totally mint, further out than people wanna go

Ideally:  Bed-Stuy wasn't a different planet from Park Slope over 100 years ago, and not all buyers think it is today either

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.

Clinton Hill Fixer-Upper Under $2M: Irving Place

In Clinton Hill, higher housing prices are coming fast & furious.  We've seen renovated 15' footers go for well over $2M, like 368 Grand Avenue.  We've seen 20' wide houses cruise well above $3M, like 384 Vanderbilt Avenue.  We've seen $4M touched on one or two townhomes too (both on AND off-market) like 503 Clinton Avenue.   And ever since the $2M mark has been broken further east in Bed-Stuy, and even a narrow house over there at 242 Gates Avenue has touched $3M, now all the nicest houses in Bed-Stuy and Crown Heights want $1.9M-$2.3M.  Will they get it?  Only the market will tell.  But in this climate, getting something significantly under $2M in Clinton Hill becomes harder and harder.  So you know when one comes up, it's bound to be something gnarly, but if it's vacant and half-way decent, it's worth the look for the right buyer.  Cue this house on Irving Place and Gates Avenue available first on HomeCanvasr.com the past few weeks.

Asking $1.6M-$1.7M, this 16' wide four story 3-Family is delivered vacant.  It is in live-able condition, but would need significant upgrades to really optimize it.  There are a lot of dated upgrades, sheet rock walls, etc. that could come down, although a decent extension on the garden is a plus.

On a freezing day last month we saw it; the heat was working just fine.  It doesn't show like anything special and there'll be plenty of griping about the owner's cost basis, but on the retail market this property delivered vacant is the perfect little canvas for somebody.  Owners with similar narrow places all renovated in Clinton Hill are asking $3M+, like a house in the works on Cambridge we toured pre-construction and this one virtually staged at 115 St. James Place asking $3.6M...

Like we always say, by the time it looks the way you want it to look, it won't cost what you want it to cost.  With buyers bidding $2M cash site-unseen for gut projects that are merely bricks & stairs in Clinton Hill, this little ditty on Irving could be just that canvas with at least functioning mechanicals at at a much lower price.  However, even if this house is one of the best situated $1.6M's in town, that also doesn't mean that the rest of the work needed is within everyone's budget.  What's nice at least is that it's easy to tour with our man Elliot Nicks who's got all kinds of early leads on properties just like these.  Even just a few quick fixes and fancy pictures would make all the difference in the world on this place.  Pop off those old awnings in the front & the back, touch up that brownstone facade, pull out carpet, yada yada.  A month spent on a $20K kitchen and a $10K bath would make it the medicine go down closer to $2M.  You know, all the stuff that makes it retail digestible.  But it might not even make it that far before being intercepted.

While we're juggling a handful of contract flips between $1.3M-$1.5M in Bed-Stuy and Crown Heights that are almost impossible to get a showing, it's nice to see something in Clinton Hill perhaps as low as $1.6M that can actually show.  This Irving place will not wow you by any stretch, but nobody said house hunting in "the most unaffordable place to buy a home in America" would come without compromises, y'all!

Pro's:  4-story fixer-upper with garden extension, totally vacant, well under $2M, quiet little block, live-able with heat pumping, not on everyone's radar, relative value in this market, a do-able compromise for the right buyer at the right price

Con's:  narrow, east in Clinton Hill, no great original details to speak of, lots of unsavory little deferred maintenance issues, lots of other major work to be done, small floorplate on upper floors, severe compromise

Ideally:  this isn't anyone's druthers, but it's a nice alternative to houses commanding $1M more than this is asking

Bed-Stuy's Best Off-Market Buy: 54 Macon Street

When we first got the call last year about this huge 5-story brownstone in everyone's favorite opening corner of Bed-Stuy, we rushed right over.  54 Macon Street was pitched off-market as an SRO for $950K, full of tenants, but with a sick owner's duplex delivered vacant.  This was major.  SRO or not, it was basically grossing $90K/year as-is, AND you can cop a duplex full of details and a yard for under a million?

Even last year, that price was a steal for 4-stories, and especially for much rarer 5-stories. We submit a full-price offer that first day we saw it, but what's too good to be true, usually is.  Eventually, the owner wanted $1.5M for the place, even though it was still perceived as an SRO, the owner was staying put on their number.

That is some seriously intact plasterwork on the ceiling.

Original mantles...

Well-kept parquet for days...

Yard...

Fast-forward to this year, and the market was still on a tear.  By the time other occupied SRO's were getting sight-unseen cash offers of $1.5M in the area, 54 Macon Street looked even better and actually realistic at that price.  Platinum Members were ready to hit the owner's asking price of $1.5M cash, but a deal much lower was already in the works.  Why the owner would be evasive in the face of a $1.5M cash deal and close last month for $1.16M financed is still a mystery to us.  It's not like we didn't bring a great buyer for another property of theirs closed nearby last year.  But off-market deals work in their own ways.  And this is a sign of the times for the rest of you looking out there.  When buyers with $1.5M cash are bidding full asking price for occupied SRO's in Crown Heights and Bed-Stuy, and not always even landing them... you know it's getting real out here.  And the buyers at $1.16M said today that selling for $1.5M wasn't even worth having a conversation about because the property is worth much more than that.  They pull off one of the niftiest deals you can still find in Bed-Stuy.  $110K over last year's original asking price, but $340K less than last year's updated asking price and this year's offer.  In the land of the $450+/sqft townhomes, the $250/squarefooter is king.

Yup, that's our Brooklyn!


Pro's:  unique 20' wide 5-story brownstone in prime Bed-Stuy with an owner's duplex full of sick original details, $1.16M purchase price with some $300K down is a song, rent roll is totally decent as SRO's go, may not be an SRO forever, this building is worth $2M+ vacant in this market

Con's:  gone already, gobbled up in the face of much higher offers, full of tenants, SRO could be a major issue, woulda/coulda/didn't, not the best block in particular

Ideally:  to the victor go the spoils on one of the hands-down best bones in Brooklyn for this price

Bed-Stuy's Best Buy Under a Million: 36 New York Avenue

Today there are more than a handful of townhomes in Bed-Stuy asking $1.9M or higher.  So finding something decent for less than half that in this market can be a challenge.  Bed-Stuy fixer uppers still come in under a million, but rarely are they this nice.  How do you find one that's 20' wide, just 2 blocks from Nostrand Avenue, with original details intact, delivered vacant?  You've gotta keep your ears open, know what you're seeing, and act fast.  Platinum Members had the pre-market lead on 36 New York Avenue asking $949K, which is just about as nice a buy as you'll find under $1M in this Brooklyn real estate market.

Sure, it's not fabulously staged, and there are garbage bags in the foreground of the pics.  But it does have the marble mantle, the parquet floors, and the moldings.  Gnarly carpet on the garden floor actually covers up & protects the parquet for a few decades.

Sure, the backyard's paved, but HELLO - it's a backyard and rental income.  The glass is half-full, not half-empty.  And for the price many people are paying for condos a few blocks west...

And the kitchen might not be ready for its close-up yet...

But for the budget that some people spend on one done-up kitchen, this whole house could be tidied up nicely.  The last time we saw something this nice for under a million this year, it was right next door at 38 New York Avenue.  When the house 3 bricks away from you just sold for over $1M in July, the one with even nicer details for under $1M is obviously a value.  Seldom do you luck out with next-door comps so apple-to-apples.  And they're essentially the same house, except 38 NY Ave showed better, even though it had a lot of the original floors covered up with cheap new flooring.

By the time 36 New York Avenue looks the way you want it to look, it's not going to cost what you want it to cost.  If you want original details in a vacant building ready for straightforward updates, this is a winner.  A perfect compromise on price, size, condition, location, and tenancy for the right buyers.  GoogleMappers will scoff at the tweener location, while one of the best condo alternative 2-Family fixer-uppers in Brooklyn is sold right out from under them.



Pro's:  20' wide 2-Family with owner's duplex & rental, Bed-Stuy's best under a million, mortgageable, delivered vacant, can be updated within a reasonable budget, perfect for those priced out of Franklin Ave just a block from Crown Heights

Con's:  gone already, work to be done, doesn't show well, didn't last long, tweener block

Ideally:  gotta wake up pretty early in the morning to snag a value like this