Almost everywhere you turn these days, new development is the talk of the town in New York City. NYC’s revamped midtown skyline is a constant reminder, as is the construction underway in virtually every part of the city. This spans from record setting towers to sheik boutique conversions. There has been no shortage of articles written on the topic, and for good reason-new development often is sexy, beautiful, and attracts a clientele that is newsworthy. For many, buying a turnkey apartment in a high quality new development is absolutely the way to go. For these buyers, there is no shortage of beautiful options in a variety of styles and locations. However, for others, there is a catch-the price tag! The cost of construction, finishes, and amenities can add up quickly. For buyers that can’t make the numbers work within budget, or those that simply prefer prewar construction and charm, I wanted to focus this month’s Katzen report on the ability to create value through renovation.
Just hearing the word “renovation” sends shivers down the spine of many of us, given it is an intimidating process. All of us have heard horror stories about time and cost overruns, and it is often uncomfortable to turn your home over to a team of professionals you have only recently met. Feeling things are in some ways out of our control can be confronting. In addition, many buyers don’t “trust” their taste and ability to create a beautiful home, and therefore feel this is better left to developers. After all, that is their job. In many cases, this is all true. But remember, the fact that many buyers are reluctant to undertake a renovation is EXACTLY why so much value can created. In a city with the wealth and in some cases impatience of New York, buyers often are more than willing to “pay up” for a finished product. Time and time again I have sold apartments well above the all-in cost of the seller, even after factoring in more general market price appreciation. And let’s not forget, for those with a strong point of view on design, a renovation allows you to create exactly what you want.
I recently stumbled upon an interesting article regarding the demographics in New York City, which very well will present interesting opportunities for those bold enough to entertain a renovation. According to the New York City Department of Ageing, the 60-plus population in New York City has been growing following a downward move in the 1980’s and 1990’s. The implication of the article was that this trend (which is expected to continue) will result in an increasing number of sales from the elderly, as many move in with loved ones or into assisted living facilities. Many of these owners have lived in their homes for decades, often with limited stylistic updates. Apartments in this sort of condition often come at very attractive buy in prices, and with a little TLC, real financial value can be generated. In addition, the price discount associated with an un- renovated apartment can help buyers navigate the proposed increases in the mansion tax ($1.75 million and $5 million price breaks). While hopefully this application becomes moot should the Mayor’s proposal not be passed in Albany, we’ll save this topic and its implications for future discussions . . .
I know renovating an apartment is easier said than done. Believe me, having lived through a gut renovation, I know first-hand things happen that are difficult to anticipate. Thus, for me to comfortably endorse this strategy, you need to find the right apartment with the right bones, and of critical importance, engage the RIGHT team of designers, architects, and contractors. With the right amount of due diligence, upfront expectation management, planning, and transparency, your team can take much of the “unknown” out of the process and make a renovation more than worth its while.
Until next time, enjoy the early summer!