Bureaucracy

The bane of modern day society.  Bureaucracy.

Throw common sense and logic out the window.  When you're mired in bureaucracy, there is little you can do.


So how does this pertain to real estate transactions?

First and foremost; real estate management companies are "the" poster child of bureaucracies.  Multi-dwelling condos and co-ops are almost always managed by one of these outside real estate management companies.  Among other things, they handle building expenses, collecting rents, common charges and/or maintenance fees, keep the books for the building and file paperwork with the city and other agencies.  They are also instrumental in the approval process for sales and rentals.  This sales/rental process is where the owner/seller/buyer/landlord/renter interacts with the management company directly.

Management companies generally do not share your concern for whether or not you have a roof over your head.  If you are missing page 37 of document XYZ, your purchase/rental application will most likely be put on hold and work stops.  If you're lucky, you're told of the problem.  It's just as likely that when you haven't heard back from them in two weeks and call for a status report that only then will you find out that it was shelved weeks ago.

Anecdotes like the one above are not exaggerations, nor are they uncommon.  Problems arise when clients refuse to accept that this can happen to them.  "After all, if I'm spending $2,000,000 on this condo they should understand that a $47 discrepancy on my credit report is not important!"    Well, yes you're right.  And no, you're wrong.  It's not common sense that rules the day, it's bureaucracy.  The person processing your paperwork is more than likely an overwhelmed minimum wage employee with absolutely no discretion whatsoever in interpreting the "Big Picture".  He or she has no concept or concern over "shades of gray".

So what is the answer?  The answer is to not put yourself in a situation (if possible) where your paperwork is incomplete or sloppily submitted.  Furthermore, you should allocate a sufficiently generous block of time (if possible) for the management company and/or board to review your paperwork.

This is classic example of why who you choose as your broker matters.  This is grunt work, but it's critical to the success of your transaction.  If your broker does the best job possible assembling your paperwork and couples it with polite, non-threatening communication with the management company, your chances of success will be greatly maximized.

Reach me at: michael.sussilleaux@gmail.com

"Full Ask"

Obtaining the full asking price, or "Full Ask", on a property is nice for the seller.  Psychologically it's "Winning" (Charlie Sheen pun intended)

But is it really wise to hold out for "Full Ask"?

Several years ago, when the real estate feeding frenzy was at it's peak, bidding wars were common and prices climbed every week.  Sellers puffed out their chests and bragged that they got $200,000 over asking price.  Interestingly, buyers also boasted that they "paid $200,000 over asking price, and I won!".  In some markets brokers even adopted the strategy of deliberately listing the property well below market value in anticipation of a bidding war driving it far beyond what it was theoretically worth.

This strategy often worked.  In that particular psychological climate buyer's fear of losing was so strong that they willingly overpaid just to keep their "competition" from winning.  Seemingly odd behavior, but a surprisingly "human" reaction.

Times have changed.  The market went through a dramatic swing when prices dropped drastically.  Interestingly, you would think that stressed-out buyers nervous about committing to paying such a huge premium to own property would jump at the chance to buy at a 20-30% discount, but no -- they did not.  They were scared and afraid.  Logically you may ask "Would you like to buy the exact same property that was priced at 'x dollars' six months ago for only 80% of 'x' now?" but the answer was almost always "No".

Where are we today?  It's neither a seller's nor a buyer's market.  Most properties are priced reasonably and most trades are reasonably close to asking price, but almost invariably there's some wiggle room.  You would be hard pressed to find someone today to pay full ask simply because they expect to negotiate.

As a seller you must consider this before you commit to an initial asking price.  If you think your apartment is worth $1,000,000 it would be far wiser to list it at $1,050,000 or $1,100,000 and negotiate with a buyer than to list it at one million and expect full ask.  The strategy may change over time, but that's the way it is now.

Summary: Markets change.  You must to adapt.to them accordingly.  Bucking the trend -- even if you think it makes sense -- is a recipe for failure.  You can still achieve the same goals, it's just the method that requires flexibility.

Reach me at: michael.sussilleaux@gmail.com

Investment Properties

Investment properties have always been popular in New York City, and there is even more interest in them now primarily due to global economic factors and very low interest rates.  Foreign investors in particular are taking advantage of currency fluctuations and the relative stability of New York real estate values as a hedge against uncertain conditions in their home countries.

Ok, so you're considering buying an investment property in New York, what should you be looking for?

The first thing to do is familiarize yourself with the various ownership options.  The three main choices are:

1. Owning a building outright
2. Owning a condominium apartment
3. Owning a cooperative apartment

There are also opportunities in commercial real estate, but that is a separate subject.  Of the three listed above, the least attractive and most constraining form of ownership is the cooperative, or "co-op".  In a co-op, you own shares of a corporation along with other owners, and your control over the property is limited; particularly regarding your right to rent out the property.

Condominiums and building ownership both give you much more latitude in what you do with the property and they're typically the best suited for investment purposes.

So what should you look for in a potential investment?

I recommend the following as a starting point:

• Location:  What is the neighborhood like now, and likely to be in the future?
• Appeal:  Will the property appeal to a wide variety or a unique niche of potential tenants?
• Rent:  What are the typical rents you can expect from a property?
• Income/Expenses: What are all the costs associated with ownership?
• Cap Rate:  What is the ratio of Net Operating Income to the price paid for a property?
• Appreciation:  What is the "upside" for the property over time?

Every investor is unique, and there is no substitute for market knowledge and good advice.  If you're considering investing in New York real estate, give me a call at (917) 647-1464.  Or shoot me an e-mail.  I look forward to hearing from you!

Reach me at: michael.sussilleaux@gmail.com

Buying a Pied-à-Terre

Are you considering buying a part-time residence, or “pied-à-terre”, in New York City?  New York is a fantastic place to do more than just “visit”, and owning your own place – without the hassle and expense of a hotel – may be just the right thing for you. 

There are many things to consider and it is important to understand all the factors that affect what, where and how you buy your pied-à-terre.  Some of the more important elements are:

1.  Location.  What neighborhoods best suit you?  Is transportation convenient?  How about restaurants, shopping, museums and the theater? 

2.  Ownership.  New York primarily offers condos, co-ops and private buildings as buying choices.  In most cases co-ops will not work for part-time residents.  You must understand the differences and the pros and cons of each choice.

3.  Financing.  At the time of this writing, mortgage rates are currently at record lows.  Lenders often have different requirements for part-time residents, particularly those who live overseas.

4.  Income/Expenses.  Are you planning to rent out your pied-à-terre?  Do you know what fees, taxes and expenses you will incur?

The list above is not comprehensive and each point above could easily be expanded to a separate blog post, but it is a start.  Because of all the details and the fact that you most likely aren’t intimately familiar with New York real estate, it is vital that you speak with a knowledgeable broker to walk you through the process and help you achieve all your goals.  I recommend that you call or e-mail me if you’re interested in finding out more.  I’m happy to help.  You can find my contact information here.

Reach me at: michael.sussilleaux@gmail.com