"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