0

Buying Against Investors

buyingvsinvestors
By Joyce Cohen of the New York Times

Adam Fleming and Julia Sommer were surprised by how much they loved Brooklyn.

The couple had lived in Morningside Heights in Manhattan when Ms. Sommer was working on her Ph.D. in neurobiology at Columbia University.

Back then, Brooklyn had “seemed so far away,” Mr. Fleming said. “Although it was physically close, it was mentally far.”

But when they returned from Europe, where Ms. Sommer completed her studies, a friend suggested Brooklyn. So they rented a studio with a sleeping loft in a small Brooklyn Heights building.

“We both had an issue with renting a larger apartment and paying significantly more rent for it,” said Ms. Sommer, who is now a staff scientist working for the autism research initiative at the Simons Foundation. “We always had the dream to be homeowners.” The rent, which started around $1,750 a month, rose to $1,850.

Brooklyn suited the pair. The people were nice, the restaurants terrific and the borough “full of authenticity,” said Mr. Fleming, a software engineer for Urban Compass, a real estate start-up. “If there is anything my generation values, it is authenticity. Brooklyn is dripping with it.”

The couple began the hunt for a house two years ago, just after their marriage. They decided against a co-op or condominium.

“I feel like a co-op is almost indistinguishable from renting,” said Mr. Fleming, who like his wife is in his early 30s. “There is a tremendous maintenance fee to pay, and people to answer to on the co-op board. It is not freedom to do things your own way.”

A condo was slightly better, but “I chafe at the idea of a homeowners’ association,” he said. “I feel like it’s taxation without representation.”

A small multifamily building, on the other hand, “is your project, your passion,” Mr. Fleming said. “I don’t think you fall into ownership in New York City. You’ve got to seek it.”

Seek it they did, online and off, spending weekends walking or bicycling through Bedford-Stuyvesant. On a map, they color-coded every block, so they would know to skip the noisy, busy ones and to pursue the leafy, quaint ones. Their budget started in the $600,000 range.

They wanted a place near the A or C train, in “mediocre condition that we could work with,” Mr. Fleming said. It needed to be authentically brownstone Brooklyn, with high ceilings, original details and “features you cannot recreate later.”

A two-family rowhouse on Pacific Street in Crown Heights, which Mr. Fleming called “a grand old dame,” fit the bill. It was listed at $700,000. But the couple weren’t familiar with Crown Heights, and preferred Bed-Stuy. (That one later sold for $650,000.)

The competition for such houses was stiff, and the couple realized they would have to spend more than they had thought. “With remarkable efficiency,” Mr. Fleming said, “property is being converted from older owners, often in dire financial straits, and sold at a steep premium to cash-only buyers,” many of them investors.

Some brownstones were immediately returned to the market at a higher price, “sold with the mattress still warm,” Mr. Fleming said. Others were renovated and then either resold or rented out.

They liked a three-family on Hancock Street in Bed-Stuy. The agent said another buyer was interested. “It’s really nerve-racking,” Ms. Sommer said, “because you never know if this other buyer really exists or they are just making it up.”

After weeks of back-and-forth, the couple offered the listing price, $700,000. But the appraised value was $550,000. That was a deal-breaker, because they could borrow against only the lesser amount.

“It took so long, and you invest so much energy, and it just pops in a bubble within a week,” Ms. Sommer said. (That house later sold for $680,000.)

Investors were so aggressive, Mr. Fleming said, that “you see salespeople walking the streets, pressuring sellers who are property-rich and cash-poor.”

The couple bypassed places with structural problems. In one, “I was attacked by pigeons living on the top floor,” Mr. Fleming said. In others, you could “look up and see the sky.”

They went to see a two-family rowhouse on a beautiful block of MacDonough Street in the Stuyvesant Heights Historic District. The couple offered $880,000. But because of complications, Ms. Sommer said, pursuing the transaction seemed like “an incredibly lengthy and painful process without any guarantee for us of a positive outcome.”

As the hunt grew more difficult, they loosened their requirements for a postcard-perfect block. And so a tip from someone in the neighborhood led them to a three-family rowhouse with beautiful bay windows and high ceilings.  It was on a bus route in Crown Heights, a location they would have bypassed earlier, but near the desired A and C trains. The house had been used primarily for storage, though it was classified as a single-room-occupancy dwelling.

The couple bought it for $950,000, closing in midsummer.

They remain in the studio, awaiting a “certification of no harassment,” proving they did not evict any residents, which they expect in a few months. When they are finally able to move in, they will do so with their baby, who is due next month.

Meanwhile, they have received more than a dozen solicitations from investors, including phone calls and notes at the door. “They are very aggressive in terms of buying people out and flipping the house,” Mr. Fleming said. “They are quite resourceful.”

About the Author

Comments are closed.

© Copyright Ardor New York Real Estate Blog 2017. All rights reserved.