Yesterday I went over a low comp in Sugar Hill that sold for $79/sq. ft. But there was another sale recently – just 3 blocks south of the other one. 540 West 149th Street sold on 6/30/11 for $609K. The building is 16.67′ x 50′ x 4 stories – so 3,334 sq. ft. though officially it’s 3,400 sq. ft. At the lower square footage it nets out to $183/sq. ft. at the higher square footage it’s $179/sq. ft. So while the prices are just $119K apart, on a price per square foot basis the 149th Street property is more than twice as expensive.

So what do you get for the extra $120/sq. ft.? You get original details and a better location. This building still isn’t in the Sugar Hill historic district, and the buildings immediately west (542-548) are low-income housing. But unlike the 152nd Street property the block is predominantly brownstones / townhouses. The low-income housing next door is very nicely done (though they have the tell-tale wheelchair ramps you rarely find with owner-occupied houses). And the ever critical subway access is somewhat better than the 152nd Street property – just a 7 minute walk to the A/B/C/D express trains @ 145 and 5 minutes to the 1 train @ 145.

If I had to guess I would say original details probably made the biggest difference in the price. Mind you, the property still needs a complete gut renovation, but you’re not starting from scratch – you’ve got floors and walls, crown mouldings, fireplaces, doors, etc… Here are some pictures that show what I’m talking about…

That’s a very different renovation than the one that will be needed at 535 West 152. At 152 the new owner is probably starting from scratch (like we our with our place) – rebuilding all the floors, the walls, the roof, etc. With this place it’s more about restoration – repairing what’s there and adapting it for modern use. It will still need all new electrical and plumbing. There will be rotten floor joists that have to be replaced, etc.

The place on 152 is best suited for someone who wants a rental property – since it has more square footage than any homeowner would ever need and the block is predominately a rental block. This place would appeal more to a homeowner who wants a wonderful old place that needs TLC.

Very different places with very different prices.

I think someone just got a pretty good deal on a Harlem townhouse shell… 535 West 152nd Street just sold for $490K. While the number may seem like it’s inline with other shell prices, apparently the place has 6,290 sq. ft. despite the fact that it’s just 16 2/3 feet wide and just 4 stories. That’s almost double the square footage of many Harlem townhouses. The place has an extension that stretches back 90 feet. So given the +/- 5 foot set back in the front – that’s nearly 100% lot coverage (though I’m sure there’s some sort of side yard).

At 6,290 sq. ft. the buyer bought the place at $78/sq. ft. – which is an incredible price. I’m not sure exactly what the condition was inside. The issue is that 6,290 is 566 sq. ft. over the max allowed square footage of 5,728. If it’s in really bad shape it’s possible that DOB might not allow the new owner to build back to restore the building to the original 6,290 sq. ft. Still, even at 5,728 sq. ft. they paid $86/sq. ft. – which is still very low.

The reason why this place went for such a reasonable price was because the seller was realistic about the place’s value. The seller was the same developer we purchased our townhouse from – TPE Townhouses Harlem (TPE is part of Tahl Propp – a big Harlem landlord). This was possibly the last of about a dozen townhouse shells they were selling. They weren’t giving away the townhouses, but they knew to sell a dozen shells you gotta take the best offer – even if it seems low.

Just to put this building in perspective… It’s outside the landmark district, and not all that close to subways – it’s a 6 minute walk to the 1 train at 157, 7 minutes to the C train at 155, and 8 minutes to the A/B/C/D trains at 145. The block it’s on is also mostly apartment buildings – not the charming tree-lined brownstone blocks you find elsewhere in Harlem. So it’s sorta lacking on location.

So there are great deals out there still. Now that I’ve got my real estate license and have access to all the listing databases it’s interesting to see what’s on the market. There are some interesting opportunities out there – but as always price continues to be an issue, as is matching the building to the particular needs of the buyer…

MAJOR CORRECTION: I’m going to sticky this post for a few days. Max loans aren’t going down nearly as much as I thought they were. So the situation isn’t all that dire. It’s worse, but not all that much worse… Essentially the limits on conforming loans are going down just 15% after September 30. I’ve stricken the parts that were wrong, and put corrections in italics.

The big news today was that it seems there’s bipartisan support for lowering the loan limits for Fannie and Freddie in high cost areas like New York. Assuming it happens, it could have a rather profound effect on places like New York – and it will particularly affect Harlem townhouse shells where many of us depend on the higher loan limits to make the numbers work and the banks avoid the risk of renovation loans.

Right now in NYC, you can borrow up to $729,750 for a 1 family home without having to get a “jumbo” mortgage – that will drop to $417,000 $625,500. For a 2 family you can currently borrow up to $934,200 – that will drop to $533,850 $800,775. For a 3 family you can currently borrow $1,129,250, but that will drop to $645,300 $967,950. (And so on…)

What that means is that fewer people will be able to buy townhouses since they won’t be able to qualify for federally insured mortgages that cover enough of the costs. They will have to try to get mortgages from banks that will require much larger down payments, higher incomes, and overall much less risk for the banks. There already is no such thing as a jumbo renovation loan – so renovation loans will really dry up are less likely to cover the cost of renovation come this fall. Somewhat less demand means real estate prices will could drop slightly (because of this). Properties like shells that are particularly risky will probably see the biggest drops are the most likely to be affected.

This is major will have real effects on Harlem townhouses…

Those of us who have already bought will could see the prices of our homes drop in value since there will be less competition among buyers slightly fewer buyers will be able to get the size of loans they need.

People who are buying will find it somewhat harder to get mortgages that cover all the expenses. A lot of people just won’t qualify. We wouldn’t qualify be able to do the renovation we want to do under the new rules. It doesn’t mean the buyers can’t afford the homes. Our place will actually be quite affordable once it’s all done. It’s just that the renovation process is a risk no bank wants to take on.

My advice to people who own shells that are on the market is SELL NOW! realize after September 30 the value of your place may go down even further. If you’re holding that property after September 30, you’re probably going to hold it for quite a while into the future and it will sell for substantially less money. Now is not the time to be greedy.

If you own a shell and haven’t closed on your rehab mortgage – do everything what you can to close the mortgage before September 30 - otherwise you may not be able to do as nice of a renovation.

If you’re in the market for a shell – that’s a tough one… After September 30 you may not be able to afford a townhouse at all. But closing on a rehab mortgage takes time. You need approved plans (which can take months to get), you need a contractor who’s ready to start, etc. And on top of it all it’s possible the place you buy could drop in value shortly after you buy it.

The same goes for renovated townhouses, but to a lesser degree – the situation won’t be quite as dire for livable places Renovated townhouse may not feel the hit much at all since jumbo mortgages will be available for them (just a little harder to get).

After September 30 cash will continue to be king (even more than it is now). You’ll need a large down payment PLUS pretty substantial income. It’s sorta sad really. The current crop of homeowners who are buying and renovating shells are often pretty regular Joes… A lot of them will just be priced out of the market.

I feel fortunate that we bought when we did and got our loan closed when we did. Yes, our place will most likely go down in value, but renovated places will fair better than shells since banks will be still be lending on regular, non-rehab mortgages. We’ve always taken a long-range view of the townhouse purchase. It will still be affordable for us after we get done. And I’m not sure any of this will matter in 15 or 20 years and we have every intention of living in our place for that long…

Hopefully something will happen to derail the support for these changes. It’s being implemented all wrong… They should take everyone down slowly. They way they’re proposing will hurt places like California and New York and not change anything for middle America. Hopefully common sense will prevail and none of this will come to reality. But from the sounds of it, it’s a done deal.

This past Saturday we had architecture students from CityTech come see the house. Dan’s a (web design) professor at CityTech and one of the architecture professors (Ken Conzelmann) took the photo below. I think it’s pretty cool – with the light streaming through the joists it’s quite beautiful…

I love the height of everything, but of course that will go away with the renovation since floors will go in.

The “hole” in the wall is an old fireplace. The previous owner (a developer/landlord) had pretty much ripped it out. We’ll fill the hole back in with brick to make the wall stronger.

You can also see that we’re raising the floor between the cellar and basement to give a full 8′ clearance in the cellar. The joists used to rest on top of the foundation – now they’re a few inches higher.

Construction has FINALLY started! It almost seems unreal – it’s taken so long to get to his point…

The first item of business was replacing the old construction fence which was an active violation because it hasn’t been built properly. Here’s the old fence…

The new fence is a thing of beauty… Our contractor built it on Friday and then painted it and put the signs up Monday morning (he didn’t even spill a drop of paint on the sidewalk). Nice color choice too!

The guy two doors down put up a construction fence and it looks awful (need to get a pic of it).

Next up was the joists between the cellar and the basement. Here’s a picture of what we started with…

The joists are being “replaced as necessary”. As you can see they were so rotten, it was necessary to replace all of them…

It feels very tall and narrow… We’re going to cut down and use the old joists to build a screen between the hallways and the stairwell in our unit. So you can see in the picture they’re being stored for later use. The joists may not be good enough to be joists anymore, but their “good parts” will still be in the building when we’re done. Not exactly “original details”, but it will be original materials – we just don’t have much to work with given the condition of our building.

And if you’re worried about how many joists we’re taking out at once… It’s been discussed and we’re trying to be conservative about it. The issue is that the joist pockets are being leveled with a laser leveling device, so it helps to have them all out. Once we get up further in the building we’ll just take half our at a time since after the first two floors the floors will basically be in two sections – front and back.

Today and Wednesday the contractor will be prepping the joist pockets and taking down the remnants of the old fireplace in the cellar. Thursday he’ll put in the new joists, and Friday we’ll probably have a floor to walk on. (Imagine that… lol) At that point he can get to the back yard more easily, etc.

A while back I wrote a post wondering if it was such a great idea to buy a townhouse. Well, the answer is, “yes, if you can get the right price” but maybe not if you’re trying to “flip” the property.

Pay 1/3rd of what you would have paid 2-3 years ago

Harlem townhouses that are wrecks and need major gut renovations have fallen about 65-70% in value since the peak in 2007. Even the ones in better condition have fallen substantially. Other real estate in Manhattan has fallen maybe 20%. I once had a friend tell me life is a lot like surfing – you need to watch waves and be prepared to get onto your next big wave and you need to do it before the wave gets too big. That analogy felt really apt as we sold our apartment at 15% off it’s peak value to purchase something that had fallen at least 65% from it’s peak value. It really felt like getting off one wave onto another that’s potentially much bigger.

Be prepared for volatility

But using the wave analogy a bit more… the Harlem townhouse market is still a market with drastic extremes. The fact that you can lose 2/3rds of the value in your home in 2 years will scare some people. There are a number of reasons for the volatility. The bottom line is that Harlem’s gentrification in the past 10+ years didn’t “stick”. Not enough got gone before the crash. The schools aren’t that great, the grocery stores are generally pretty bad, and there are still a fair number of empty lots and derelict buildings.

That’s why investing in Harlem today needs to be part of a long-term strategy. If you’re hoping to sell in a year or two – don’t do it. Harlem real estate could very well continue to go down in the next few years. Instead, look 10 or 15 years out at the next wave of investment/development and ask yourself which NY neighborhoods have the most upside potential. In Manhattan, Harlem is probably top of the list.

Signs of change – even now

If you’re not all that familiar with Harlem and it’s been years since you’ve been to Harlem try taking the ABCD trains to 125th Street and walking south on Frederick Douglass Boulevard (8th Avenue – the continuation of Central Park West). Years ago the place was pretty blighted, now the developers are calling it “SoHa” (South Harlem). Where once there was blight, now there are tons of brand spanking new buildings. Look closely at the buildings and you’ll see they’re quality building with decent design and above average construction. They’re a lot more like the new buildings you’d find on the Upper West Side than they are the drab new buildings you see in Washington Heights. At 124th you’ll see the new luxury Aloft Hotel being constructed. Around 120th go into Moca Lounge in the evening and see all the hip buppies. Around 119th go into Best Yet Market and see a grocery store that rivals downtown stores like Whole Foods and Gourmet Garage (it just opened a month ago and only had it’s official grand opening yesterday). There are great places to eat  all along that stretch – like Melba’s at 114th Street.  Yes, prices are down, but those new condos are still selling – even in this market. I genuinely think that type of development will spread to other parts of Harlem in the next upswing. If you’re patient enough to wait you can reap the benefits by buying now – at or near the bottom of the market (knock wood).

Pockets of long-time quality

There are certain parts of Harlem that have always had great townhouses and those neighborhoods are offering quality at a great price. Hamilton Heights / Sugar Hill (near the ABCD train at 145th) is one solid area. Strivers’ Row (138/139 between ACP and FDB) is another classic area that’s always been good. Mount Morris Historic District just south of 125 between 5th Avenue and ACP (6th Ave) is another solid neighborhood. And the blocks over by Morningside Park near Manhattan Avenue are great as well. Buying in an area with a reputation for stability is a pretty safe bet (long term). However, you really need to study Harlem to understand which blocks are solid and which aren’t since in some cases crossing an avenue can take you from one of the best blocks in Harlem to one of the worst.

Is the market going up or down?

Personally I think it’s leveled off. I don’t feel like it’s gone up or down much since about the middle of last year. Last July there were two sales in Sugar Hill that I saw as benchmark sales – 419 West 146th Street for $495K and 400 West 145th Street for $550K. When you looked at actual square footage both were at about $147/sq. ft. Both are in the historic district – with the one on 146 having the negative of a 12.5′ width, and the one on 145 having the negative of being on a busy street.

[The Department of Buildings has used two different ways to measure square footage over the years. As a result basement / garden levels are sometimes included and sometimes not. You need to determine the real square footage to determine the real cost per square foot.]

Doing the a 1/2 mile radius around those sales for the past 3 months we see prices haven’t changed all that much. The least expensive was 505 W 144 which sold for $122/sq ft. That’s one we bid on at one point and it’s outside the historic district on a “less than desirable” block. 400 W 145 sold for a 2nd time later in the year – this time for $650K – $100K more than it sold at auction for in July. 48 Hamilton PLACE sold for $450K ($143/sq. ft.) but it doesn’t have great location and I think it’s a fully occupied SRO. So, if anything I’d say prices have gone up slightly.

The higher end of the market is seeing similar stability. For almost a year now $300/sq. ft. will get you a habitable townhouse on a prime block needing significant renovation. In  the $400s/sq. ft. you’ll get a very nice fully renovated townhouse. And the exceptional townhouses will go for around the $500/sq. ft. mark.

Starting with a shell/wreck in a “decent” location (like ours), add about $20/sq. ft. for a prime block in a historic district or even a bit more the area in SoHa around Morningside Park & Manhattan Avenue. Or subtract about $20/sq. ft. for the worst locations. So the range for shells is just over $100/sq. ft. to about $150/sq. ft. on a prime block. It’s been that way for at least the better part of a year.

[If the townhouse is close to the FDB corridor and has the new R8 zoning with a commercial overlay, then it's worth significantly more given the development potential. 243 West 120 is a building that falls in that category.]

That said, in our experience very few owners price their townhouses anywhere close to where they’ll sell. Chances are you’ll get around $200K off the asking price. We got $270K off what the asking was at the time we started bidding (they lowered it $100K while we were bidding to attract other offers). Any owner who scoffs at an offer $250-300K below their asking probably won’t be selling their place any time soon.

How much do the renovations cost?

When looking at places don’t underestimate how much work has to be done. Even places that look half way decent can require $200-250K in renovations. In addition to the little stuff, most of the townhouses have original(ish) plumbing and electrical ($150K or so to replace). Most of them will have rotted floor joists near the bathrooms. Most of them will need all new kitchens and bathrooms ($200K to replace). Then there are things like repointing brick, replacing old, inefficient boilers, etc.

For an “average” wreck you’re probably looking at $500K in renovations. Our place is a complete shell with nothing left inside. We’ve budgeted $700K ($550K for construction + 10% overage contingency + $50K for architectural + $50K to cover the mortgage during construction) and that’s a very tight budget – $800K would be better, but we just can’t go that high. And god forbid you have problems with your contractor – then things can get VERY expensive.

Make sure the numbers work in the short term

Even though you may be buying as a long-term investment, be conservative and make sure the numbers work in the short term. Over-estimate on your renovation budget and timeline and under estimate your rental income. Get to know the rental market, figure out what your rental unit(s) will rent for, and then only assume that you’ll receive 70-75% of that since the market may go down or you’ll have vacancy between tenants.

If you’re in the market for a shell make sure that if push came to shove you can sell it when you get done if you have to without losing too much money. So if you buy at $125/sq. ft. and put $200 sq. ft. into it then you need to be able to sell it for $325/sq. ft. It’s really easy for a architect and contractor to give you a price of $800K to renovate your place, but you may find that the market only warrants spending $500-600K. Do all the numbers before you buy – some places just don’t make sense to buy. But if you really like the place put in a lower bid based on those numbers. Never be afraid of a low ball bid that makes sense when you crunch the numbers.

Pay attention to the certificate of no harassment

In the 1980s landlords started evicting tenants who were in rooms in townhouses so they could flip the building or have  units that were more profitable. Those rooming houses are called “SROs” in NY which stands for Single Room Occupancy. Since around 1985 it is illegal to convert an SRO unless everyone who’s lived there for the past three years signs a document saying that they were not harassed to leave. This protects NY’s poor who often can’t afford the rent of a full apartment. It’s not uncommon for landlords to pay $10,000-$15,000 to get someone to sign.

If you purchase a building that is considered an SRO – even an empty one or one that doesn’t seem to be an SRO, you may need to wait 3 years before you can apply for a certificate of no harassment. Then you’ll need to wait about 9 months to actually get the certificate, and then you’ll have a year of renovation. If you absolutely love the place and don’t mind waiting 5 years to live there, go right ahead, but otherwise always insist on seeing the certificate of harassment before you even start bidding on the property.

It’s amazing the things brokers will say when they don’t have a certificate of non-harassment. Sotheby’s claimed an SRO on Strivers’ Row was a 2 family. I’ve also heard “it will be delivered vacant” as a response (as if that changes anything), or “we’re in the process of getting it”. As much as you like the place, if they don’t have the certificate – move on…

Loans are available

Financing is a critical component of buying a townhouse and Wells Fargo seems to be the bank most eager to issue rehab mortgages on Harlem shells (they’re possibly the only bank doing those loans). Your interest rate will be a bit higher, you’ll have some extra expenses to cover their management of your construction, and there will be a lot of hoops to jump through – but it is possible to get a loan. We recommend speaking with Michael Stein (Michael.B.Stein@wellsfargo.com) if you’re in the market for a townhouse.

Just imagine – lots of space in Manhattan…

When it’s all said and done, if you can get the numbers to work for you, you’ll have a wonderful home with tons of space in Manhattan. Space is a pretty rare thing to have in NY. So all of the hassle really is worth it…

And on top of it all, in 30 years when you’ve paid off your mortgage you’ll still have rental income that will more than cover your housing costs. So you’ll live rent-free in Manhattan. Not a bad deal – but at this point it’s all about the long-term investment.

I genuinely believe that in 5 or 10 years Harlem will start going up again very quickly and dramatically and next time the gentrification will stick. If you’re well positioned on the wave you’ll have a great place to live, at an affordable price, with solid rental income, and tons of equity in your home. All in all, a very good deal…

After a VERY VERY long time waiting, we finally closed on 168 West 123rd Street in Harlem.

We’ve been looking at townhouses in Harlem for about a year now and saw at least 30 different places (not including drive-bys). At first I was only interested in Hamilton Heights and Sugar Hill (aka “West Harlem”) which would have had us near the A, B, C, and D trains at 145th Street. Being two stops from 59th Street (on the A and D) seemed like it would be great. The nice part about Hamilton Heights / Sugar Hill is how stable the area encompassed by the historic district is. It really is lovely, but once you get outside of the historic district it’s hit-or-miss. The bottom line was that there was  nothing available in our price range on a block we wanted to live on. I’ll be doing blog posts in the near future on the various places we looked at and the reasons why they didn’t work out…

I really didn’t know that much about Central Harlem, but as Hamilton Heights & Sugar Hill started drying up we started looking at places further south and east. Strivers’ Row is stunning, but it wasn’t quite in our price range and the subway access was a bit bleak. Strivers’ Row townhouses do have garages, but that doesn’t help the people we want to visit us and work for us. The other issue in Central Harlem were the rather large and ugly housing projects that were built in the 1950s. I just refused to live in a place where I’d have to walk past something like that all the time. Other places were on the 2/3 train and while that was OK, it wasn’t as good as being on the A, B, C, D.

In early October our (wonderful) broker, Maria McCallister of Barak Realty, suggested we look at 168 West 123rd Street. Up to that point I had found most of the places we looked at. I’m not quite sure why I kept skipping over that particular listing, but (obviously) I’m quite happy she suggested it. As I went over the details of the property I realized the location was pretty incredible. It wasn’t near any big housing projects and it was within easy walking distance of the 2, 3, A, B, C and D trains. And since this was Central Harlem it was just 1 stop from 59th Street on the A & D trains. And the 2/3 gives us great access to the Upper West Side.

The building had the critical “certificate of no harassment” that you need to convert the building to 2 family. There is public housing close to our place, but it’s the type of building that you don’t know is public housing unless someone tells you or you’re particularly well-versed in the tell-tale signs. I knew the townhouse was one of a group of townhouses that were all being sold by the same owner – TPE Townhouses Harlem. At the time I didn’t know much about TPE or the story behind those particular townhouses. In the coming months I’d learn a lot more about them than I ever wanted to…

When we looked at the building we realized it was a total shell. There were no floors, no windows, not much of anything – just 4 walls, a leaky roof, and some rotting floor joists. It was sorta cool – you walked down into the cellar and looked up 60 feet to the roof. It was somehow very peaceful and had a strange beauty about it. Here’s a picture of the interior – it’s the view looking up. The timber you see are old floor joists (they happen to be some of the better, less rotted ones)…

As you can see, there are no “original details” to preserve. In other places there may be plaster walls, or original tile work, or old fireplaces. While we would have been game to take on a project with original details, they do create a bit of a problem since you have to do the construction somewhat surgically in order to preserve them, which will increase cost somewhat. None of that is necessary here. It also gives us a completely blank slate to construct whatever we want (and can afford).

The good part is that people with total shells are more realistic about the value of their place than other people are. Finding realistic sellers was one of the many problems we encountered in our search. Most owners just didn’t (want to) realize how far the values of their places had fallen since the height two years before. The reason we bought was because values were down about 65% from their high in 2007. That’s a hard pill to swallow for owners. Estates were some of the only people who were being realistic.

Another seller that was being pretty realistic was TPE Townhouses Harlem. They had purchased 11 townhouse shells in 2004 – 2005. They were all townhouses that had been involved in mortgage fraud starting in the early ’90s. Unbelievably the mortgage fraud was perpetuated by churches who typically would buy townhouses at inflated prices from accomplices and then take out the maximum federally-insured mortgages which they would promptly never pay. The church involved in the TPE Townhouses was Beulah Church Of God In Christ Jesus. I do not know the particular details of the Beulah case – just how it turned out. Based on how it turned out there’s a very good chance Beulah didn’t actually commit the fraud, but again – I don’t know. In some of the cases people would forge documents pretending to be the churches so the churches were involved but not guilty of any wrong doing. I do know there was a court decision in 2002 that determined that Beulah was the actual owner of the properties. TPE bought our particular townhouse from Beulah in 2004 for $1.13M.

TPE then seems to have wasted the next three years of opportunity. They could have developed and sold the properties at the height of the market in 2007 for a huge profit. In 2005 they took out a blanket mortgage on 11 townhouses for a total of $14.3M. They’ve developed the two most valuable buildings that are over on Frederick Douglass Blvd (8th Avenue) in the heart of “SoHa” (South Harlem – the new and upcoming area in Harlem that’s been recently gentrified), but they only did that development recently. The other 9 townhouses they decided to sell just before the market crashed.

TPE put our place on the market in July of 2008 for $1.1M. In November they lowered it to $995K. In March of 2009 they lowered it to $895K and a week later reduced it again to $795K where it stayed for quite a while. We saw the place for the first time on 10/15 and put in an admittedly low-ball offer of $450K the next day. It was rejected and we were told our offer “needed to start with a 5″. Almost 3 weeks later, on 11/5, we came back with an offer of $500K. We then continued to take our time negotiating the price because some other properties came up that we were interested in. On 11/13 they reduced the price $100K to $695K most likely trying to see if anyone else would come in with a higher bid. At this point we gave our broker a ceiling price that we couldn’t go over and told her to see what she could do. By this point in our relationship with Maria we knew she was very good at negotiating price and we trusted her. After a few rounds of negotiation, the day after Thanksgiving (11/27) we got the call that the seller accepted a price of $530K. (That’s less than half what they paid for it in 2004 and what they listed it for a year an a half before).

We were thinking that since it was technically an all cash deal we might close before the end of the year. Boy, were we wrong! First things were slowed down by TPE telling their lawyers to put as little time into the closing as possible to reduce costs. I should mention that TPE is Tahl Propp Equities which is a big Harlem landlord that seems to own over 100 buildings in Harlem alone as well as some fairly large office buildings in Midtown. Tahl comes from a well-established NY real estate family. Propp was one of Donald Trump’s lawyers at one point. This sale was pretty insignificant to their overall operations.

Then we hit a wall with title issues. Given the sordid legal history of the building our lawyer insisted in using his own title agent and insurance company – not the one TPE was insisting we use. In fact, they wouldn’t even go into contract unless we either settled the title insurance issue or used their title company. So we waited. In a hotter market not being in contract would have been dangerous. But in this particular case we were pretty safe. It wasn’t in the best interest of the seller or the seller’s broker to get another offer on the place. They still have about a half dozen similar properties to sell. It’s much better that they make two sales than one at a slightly higher price.

It wasn’t until early February that the title issues got settled. The seller’s title company was actually a pretty good company so now we have two big, solid title companies that think the building is OK, which will help when we go to sell. We signed the contract during the (first) big snowstorm on 2/10 and the seller’s signed a week later on 2/18 and we closed yesterday, 3/3.

The closing was actually a bit up in the air there for a little while. Apparently the seller’s bank was giving them difficulty about it. Remember, they initially had a $14.3M mortgage covering 11 buildings. They’ve developed two of the buildings, and sold maybe half the others ones. It makes me wonder how well that loan is collateralized these days… I know our final payment went 100% to the bank (The Community Preservation Corp). I’m guessing a fair amount of the deposit went to the bank as well.

So now we’re working on plans with our architect. More on that soon…

Just some basic info on the building – It’s 15 feet wide, 5 stories tall (most are 4 stories). The usable interior space will be about 13 feet in width. It’s longer than most townhouses – 58 feet. That means we can have decent sized bedrooms of 200+ sq. ft. The ground floor and part of the cellar will be a rental unit (residential or commercial) which will help offset the cost of the mortgage.

Here are some pictures of the front and back of the building. The big window on the parlor level is nearly 8 feet tall and 4 feet wide! The front of the building faces north. You can see in the picture how there’s an alleyway between us and the apartment building to the right. This will be helpful since we can punch holes in the wall and have windows in the bathrooms, and vents for the kitchen range hoods.

The back of the building will be incredibly sunny since it faces south. Some of the windows you see are about 7 feet high and 3 feet wide – so the rooms on the back of the building will be incredibly sunny. Obviously the entire back wall has to be resurfaced and the brick repointed.

It’s a huge project, but it’ll be fun and the end result will be pretty spectacular. And no, we’re not doing the work ourselves. Everyone seems to ask that but it’s an absurd question… Just monitoring the work and choosing finishing materials will require an incredible amount of time.