When weighing the decision to sell your NYC apartment or rent it out, it pays to have your finger on the pulse of the real estate market. If you haven’t already bookmarked Brick Underground’s market reports, now’s the time because, more than ever, sellers and landlords will benefit from staying fully informed about market trends and legislative changes.
A case in point—the market for studios and one bedrooms is currently moving much faster in NYC than the sales of higher-end condos. Steven Gottlieb, an agent with Warburg Realty, sums it up like this: "The ultra-luxury market is seeing substantial negotiability on asking prices, with contract prices reflecting deeply discounted numbers. In more affordable submarkets, like studios or one-bedroom apartments in most buildings, prices are holding more steady, despite the overarching chatter about this buyer’s market."
Speaking on the Brick Underground podcast, Jonathan Miller, president and CEO of appraisal firm Miller Samuel, says this means if you are trying to sell what’s considered a starter apartment, you’re in a much better position than someone with a luxury three bedroom that's in competition with a glut of high-end new developments. If that’s your situation, renting your apartment out rather than selling might be a better bet. That’s if you have the flexibility to hold onto your asset.
To help you decide whether to sell or rent, start by asking yourself these questions.
Are you prepared to price the apartment correctly?
“If you price too high you are not going to get people in,” he says. If you’re prepared to let the market guide your pricing and adjust it quickly if you are not getting offers, then you’ll likely sell.
If you need the money that’s tied up as equity in your real estate you may find the decision to sell is made for you. “If you need to free up your capital to fund another venture or property purchase, then selling is your only option,” says Samantha Rose Frith, an agent with Warburg Realty.
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Bidding wars on apartments priced below the average aren’t unheard of—the market share of sales that entered a bidding war and sold above the asking price is well below the 31 percent record set four years ago but 6 percent of sales still went to bidding wars in the last quarter according to Doulgas Elliman’s latest report.
If you’re holding out for a target price that the market is telling you is unachievable, or your apartment has lost value and you would take a loss by selling, you may have no choice but to hold onto your apartment.
Do you understand the recent rent reforms?
Renting in NYC is as competitive and expensive as ever, so if you’re an owner thinking of renting out your apartment, you’ll likely find plenty of interested tenants. Keep in mind, however, that maintaining an apartment you don’t live in can generate some headaches and may be further complicated by changes to New York's rent laws, which, among other things, include new limits and deadlines related to the security deposit.
Frith recommends asking yourself whether “you even want to be a landlord and assume the responsibility that comes with it.” If the answer is ‘yes’ or ‘maybe.' figure out how much your unit will rent for and whether it will cover the cost of your monthly expenses including mortgage payments, taxes, common charges or maintenance, and insurance.
“Don’t forget that you’ll need reserves to pay for unexpected repairs and maintenance that can occur, and consider that there may be times when your apartment is vacant while you’re trying to procure a tenant,” she says.
If you are new to being a landlord, your checklist should include getting up to speed on the impact of the rent reforms on your role, going to extra lengths to find a financially qualified and responsible tenant, and making sure your insurance is up to date. Read: “8 tips for first-time landlords in New York City” and listen to a discussion of the rent laws on the Brick Underground podcast.
Would your apartment sale compete with luxury developments?
If you own a high-end condo above the $2 million price range you won’t be the first to consider holding onto your apartment and renting it out rather than selling. Robert Rahmanian, co-founder of REAL New York says owners at the high end are in a tough place as the market softens.
“This is not the time to put your luxury apartment on the market if you are looking to get top dollar or sell quickly. I would hold and wait for the luxury market to absorb some of this unsold inventory.”
If you’re willing to turn your high-end apartment into an income-generator, however, Miller says these types of listings are being “snapped up” by tenants and can command high rents. So if you have the funds to hold onto your apartment while you live elsewhere, renting might suit you better than selling.
“We are seeing an emphasis on the higher-end [rentals] as a reaction to the lower level of activity in the high-end sales market,” says Miller.
Do you need more space in NYC?
With the market being softer the higher you go, if you’re looking to upgrade from a one bedroom to a three-bedroom apartment, you may find your leverage increases as you look for something bigger. To take advantage of this, you’ll need to be selling and buying in the same market.
“Where prices soften as the apartments get bigger and more expensive, common wisdom would suggest that it makes sense to sell if you are subsequently going to buy something more expensive. If you are simultaneously buying and selling, you always want market conditions to favor your more expensive property,” says Gottlieb.
Is your apartment a co-op?
If you are a tenant shareholder in a co-op, part of your decision process will include an understanding of your building’s sublet restrictions and fees. Many co-ops place limits on shareholders renting out their apartments. If your board is flexible on this, it may come down to other considerations—your own finances or how competitively you can sell your apartment. “New buyers aren't exactly thrilled with co-op rules and ownership rights and the glut of luxury products out there on the market isn't helping,” says Rahmanian.
That puts co-ops in a tough place, he says, “especially in neighborhoods like the Upper East Side where the inventory is plentiful.”
Could renovating be a solution to your housing goals?
If you want to sell, it’s worth asking whether a renovation might give you the apartment you’re looking for, albeit with the same size and location. There are no guarantees you will recoup the cost of your investment but in a down market, this is certainly a consideration.
“For a large co-op, renovating might be a smarter option versus wading into this tough market where buyers have choice and leverage,” says Gottlieb.
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