Everyone wants a piece of New York. Many dream of living it in a quintessential NYC townhouse. There is nothing better than coming home to the peace and privacy of your own home after a busy day in this hustle and bustle city. Here is some helpful advice to keep in mind when shopping for a townhouse and buying real estate in New York City.
- decide if a single family or multiple family is best
- understand what is and is not possible
- have financing lined up
- inquire if the townhouse is landmarked
- know what to look for in investment properties
- underestimate rent regulated units
- be caught without the right team
- think that size doesn’t matter
- go stoopless if you don’t have to
- fight compromise
Most townhomes were originally built as single family structures. Over time many have been subdivided into multiple units, often with one unit per floor. With the rise in operating costs, especially real estate taxes, this allowed owners to stay in their homes while bringing in revenue with renting parts of the house. The current trend is for turning these multi-unit buildings back into single family homes again. This zoning change requires approval by the city buildings department.
When making changes to a townhouse it’s important to know the zoning classification and floor area ratio (FAR). The zone type will determine how a building is to used (how many units are allowed, is there commercial space included, etc). The FAR ratio is generated by dividing the building area by the parcel area to determine how much can be built on the lot. Many townhouses have unused FAR that allows expansion. So if renovations are in the plans, understanding the zoning classification and FAR is a good place to start.
It’s more important than ever to have your financing (source of funds) lined up. Most townhomes are sold in all cash transactions. Financing can be a challenge especially when the building needs work. When bidding in today’s competitive market, buyers need to have all source of funds fully documented, up to date, and ready to submit with all offers.
Many metropolitan areas have areas with landmark status. Approximately 30% of Manhattan properties fall within a designated landmark area. The purpose of defining a building or neighborhood with landmark status is to prevent material changes to its look and feel. This designation requires exterior and some interior changes to be reviewed and approved by the group that governs such changes. It’s important to know if a townhouse you plan to alter in some way falls within a landmark designation. Landmarked properties add time and expense to renovation plans.
If the property will be used as an investment and rented out, it’s important to understand what the annual expenses are and the rental income potential. Whether a single family or multiple unit building, these figures should be made available from the current owner. Gross income less expenses will give you the net operating income for the building. Dividing the net operating income by the purchase price will yield the capitalization rate, which is also known as the rate of return on your investment.
Buyer beware: Do not underestimate the power of rent regulated tenants. Often times multi unit townhouses are not delivered vacant, but instead have existing tenants in place. As a buyer you prefer these tenants be in non-rent regulated units. The two classifications of rent regulation, rent control and rent stabilization, both give tenants the right to renew their leases and controls rent increase amounts. These types of tenants make it difficult to convert a building into a single family and also reduce capitalization rates on investment properties.
No need to go it alone when looking to buy a townhouse. Find yourself an experienced real estate agent with first hand knowledge in the townhouse market. This is a large investment and a good agent can guide you through the often tricky prospect of New York City real estate. The same is true for an attorney. Be prepared with the right team to make this process as smooth as possible.
While all townhomes have the same basic profile, tall and narrow, they do come in varying sizes. The golden rule of thumb – the wider the better. Anything less than 20 feet is considered on the narrow side. Manhattan’s narrowest townhouse located in the West Village clocks in at a mere 9 ½ feet wide. Conversely, Madonna owns a 57 foot wide beauty on the Upper East Side. Buyers will pay a premium for wider, more functional homes.
Most townhouses were built with a front stoop, that grand entrance to the parlour level that welcomed visitors into the home. Today many buildings are stoop-less, a result of the early twentieth century when they were lopped off to make way for multi-unit floorplans. When considering renovating back to a single family home, it’s a good idea to add back the front stoop. It adds to the appearance of the building and appraisers will tell you it increases the overall value of the home.
Anyone will tell you compromise is something that is learned quickly when transacting in real estate. Even multi-million dollar properties will not have everything on your wish list. Prioritizing and knowing what’s important will go a long way. Townhouses are no exception. Light, views and room sizes are just some of the things you may need to be flexible on when deciding on the right townhouse property.
Buying a townhouse in New York City can be a rewarding experience, both emotionally and financially. Given today’s price points this opportunity is available to a select few. If you happen to be one of the lucky ones, you should jump in sooner rather than later. There is a limited inventory of these remarkable homes and what better place to own one than New York City!