Buying A Manhattan Apartment
We decided to replace "vacationing in faraway places" with "vacationing in nearby Manhattan" and to acquire a pied-a-terre apartment to make it work. We made lots of mistakes in the process that we share in this website.
Several years ago my wife and I decided that we were done with faraway vacation travel; it just wasn't worth the growing problems and increasing costs. Instead, we decided to buy a close-to-home apartment in Manhattan and use it to vacation in the city. This website describes how we did it, our mistakes, and how you can do it better.
It's called "staycationing," vacationing close-to-home, and it's gaining popularity fast as travel problems worsen and travelling gets more expensive. The stress of long lines, demanding rules, and the growing number of delays, cancellations, and changes are causing people to question their decisions to vacation in distant places. Millenials, for example, are now taking three "staycations" a year on average. It makes sense; for most of us there's usually plenty worth visiting close to home, especially if your home, like ours, is Manhattan.
Of course, a staycation in Manhattan doesn't require that you rent or buy an apartment. But, we knew that if we allowed our journey from our home in Staten Island to Manhattan to feel like a commute, our plan wouldn't work. We also knew that if we we're too regimented about "visiting Manhattan destination," that our plan would soon feel like work. Instead, we needed to immerse ourselves in city life such that touring came naturally and at a leisurely, vacation-like pace."
Getting to our Manhattan "staycation" home from our permanent residence needed to be easy and touring the city needed to feel natural just like it would if we were visiting Paris, Rome, or London.
On the other hand, we were not so obsessed with the staycation idea that we were ready to become full-time Manhattan residents. We estimated that we would split our time 60-40 between our home in Staten Island and Manhattan.
An apartment used for this purpose is called a pied-a-terre, a French phrase that literally means "foot on the ground" and describes "a second home in a city used to take advantage of city life on a temporary basis." The pied-a-terre doesn't replace the primary residence, it complements it like a beachhouse. This would allow us to keep our Staten Island doctors, neighbors, friends, restaurants, and activities.
An apartment used for this purpose is called a pied-a-terre, a French phrase that literally means "foot on the ground" and describes "a second home in a city used to take advantage of city life on a temporary basis." The pied-a-terre doesn't replace the primary residence, it complements it like a beachhouse. This would allow us to keep our Staten Island doctors, neighbors, friends, restaurants, and activities.
A pied-a-terre was a compromise that allowed us to keep our home and our regular lives while we staycationed stress-free in Manhattan.
We thought we could do this for close to the same money we were spending on vacation travel. As it turned out we could, but only if our pied-a-terre was the size of a hotel room.
By definition, your staycation destination needs to be close to home, but more importantly it needs to be big and diverse and interesting enough to compete with those faraway destinations you've visited. We choose Manhattan because it could compete.
We didn't start out thinking that the right staycation destination for us was Manhattan, we thought it was Boston, where our daughter and her family lived. After all, it's a great and beautiful city with lots of history, tradition, and places to visit, and it's close enough to Staten Island for us to drive to in a few hours.
To try it out, we rented an Airbnb apartment on Beacon Hill across from Boston Common that cost us $8,000 for six weeks...we only lasted for three. Yes, Boston is a great and beautiful city--walkable with plenty of historical and cultured attractions--but it's far too small as a long-term staycation destination. We simply ran out of places to visit in three weeks. Sure, we could had adapted, but Boston was not delivering on our goal of a long-term vacation replacement.
Manhattan, on the other hand, has never run out of things for us to do in 50 years of visiting the city. It is a completely different destinmation than Boston; it's a massive, high-energy metropolis with literally ten times more people and land area and far more attractions...think Broadway, Lincoln Center, Greenwich Village, Central Park, Fifth Avenue and lots more. Sure, Boston has it's version of all of these, but their scale is an order of magnittude smaller.
To try it out, we rented an Airbnb apartment on Beacon Hill across from Boston Common that cost us $8,000 for six weeks...we only lasted for three. Yes, Boston is a great and beautiful city--walkable with plenty of historical and cultured attractions--but it's far too small as a long-term staycation destination. We simply ran out of places to visit in three weeks. Sure, we could had adapted, but Boston was not delivering on our goal of a long-term vacation replacement.
Manhattan, on the other hand, has never run out of things for us to do in 50 years of visiting the city. It is a completely different destinmation than Boston; it's a massive, high-energy metropolis with literally ten times more people and land area and far more attractions...think Broadway, Lincoln Center, Greenwich Village, Central Park, Fifth Avenue and lots more. Sure, Boston has it's version of all of these, but their scale is an order of magnittude smaller.
Lesson learned: make sure your staycation destination is going to keep you busy "vacationing" for a few years.
The location you choose needs to fit the staycation purpose by being big, diverse, and interesting, but its "pros" also need to overwhelm its "cons." This sounds very objective and scientific but of ourse, it's not; it's highly subjective. Still, it's critical to understand what these pros and cons are, to think and talk about them with your partner, and to write them down for future reference. This is especially important in a place with such extreme extremes like Manhattan. As we all know, when you want something, it's easy to get seduced by the pros and ignore the cons.
Here's are the lists we made and discussed ad nauseum.
Manhattan Pros (a partial list)
Manhattan Pros (a partial list)
- The city is magical...the center of the universe.
- Home to many of the country's largest corporations.
- The world's financial capital.
- A place where many of the richest and most famous choose to live.
- Full of world-reknown parks, museums, hotels, shops, and cultural centers.
- Repleat with excellent systems for transportation, hospitals, fire, police...
- Where Broadway, Times Square, 5th Avenue, The Village, Macys...are found.
- "If you can's find it in New York, it doesn't exist."
Manhattan Pros (a partial list)
- One of the most expensive and complex real estate markets in the world.
- Crowded with 65 million tourists a year whose interests often conflict with resident's.
- Overfull of cars, trucks, buses, and electric bikes that make streets dangerous.
- There's noise, dirt, dust, and soot everywhere.
- Everything you need--food, transportation, medication, services--costs more.
- Taxes are exhorbitant, especially if you're rich or spend like you are.
- Driving is a nightmare and road-use tolls and fees are outrageous.
- Street parking and parking lots are expensive and spaces are often unavailable.
The pros and cons you identify and talk about are not definitive, but by thinking and talking about them, you take a giant step towards making a well-reasoned decision.
In the end, after reviewing all the good and bad about the city, we consciously picked Manhattan as our staycation destination. This helped when we actually experienced the cons.
Manhattan is a complicated real estate market. Make a list of the decisions you will need to make--usage, location, budget, ownership, size, facilities--and do the research so you're informed when the time comes.
- Trade-offs…How are YOU going to use YOUR apartment? This question drives high-level decisions that narror the scope of your decisions and make it sensible to beging working on the details.
- Location…Just like evertyone says, it's all about location. Every street, every block in Manhattan has a unique personality, make sure the one you pick fits with yours.
- Cost…Manhattan is uber-expensive. Know what things cost and have a budget that makes sense.
- Try everything out...no matter how convinced you are, what's in your head is often wrong when you experience it first-hand.
- Buy v Rent…It's not at all obvious; settling on which is right for you is a critical first step.
- Condo vs. Co-op…You need to know the pros and cons of each before you start looking.
- Apartment…Everything about your future living space--size, layout, rooms, light...--is important.
- Building…Everything about your apartment's "container"--age, services, facilities, governance...--is important.
- Access…Getting to/from your pied-a-terre destination is critical to ensure that your "want" to go and to be there.
- Representation…You will need help at every step in the process. Choose this help wisely.
Make a list of the decisions you will need to maske then do the reseach so that when these decisions are at hand, you're ready to evaluate.
Requirements lead to realistic trade-offs which lead to well-informed decisions. This top-down approach is significantly better than the bottoms-up method of touring generally-suitable apartments looking for "the one."
It seems incredibly dumb in retrospect, but we started by touring apartments even before we knew exactly how we were going to use the apartment and before we knew our minimal requirements. Sure, we had some ideas, but they were far too unformed to limit our options and certainly too vague to drive decisions. What we needed to avoid wasting our time and that of anyone we asked for help was a series of questions and answers that presented the trade-offs needed to narrowed our scope. For example...
What's the purpose of the apartment? Easy and leisurely Manhattan staycations.
How much time would we spend there? About 12 days a month, traveling in from Staten Island.
How long do we expect to be there? Four or five years.
How big does it need to be? One bedroom at least, preferably two.
Do both bedrooms need to be full size? No, just one.
What do we minimally need in the apartment? One bathroom, lots of light, a kitchen window, a place for an early-morning office, a view.
What kind of neighborhood? Lively and active, within easy walking distance of stores, restaurants, and the park. More residential than touristy, but not totally residential.
Can we use buses and subways? Yes.
Do they need to be close? Yes, we're healthy but old.
What must we have in the building? A doorman and an elevator.
What's our budger? Price: $1 million; Carrying costs: $3,000 a month.
What help do we need to start? An accountant to confirm our budget and a real estate agent familiar with lots of neighborhoods.
Do we need street parking? No, just a nearby lot for guests.
How much time would we spend there? About 12 days a month, traveling in from Staten Island.
How long do we expect to be there? Four or five years.
How big does it need to be? One bedroom at least, preferably two.
Do both bedrooms need to be full size? No, just one.
What do we minimally need in the apartment? One bathroom, lots of light, a kitchen window, a place for an early-morning office, a view.
What kind of neighborhood? Lively and active, within easy walking distance of stores, restaurants, and the park. More residential than touristy, but not totally residential.
Can we use buses and subways? Yes.
Do they need to be close? Yes, we're healthy but old.
What must we have in the building? A doorman and an elevator.
What's our budger? Price: $1 million; Carrying costs: $3,000 a month.
What help do we need to start? An accountant to confirm our budget and a real estate agent familiar with lots of neighborhoods.
Do we need street parking? No, just a nearby lot for guests.
Of course, in the beginning our list of requirements was just an unrealistic wish list, but the more we learned, the more we were able to make the trade-offs needed to whittle it down in an organized way. Believe me, it helped us with out thinking.
It helped our agent even more. Contrary to popular opinion, smart agents are not going to insist on a list of requirements or push you in a particular direction. Their job is to get you to buy something by building your confidence in them, which leads to a dependent relationship. The more time you spend touring apartments, the more of a relationship that develops. You can and should short-circuit this process by having a list ready and refine it over time.
It helped our agent even more. Contrary to popular opinion, smart agents are not going to insist on a list of requirements or push you in a particular direction. Their job is to get you to buy something by building your confidence in them, which leads to a dependent relationship. The more time you spend touring apartments, the more of a relationship that develops. You can and should short-circuit this process by having a list ready and refine it over time.
Make another list of requirements and whittle it down as you learn. At some point, the trade-offs you need to make will become obvious.
I'm sure you have gotten the idea by now--buying an apartment, even a part-time pied-a-terre in manhattan is not for the feint of heart. You can greatly reduce the stress by knowing what decisions you will need to make and by understanding your decision-making options in detail. Most of us who have been around for a while (we're in our 70s) understand that when it comes to real estate, there are no experts. This applies in spades to Manhattan which has its own byzentine rules and conventions. Preparation is the only way to cope and this begins with making a list of decisions.
Requirements lead to realistic trade-offs which lead to well-informed decisions. This top-down approach is significantly better than the bottoms-up method of touring generally-suitable apartments looking for "the one."
It’s not just an old joke. Location is the most critical decision you will make. You must fit in the place you choose to live. Sure, this is true for real estate anywhere, but it’s even more important in Manhattan where one location, even one right next door to another, can be night-and-day different. Everyone knows this, of course, but not many appreciate what makes locations different, and what differences are important. The people, lifestyle, stores, parks, parking, police, transportation, and lots more are all critical. The avant guard Village, for example, is on another planet when compared to the conservative Upper East side.
But it’s not just “the neighborhood” that’s important. Although it’s possible to make general statements the Upper West Side, Upper East Side, Harlem, Hell’s Kitchen, SOHO, Chinatown, the Financial District, and the Village, it’s the specific street and block that really counts. We fell in love with the Upper West Side (UWS), for example, because we liked the residential feel of the place and the presence of upscale restaurants, high-end stores, transportation, supermarkets…but even on the UWS, every block is different. The culture-rich, touristy Lincoln Center area is very different from the shopping and restaurants found in the Broadway corridor, which is very different from the ritzy, streets adjacent to Central Park, which is very different from the quiet, residential streets near the Hudson river.
But it’s not just “the neighborhood” that’s important. Although it’s possible to make general statements the Upper West Side, Upper East Side, Harlem, Hell’s Kitchen, SOHO, Chinatown, the Financial District, and the Village, it’s the specific street and block that really counts. We fell in love with the Upper West Side (UWS), for example, because we liked the residential feel of the place and the presence of upscale restaurants, high-end stores, transportation, supermarkets…but even on the UWS, every block is different. The culture-rich, touristy Lincoln Center area is very different from the shopping and restaurants found in the Broadway corridor, which is very different from the ritzy, streets adjacent to Central Park, which is very different from the quiet, residential streets near the Hudson river.
Hover Me
You get the idea. To understand this at the level of detail necessary to make a decision about living on a particular block or street, you need to spend time there. Walk around, go to the restaurants, see a movie, sit in the park and people watch, talk to people, take an inventory of what's around, Google the locations and read what people have said, watch for police and fireman, find the bus and subway stops, find out what lines are served and where they go, get information on parking lots and the cost of street parking, take note of the traffic, the noise, the trash, the condition of the streets... The more you know about the location, the more confident you will be in a decision to buy.
Experience the locations you think are right for you first-hand by going there and taking notes. Without notes, unless you are intimately familiar with the place, you will forget what you find, making it difficult to compare on location to another.
I'm sure you have gotten the idea by now--buying an apartment, even a part-time pied-a-terre in manhattan is not for the feint of heart. You can greatly reduce the stress by knowing what decisions you will need to make and by understanding your decision-making options in detail. Most of us who have been around for a while (we're in our 70s) understand that when it comes to real estate, there are no experts. This applies in spades to Manhattan which has its own byzentine rules and conventions. Preparation is the only way to cope and this begins with making a list of decisions.
Most people believe that renting, even if the apartment you want requires a two-year lease, is much less expensive than buying.
I disagree. According to my analysis (shown below), it costs the same to rent a $1,000,000 apartment as it costs to buy it if you must stay there for two years. Worse, if you decide this apartment is the pied-a-terre for you, it will cost you $101,000 MORE to rent than to buy for five years.
I disagree. According to my analysis (shown below), it costs the same to rent a $1,000,000 apartment as it costs to buy it if you must stay there for two years. Worse, if you decide this apartment is the pied-a-terre for you, it will cost you $101,000 MORE to rent than to buy for five years.
Sure, I've made several assumptions like
...the buyer is a New York city resident and that his/her combined marginal fed/state/city income tax rate is the maximum 51.8%, which is not unreasonable given that the buyer can afford to buy a million dollar pied-a-terre;
...the appreciation on the apartment is 2.5% a year (the average annual appreciation for Manhattan condos is about 9% over the last 25 years);
...the building's monthly maintenance is $1,200 and the apartments monthly real estate tax is $1,200 which is about the average for a high-end building with "good" facilities and personal services;
...the current real estate tax deduction max. of $40,000 is maintained as is a 20% rate on capital gains and, of course, the mortgage interest deductions on a second home stays.
Which I believe are all reasonable.
This suggests to me that buying is a better option than renting if you are committed to the staycation and pied-a-terre plan. According...
...the buyer is a New York city resident and that his/her combined marginal fed/state/city income tax rate is the maximum 51.8%, which is not unreasonable given that the buyer can afford to buy a million dollar pied-a-terre;
...the appreciation on the apartment is 2.5% a year (the average annual appreciation for Manhattan condos is about 9% over the last 25 years);
...the building's monthly maintenance is $1,200 and the apartments monthly real estate tax is $1,200 which is about the average for a high-end building with "good" facilities and personal services;
...the current real estate tax deduction max. of $40,000 is maintained as is a 20% rate on capital gains and, of course, the mortgage interest deductions on a second home stays.
Which I believe are all reasonable.
This suggests to me that buying is a better option than renting if you are committed to the staycation and pied-a-terre plan. According...
Do the research, commit to the staycation and pied-a-terre decisions, and BUY rather than rent.
This is what we did so we could make changes and improvements that fit our needs. This is a significant advantage as your long-term use of the apartment depends on how much you enjoy staying there. Whatever you "save" in renting is irrelevant if an unsatisfactory condition of the apartment undermines your plan.
If I believed that renting was the "safer" route than I would reevaluate my commitment to the plan as the absolute safest and least costly option is to do nothing.
If I believed that renting was the "safer" route than I would reevaluate my commitment to the plan as the absolute safest and least costly option is to do nothing.