Investors are buying up apartment buildings in Manhattan and converting them back into single-family homes. Townhouse sales, in particular, are becoming increasingly popular. In the last three years more single to triple family units have been bought than in the previous three years combined. But why is this happening? It appears that luxury real estate changing hands amongst wealthy investors is more profitable than dealing with smaller sales from the ordinary homeowner, who is buying property for completely different reasons.
Long-term buyers are finding it so difficult to find a single-family home in Manhattan that they are creating their own. Ironically, many of these townhouses were initially single-family homes to begin with. Now, buyers are investing millions to renovate and re-build them back to their original layouts from their current multi-family state. This often involves redoing the plumbing, wiring and tearing out walls placed in after the fact.
Manhattan realtors estimate that the average complete townhouse in the Upper West Side costs approximately $10 million. Renovations to revert the building to its initial layout can set them back an additional $3 million to $5 million.
On the flip side, multi-family rentals are becoming more popular in the city. The post 2008 employment environment is still uncertain, meaning that more and more people are renting, sometimes with several other families. It is not the ideal scenario for an owner. With every new member on the contract, the odds of rent being missed, or problems arising increases. In light of a tenuous rental market, the idea of renting out individual suites in one’s townhouse becomes less appealing, perhaps indicating why more owners are opting to convert multi-family townhouses into single dwellings, and catering exclusively to the luxury market in Manhattan, as opposed to the general population.
It is one thing to own a residence for your family to put down roots, and another to analyze the current status of the housing market in terms of the rental potential and ease of resale down the road. With multi-family rentals becoming more popular, it looks like the renovations to convert to a single-family home may be well worth the investment.
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