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How much apartment can you afford?

By: Cotton Delo
Published: 6/19/2007Source: Resident Magazine

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Though you might think earning riches means you can buy a penthouse apartment overlooking Central Park, the calculus of Manhattan real estate isn't so simple.

According to financial planner Al Zdenek - CEO of the New York-based Zdenek Financial Planning - your salary isn't directly proportional to the apartment you can afford. It's just one variable in a complex formula - which takes into account the lifestyle you aspire to, the amount of income tax you pay, and the amount you choose to set aside for retirement. Thus, imprudent big spenders could wind up working far into their Golden Years.

"If a person is going to all of a sudden go out and buy a place without looking at those three components, they could wind up having a lifestyle they like and paying too much in taxes and not saving anything for their independence," said Zdenek, whose clients typically have a net worth of $4-$20 million. - Cotton Delo


What a fortune will get you

The search for a decent, affordable apartment in Manhattan can seem like an exercise in futility for those born without a trust fund, but for the city's ultra-rich, real estate purchasing options become more interesting.

With $20 million in liquid assets, the elegant residences that define New York in the popular imagination - from gorgeous West Village brownstones to stately Upper East Side coops overlooking Central Park - are within reach.

Though it's the iconic former domain of bohemians and artists like Allen Ginsberg and Jack Kerouac, the West Village is turning into "Beverly Hills East," said Prudential Douglas Elliman agent Tony Sargent, who adds that the neighborhood's housing stock is highly sought-after by Hollywood producers, starlets and hedge fund managers.

He described the stretch of Waverly Place between Bank and Perry streets as the "Park Avenue" of West Village townhouses, and glitterati like Liv Tyler, Julianne Moore, Sarah Jessica Parker and Vanity Fair editor in chief Graydon Carter all live in the vicinity.

A house Sargent recently represented on that strip was a Romanesque revival designed by Carnegie Hall architect William Burnet Tuthill; it went on the market at $6.3 million but sold for $6.8 - payable only in cash.

Though a person with a mere $5 million in the bank could potentially have made that deal if financing were an option, a vast number of the city's elite properties require tremendous liquidity.

Take tony co-op apartments, whose prices only reflect the tip of the iceberg of a buyer's wealth.
Doug Russell, who heads the Russell Condominium Group at Brown Harris Stevens, described a 2,700-square-foot apartment with two terraces he represented on East 70th Street, which recently sold for $3.2 million, payable in cash - a relatively low price for the neighborhood, due to the extensive renovation the unit needed.

But, in addition to signing on to pay the $9,264 monthly maintenance fee, the new owners had to demonstrate they had four to five times the asking price in liquid assets - ostensibly for no better reason than to demonstrate they're of a kind with the neighbors.

Though it seems like every big spender wants to own a piece of classic New York, the extravagent properties in new developments tend not to stay on the market for long, either.

A paradigm in the building of luxury condos is 40 Bond, a product of the collaboration of famed developer Ian Schrager and Swiss architects Herzog & de Meuron. According to Kyle Blackmon of Brown Harris Stevens, it's the attention to details like finishings, windows and lighting that helps these apartments sell for $10 million apiece since becoming available in June 2006.

Blackmon says the market for $20-35 million apartments has gotten hot lately - due largely to Wall Street and hedge fund bonuses as well as the devalued U.S. dollar, which has let foreign nationals plunge into real estate with new relish.

Lest you imagine the super-rich are putting all their golden eggs into one basket, rest assured - properties like 40 Bond are often a mere pied-…-terre, or a small second home for trips to New York.
"I don't even know of a case when someone's buying a $10 million apartment and they don't have multiple homes," Blackmon said.

 


What renting gets you

Everyone knows buying an apartment makes more financial sense than renting one - for those who can afford it.

So why are there so many well-heeled renters in the city? Many are executives who've relocated from other cities, according to Paul Gavriani of the real estate brokerage firm the Corcoran Group. Others are weekenders seeking a New York pied-…-terre instead of a permanent home, couples giving cohabitation a try, and people who love a certain neighborhood (i.e. the West Village) but are having trouble finding the right unit to buy.

Whether you're a hedge fund manager renting a cavernous loft or a recent graduate inhabiting a space so tiny it makes you wonder if you've grown, landlords typically want you to earn 40 to 45 times the monthly rent annually. (For parents who agree to guarantee their child's lease, this climbs to 80 to 85 times.)
"It's a landlord's market," said Gavriani. "It's probably the most expensive market, in dollar terms, we've ever seen."

So, if you do the math, the renter of a $2,400 studio (a recent aggregate price) would make at least $96,000, the renter of a $3,400 one-bedroom would make $136,000, and the renter of a $5,500 two-bedroom would make $220,000.

Getting beyond the ordinary, if $16,500 is burning a hole in your pocket each month, you could rent a penthouse in Murray Hill. It has three bedrooms and three bathrooms on two levels, as well as three wood-burning fireplaces. There's also a 3,000-square-foot terrace for hosting soirees.

Luxurious as that sounds, it only scratches the surface of what's available in New York - for a price.
The Waldorf Towers, 100 E. 50th St., have monthly rentals ranging from $15,000 to an eye-popping $130,000.

The amenities of the highest-end rentals - starting at $65,000 per month - include an enormous entry gallery that may be marble, intricate moldings, a formal dining room, an original marble bath, views of the Chrysler building and five-star hotel service.
"Some people just like hotel living," explained executive listing broker Margaret Bay. Describing an archetypal Waldorf Towers resident, she gave the case of a divorc‚ who left his Park Avenue abode, moved to the hotel for convenience's sake, and ultimately preferred to stay instead of dropping $20-40 million on a new home.

No matter what your price range is, this is the time of year - from May to September - to rent, since approximately 80 percent of properties are changing hands.

Gavriani says it's due to the influx of people arriving in the city to start new jobs after graduation and the tendency of parents to coincide a move with the start of the school year. He also noted that it's a self-perpetuating cycle, since many landlords agree to continue a lease with outgoing tenants on a month-to-month basis until spring arrives and demand is sure to be strong.


What six figures get you

A six figure salary means big real estate in most parts of the country, but in Manhattan that sum won't buy you a castle.

In fact, how about a studio? A yearly income of $100,000 in many cases gets you a studio apartment in the high $300,000 range, said Hubert Etchison of the Corcoran Group. Though what that means in terms of living space depends on what neighborhood you're hoping to live in.

If you're hell-bent on living in the West Village, you can get a 400-square-foot cubbyhole on West 9th Street. You'll pay $385,000 - 25 percent down, as opposed to the more typical 20 percent - for the privilege of living near Washington Square Park.
For a slightly more spacious abode, you might consider Midtown. A 450-square-foot studio on East 50th Street is going for $399,000.

However, if you're willing to be a pioneer in the gentrification of Washington Heights, you could live in relative luxury of a two-bedroom, 750-square-foot apartment with inlaid hard-wood floors and ornate French doors opening onto a master bedroom for $399,000.

Bear in mind, though, that the mortgage isn't all you're paying. Many first-time buyers forget that co-ops have maintenance fees - called common charges, in condo speak - that can exceed $600 per month in this price range.


What more than six figures gets you

A yearly income of $200,000 would be enough to finance a verdant suburban compound in Westchester, but if you've chosen to stay in Manhattan, you'll have to settle for something a bit more compact.

While earning in the mid-six figures doesn't rank you among the financial elite in a city stacked with billionaires like New York, it's enough to buy a space big enough to stretch out in. With $300,000 to 400,000 in annual income to work with, you could have a one-bedroom, 1,175-square-foot coop apartment downtown - like one on Nassau Street that recently sold for $1.2 million at over $1,000 per square foot, which has become commonplace in an area not historically known for residential development. It's ideal for a young couple with a baby - with coveted design elements like high ceilings and red brick walls.

Lower Manhattan "is suddenly surging in terms of condo development," said Prudential Douglas Elliman's Tony Sargent. Recent condo projects in the area include the William Beaver House and 25 Broad Street.
If you're making $350,000, you could buy a three-bedroom, 1,544-square-foot place with two terraces on East 50th Street in a relaxed co-op building that doesn't require approval from the board of directors. The price tag is $1.75 million, but only 10 percent is required down. It's spacious enough for a family of four, leading Corcoran's Greg Kammerer to call it an alternative to the suburbs.

But with a cool million per year in hand, the options become more engrossing. You could get a three-bedroom, three-bathroom, 2,570-square-foot unit on West 22nd Street that Sargent recently sold for $3.6 million. You'd need to make at least $1 million to even throw your hat in the ring, since it's in a hot section of Chelsea that's been getting high bids. But the greatest point of interest to many prospective buyers - all of whom worked in hedge funds, Sargent said - was its 1,000-square-foot terrace, built for raucous soirees.

Perhaps attracting a more subdued demographic is a $3.7 million apartment Kammerer represents in Astor Place on Lafayette Street - a three-bedroom, 2,250-square-foot loft-style apartment with graceful floor-to-ceiling windows providing dramatic city views in a building with a full-time concierge, fitness center and on-site garage.
"We've been getting artistic types for that," he said. "We've also been getting empty-nesters who want something kind of hip and cool but want all the amenities that go with it."

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