The Full Nelson

The Turnkey Premium

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DUQO_50_Orange_StreetIt should be obvious that properties which are in great condition sell for more than those in need of repair, but by how much of a margin? Is it cheaper to buy an investment property and do the work yourself?

To consider this question, I wanted to compare two recent Brooklyn Height sales. One was a vacant turnkey property at50 Orange Streetwhich my office recently sold. The five-story, 12,583 SF elevatored building sold for $7,100,000 or $546/SF.

The property had been owned by The Watchtower Bible and Tract Society of New York, Inc. for over 20 years. The property had been maintained according to the incredibly high standards of care and attention that Watchtower is particularly well-known for. The Witnesses' award-winning restoration and maintenance of their properties is well-documented.

In 2006, a renovation of the property was completed including the installation of a new elevator and central heating and air-conditioning system. The property also features views of theManhattanskyline, harbor, and bridges from the upper floors. There were a total of 20 residential units of which10 are studios and 10 are one-bedroom units.

So how much would this property have sold for if it required a gut renovation?

Nearby, 184 Joralemon Street, a vacant residential building, recently sold for $10,756,000 or $387/SF. The buyer plans on renovating and selling condos. He will likely get around $800/SF after doing about $200/SF of renovations.

This would suggest a difference of about 40% on the purchase price between the two properties. Another way to look at this is once the buyer renovates the property, he'll have the same basis asOrange Street, albeit with higher end finishes for a condo buyer.

If doing this extra work to unlock value doesn't appeal to you,Massey Knakalis marketing two other properties on behalf of the Watchtower:

183Columbia Heightsis a seven-story elevatored apartment building which will also be delivered vacant. It is located between Clark and Pierrepoint Streets just steps from theBrooklynwaterfront promenade. The gorgeous residential building has been immaculately maintained and features 10' ceilings, storage space, a bike room and laundry room. Additionally, the property features stunning unobstructed views of theManhattanskyline, harbor, and bridges from the upper floors. The building is approximately 15,158 gross square feet including the cellar and consists of 13 fair market apartments. The asking price is $7,100,000.

Just a few buildings away is a beautiful five-story townhouse located at 161 Columbia Heights, which consists of seven fair market units, one rent stabilized unit and two rent controlled units. The building is approximately 7,513 gross square feet including the cellar. The property is an excellent candidate for an owner user who wishes to live in a portion of the building while receiving income from the remaining apartments. The asking price is $3,450,000.

These types of opportunities are ideal for a first time buyer, someone who is not predominantly in the real estate business, or a foreign buyer. Although turnkey properties do not have the value-add component, they do not require ongoing renovations or constant attention. This is a great trade off for many.

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