Should I Stay or Should I Go

By Robert Schork

It's been almost two years since the "condo bomb," as I affectionately call it, dropped on me and my fellow tenants in one of the highrises overlooking the Hudson in the Greystone section of Yonkers. There we were, all happily renting along with our year-to-year leases when our building got sold to new owners, who promised a lot of “improvements.”

We expected to hear the details at a meet-and-greet they held in our lounge, replete with refreshments (always the way to get a large turnout in our building).

Like many of the other residents, I was initially disgruntled at the prospect of “buy or get out,” (in their defense, they put it to us much nicer than that!). And like many of the residents, I’d been a happy tenant there for a long time (almost 10 years). Our new landlords quickly trotted out suits from the mortgage companies, extolling the virtues of home ownership at “informational” meetings that felt like 3-am infomercials. I was skeptical, but I attended. When my first session was over, my head was swarming with a new lexicon of terms — I didn’t know my basis points from my ARMS. To be honest, the most experience I had in buying and selling real estate was bankrupting my sister, mother, and father with my hotels on Boardwalk and Park Place during family Monopoly sessions. Ergo, I soon realized a crash course in real estate was in order — several of them to be exact. I needed to learn all about condos vs. co-ops, I needed to understand all about mortgages, and, as the unfolding sub-prime mortgage mess would soon underscore, I needed to bone up on my understanding of interest rates (I was an econ major in grad school, but that was, ugh, 10+ years ago). That night I was closing down the Barnes & Noble, buying their last copy of Mortgages for Dummies (no kidding).

I hope to visit these and other topics in greater detail in future posts, but today I want to take up the initial question I had to answer: Stay and buy, or move out?

The answer becomes every bit as emotional as it does financial. I ultimately chose to buy. I loved the building, its amenities, location, and especially its stunning views of the Hudson, Tappan Zee and Palisades. And I knew the market, kind of. Because the sales market has been in decline, people have been shifting towards rentals. This has meant an ever-tightening rental market, especially in the city but also here in Westchester. I made a short-list of rental properties I found desirable in the area, only to find out many had long wait lists. The high demand for good rentals also drove up their cost, which further narrowed the cost differential between renting something in a comparable setting versus staying and buying.

Not only has the demand for rentals been increasing, but it’s been going up at the same time the rental supply has been declining. The previous owners of my building sold it because they, like many residential property firms, had been divesting their rental properties to focus more on sales and new construction. When I moved to my neighborhood a decade ago, the majority of the buildings on my strip were rentals. Now, almost all have converted to condo or co-op. I concluded that unless I switched to single-family-dwelling-style rental housing (i.e. renting that floodable basement apartment or that Greg-Brady-style attic studio), that moving to a similar highrise or complex could very well return me to the same position a year or two from now if they decide to convert.

A third option did exist — buying someplace else. I had explored that, too. In my situation, our building has a unique set of characteristics that made it difficult for realtors to assemble good “comps,” or comparable properties, for us to view. However, many of us did look at similar housing in the area. Most of it was new construction, which carried with it a hefty “new” price tag. Renovating and remodeling our middle-aged but well-maintained building seemed more and more to be the most cost-effective option.

But if you think it all becomes cut-and-dry after making the big decision to stay, think again! In my next post I’ll walk you through some of the next set of questions and decisions I faced as a homeowner-elect.