Combining apartments: Need another bedroom or two? How about the ones next door?

As you may have heard (over and over again), there are very, very few apartments for sale in Manhattan.  

Need a bigger apartment?  Too bad.  There aren't any.  So more and more, people are buying the apartment next door and combining it with the one they already have. 

Some may even buy the apartment beyond the one next door as well, or the one on the other side of theirs, or upstairs, or downstairs.  I’ve seen combinations of as many as four units.

This can be a satisfactory arrangement for all concerned.

The people next door may be motivated to sell by the prospect of getting a higher-than-market price for theirs, as they hold all the negotiating chips.  

The buyers pay a premium, but they get the additional space with considerably less hassle than they’d have if they sold their current apartment and bought another larger one, assuming they could even find another larger one.

Plus, there's synergy in a combination.  

Jonathan Miller's Combinations: Creating a Larger Manhattan Co-op or Condo says that the more square feet involved, the higher the price per square foot, or in Miller’s words, “1 + 1 = 2.5.”   So the combination is worth more than its components would be worth separately.

Miller is president of Miller Samuel Inc. Real Estate Appraisers and Consultants, and the universally acknowledged best source of information on  Manhattan real estate.

The value of the smaller apartment in a combination is increased even more if it’s in the back of the building, gets less light, or has other disadvantages.  

Now it’s part of a nice big apartment in the front of the building with plenty of light.  If it’s turned into, say, a master suite, the lack of light may become an advantage. 

Some combinations work more gracefully than others.  Here’s what to watch out for:

If you’re thinking about converting one of the kitchens to a bathroom, check with a plumber well in advance to make sure the waste line in the kitchen will accommodate a toilet. 

If a bathroom is to become a laundry room, remember you’ll have to either vent the dryer or get a dryer that does not require venting.

If you want to move or add plumbing, especially if you’re thinking about converting a closet to a powder room or laundry room, be aware that most buildings do not allow wet rooms over dry rooms.  

The room directly below the closet you’re thinking of converting is also a closet.  Leaks happen.  Nobody likes leaks, especially leaks into closets.  Closets are where people keep things they particularly don’t want to get wet. 

Be aware that your maintenance may be disproportionately high.  As of course you know, maintenance in a co-op (I’m dealing mostly with co-ops as they comprise the lion’s share of ownable residential real estate in New York) is based on the number of shares attached to the apartment in a co-op.  

From the many offering plans I’ve looked at, it appears that an apartment gets a certain base number of shares just for existing as a discrete unit.  Then more shares are added for higher floors, balconies, fireplaces, etc.   

After you combine, you have the base number of shares for two or more apartments instead of just one.  

Thus your new three bedroom apartment may have significantly more shares—and thus significantly higher maintenance—than a three bedroom in the same building that’s not a combination.  

Of course you will play with the floor plans, which should be in your co-op or condo’s offering plan. 

If you’re combining two or, especially, more than two one-bedroom apartments, you may have to do significant reconfiguring in order to have a living room that’s big enough to be in proportion to the size of the new space. 

Make sure the new living room will be facing the street, not a brick wall or an airshaft (a courtyard in real estate language).  

Check for lot line windows in the new apartment (these are windows that legally don’t exist, as they will be lost if another building goes up next door).  

Note that thick black lines in floor plans indicate walls that can’t be removed—either they’re holding up the building or they house plumbing risers or something else too important or difficult to change.

The fewer obvious seams between the apartments, the better.  The combinations that work best, and are most valuable for resale, are those where you can’t tell where the division was originally.  

Be aware that an architect may have better ideas for arranging the space than you will, but be absolutely sure you hire an architect who has combined apartments in the past and is familiar with co-ops.

There are also legal issues to be addressed, such as what to do about the stock certificates, and what impact the combination will have on the building's certificate of occupancy.  

Miller suggests keeping the stock certificates separate, to give the owners and the co-op more flexibility.  

But if you keep them separate,  you may have to re-separate the two apartments, restore a kitchen, put up a wall or two, or whatever, when you ultimately sell.  

Talk about what to do with the stock certificates with your lawyer and of course your co-op board and or managing agent.  

If possible, talk to someone in your building who has already done a combination.

By the way, even if you’ve owned your apartment for many years, you will need co-op board approval to buy a second one in the building.  You will most likely have to go through the same process you did the first time.  For a condo, you will still probably have to get a waiver of the right of first refusal.

Any questions?  E-mail cstimpson@stribling.com or call 917-991-9549.  I'll either answer them or know where to get the answers.

Yes, rent is very high in New York. But it's a lot higher in Los Angeles,* and that's not counting the car.

More years ago than I care to admit, when I was a very young advertising copywriter in Los Angeles, I needed to borrow money to buy a used Volkswagen.
 
I had been taking the bus to work from the north end of Van Nuys, where rent was cheap, to Wilshire Boulevard, where the ad agency was cheap.                                                                                                             

It was sometimes said that this was a great agency if your parents could afford to send you there.  At the time it was considered the best in the world.  I wasn't about to seek a better salary elsewhere.

But after a year of spending three hours a day commuting, including half an hour walking to and from the bus stop on Victory Boulevard and twenty minutes waiting for a connecting bus at Hollywood and Highland, I was finally earning enough to buy a small, inexpensive car.  

The bank reluctantly gave me the loan.  They were reluctant because my rent was too high--23.5% of my salary.  

The rule then was that your rent should be no more than 20% of your salary.  They wanted me to live someplace even cheaper.

Today in Los Angeles, median rent is now a horror-inducing 47% of median income, or exactly double what the bank thought was too high for me years ago, according to a recent article in The New York Times (In Many Cities, Rent is Rising Out of Reach of Middle Class). 

And in Los Angeles, you also have to pay for a used Hyundai, a new Maserati, or something in between.  Then, after you pay for the car, you have to pay to park it, to insure it, to put gas in it, to change its oil, rotate its tires, and on and on.  Cars are expensive.

The magic proportion for a landlord is now 30% or less (re less: fat chance for most).  That’s what a landlord wants to see when you fill out an application to rent an apartment.

The Times, citing an analysis done for the paper by a real estate website, says there are 90--90!--U.S. cities where the median rent, not including utilities, is more than 30% of median income.  Los Angeles is at the top of the list.

Presumably, people moved in when their rent was no more than 30% of their incomes, thus satisfying the landlord, but then their rent went up and their incomes didn’t.

New York ranks tenth on the list, with median rent at 39.5% of median income.  

But our position is artificially high to my way of thinking, as New York is the ONLY city on the list where you don’t have to have the added expense of a car.  (Try living in LA without one, as I did for a year. Or in San Diego, or Flagstaff, or Hattiesburg, Mississippi.)

California is over-represented in the top twenty, with nine cities.  New York state has only two, us and Ithaca.

So yes, if you’re renting in New York, you definitely have a right to complain.  But you’d have a right to complain a lot louder if you lived in LA, or any of the other eight cities where rent takes more of your income than it does here.  Not to mention the car.

E-mail or call me any time if you have any questions about real estate, or just want to discuss. cstimpson@stribling.com, 917-991-9549 

*Several people have pointed out to me that this headline is not strictly accurate.  They're right. In absolute dollars, rent is probably higher in New York.  It's as a percentage of income that the rent is higher in LA.