1) Buy some property. Put as little money down as possible.
2) Mortgage the shit out of the property. The more cash you can take out, the better. Make sure it is an interest-only balloon note of ten years or more.
3) Renovate the property. Be as cheap as possible and put as little of the cash back in. 50% or less is good.
4) Lease out apartments but keep 20% vacant to break any tenant association (at 85% occupancy tenant associations become powerful).
5) Co-op the building and sell all the apartments. All the debt (the interest-only balloon note) gets passed on to the new owners.
6) Take the profit (sales + whatever you skimmed off the original construction loan) and do it again.
7) Laugh your ass off when the balloon comes due and the proud co-op owners wake up to $40 million in fresh debt.
Example:
Non Sequitur
Nov 5, 17 6:32 pm
So the moral here is "dont buy into coop".
good to know. I'll stick with my detached single family early 60s bungalow.
citizen
Nov 5, 17 7:37 pm
Careful, NS... that's likely built by an evil developer, too.
Non Sequitur
Nov 5, 17 7:41 pm
perhaps, but I know who the builder was and if they were evil, they hid it well. 8-)
citizen
Nov 5, 17 8:02 pm
Yeah, they're good at that ;o]
geezertect
Nov 5, 17 8:29 pm
How could the debt be "fresh"? Wasn't it secured by the real estate and an existing encumbrance when the coop owners bought their unit?
Miles Jaffe
Nov 5, 17 9:06 pm
Interest-only balloon, no reduction of principle, has to be paid off or financed. Thus a brand spanking new full value mortgage, probably half of which the developers pocketed.
geezertect
Nov 6, 17 8:18 am
But, unless the buyers are completely stupid, they know about the debt before they buy. Anybody buying a seven figure living unit without a lawyer or title work doesn't get much sympathy from me. JMHO.
Miles Jaffe
Nov 6, 17 8:51 am
Lots of condos well under 7 figures, lots of ways to obfuscate the underlying debt, lots of lawyers do less than due diligence, lots of developers get property tax abatement that surprise! expire. And I only know a few of their moves on one project.
David Cole, AIA
Nov 6, 17 1:43 am
Biggest reason I left NYC. The real estate market there -- be it commercial or residential rental, co-op, or condo -- is a complete racket that attracts the worst people on the planet like flies to a pile of shit. I wasn't the least bit surprised when my last client there was named in connection with one of Trump's shady real estate dealings with the Russian mob.
I roll my eyes whenever people on the west coast suggest that co-ops are the solution to our housing affordability crisis. The typical co-op in NYC requires 20% down and perfect credit, and has the power to discriminate against any potential tenant for any reason, as long as they don't actually tell you to your face why they won't let you buy an apartment in the building.
1) Buy some property. Put as little money down as possible.
2) Mortgage the shit out of the property. The more cash you can take out, the better. Make sure it is an interest-only balloon note of ten years or more.
3) Renovate the property. Be as cheap as possible and put as little of the cash back in. 50% or less is good.
4) Lease out apartments but keep 20% vacant to break any tenant association (at 85% occupancy tenant associations become powerful).
5) Co-op the building and sell all the apartments. All the debt (the interest-only balloon note) gets passed on to the new owners.
6) Take the profit (sales + whatever you skimmed off the original construction loan) and do it again.
7) Laugh your ass off when the balloon comes due and the proud co-op owners wake up to $40 million in fresh debt.
Example:
So the moral here is "dont buy into coop".
good to know. I'll stick with my detached single family early 60s bungalow.
Careful, NS... that's likely built by an evil developer, too.
perhaps, but I know who the builder was and if they were evil, they hid it well. 8-)
Yeah, they're good at that ;o]
How could the debt be "fresh"? Wasn't it secured by the real estate and an existing encumbrance when the coop owners bought their unit?
Interest-only balloon, no reduction of principle, has to be paid off or financed. Thus a brand spanking new full value mortgage, probably half of which the developers pocketed.
But, unless the buyers are completely stupid, they know about the debt before they buy. Anybody buying a seven figure living unit without a lawyer or title work doesn't get much sympathy from me. JMHO.
Lots of condos well under 7 figures, lots of ways to obfuscate the underlying debt, lots of lawyers do less than due diligence, lots of developers get property tax abatement that surprise! expire. And I only know a few of their moves on one project.
Biggest reason I left NYC. The real estate market there -- be it commercial or residential rental, co-op, or condo -- is a complete racket that attracts the worst people on the planet like flies to a pile of shit. I wasn't the least bit surprised when my last client there was named in connection with one of Trump's shady real estate dealings with the Russian mob.
I roll my eyes whenever people on the west coast suggest that co-ops are the solution to our housing affordability crisis. The typical co-op in NYC requires 20% down and perfect credit, and has the power to discriminate against any potential tenant for any reason, as long as they don't actually tell you to your face why they won't let you buy an apartment in the building.