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Purchasing a Manhattan or Brooklyn townhouse can be a complicated process, but with Elika representing you, it can be handled, with ease. We focus on representing buyers and providing the kind of unbiased expert assistance that guides clients through the entire process of purchasing a single or multi-family townhouse.
Elika is known for its attention to detail coupled with the kind of diligence, integrity and in-depth knowledge of the townhouse market that helps our clients make informed and financially sound decisions. A dedicated buyer’s broker, Elika saves our clients time and money.
From financing to negotiations, to contracts, inspections, and closing costs, we handle all of the details. That’s important because no two transactions are alike. In addition to providing tailored services, our goal is to utilize our negotiating strategies to secure the New York City townhouse of your choice at the best price, with the best possible terms, and with the least amount of hassle.
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New York City Townhouse Guide
This complete guide takes you through every step of the process of buying a townhouse in NYC.
Table of Contents
Buying a Townhouse
Anyone who has been looking for a new home in Manhattan or Brooklyn will have noticed that most of the properties for sale are co-ops and condos. While these types of properties may have many benefits, they also have downsides such as needing board approval for renovations and restrictions on noise levels. For those who want the ultimate privacy and own their piece of New York City land consider buying a townhouse.
Gardens, historical details, privacy, and many bedrooms and bathrooms are just some of the benefits of townhouse living. Space and flexibility they offer truly make them dream homes for many buyers. However, they also come with a whole new set of responsibilities. You’ll be responsible for salting your icy stoop, taking the garbage to the curb and maintaining your boiler and HVAC. But if it’s privacy and independent living that you’re after they’re probably the best choice in the whole city.
What is a Townhouse?
If you’ve recently moved to the city, or have only lived in apartment buildings until now, you may be a little uncertain as to what constitutes a townhouse. A townhouse is a multilevel residential structure which usually shares a wall with an adjacent property. They’re narrower than a detached house but typically provide some outdoor space in the rear. They can be found throughout NYC and are differentiated depending on the architecture and building material used.
The best-known type is brownstones, named for the reddish-brown sandstone from which they, are made. Different categories include clapboard, limestone, vinyl-sided and brick. Only about 2% of New York’s available residential properties are townhouses which makes for a competitive market and safer investment. You can gain the most advantage over other interested buyers by working with an experienced townhouse buyer’s agent.
Single Family Townhouses
A single-family townhouse is meant to house ‘one’ family. The advantage of a single-family home is that it will be ‘your’ home. The reality (compared to apartments) is that ‘you’ are responsible for everything about this home – including structural repairs and renovations. Single-family townhouses can be an expensive choice. If you can handle the purchase and you value freedom and privacy, a single-family home may be the right choice for you.
Multi-Family Townhouses
A multiple-family townhouse comes with a significant up-front cost (more than a single-family home). Since multiple-family townhouses include rental units, they can be a wise investment. Even if a buyer has to borrow the purchase price, these homes can work out to be an affordable choice in the long term. Homeowners will be able to collect rental income from tenants. The collected rent can go towards mortgage payments.
Lenders look more favorably on multiple-family home buyers. Often lenders are willing to give jumbo mortgages to on multi-family townhouses. The lender will even accept a lower household income. They understand that rent will supplement their income. If a home has six or more rental units, homeowners must charge within the guidelines of citywide rent controls.
What are the Benefits of Buying a Townhouse?
One of the most attractive benefits of townhouse living is that there is no co-op or condo board approval process to go through in the purchase or sale. Not only does this mean less hassle and delays in closing, but it also means no house rules. Coupled with that; most townhouses have backyards, decks or terraces and beautiful tree-lined streets.
I do not forget the original and historical details as well that you can find in each one — most, but not all, date to the 19th and early 20th century. Stained glass, original woodwork, and decorative fireplaces are just some of the unique details that buyers love.
There’s also the low carrying costs. By owning a townhouse, you can save big by avoiding monthly co-op maintenance and condo standard common charges to use the amenities found in many New York buildings. Along with that, real estate taxes are typically lower on townhouses.
What are the Disadvantages of Buying a Townhouse?
Like everything though, there are a few downsides to consider. The cost of maintaining the townhouse falls entirely on your shoulders. Unlike in a co-op, there’s no way to share, costs with other owners.
The townhouse and all its utilities are entirely your responsibility. If you’re planning to sublet by splitting it into multiple units, you may require a change in the Certificate of Occupancy — something which you should consult with a real estate attorney before doing so.
Townhouse Pros and Cons
In a crowded city like New York, privacy is always a luxury. But if that’s a high priority on your home wish list, then there’s no reason you can’t have it assuming you have the means. Owning a townhouse not only gives you greater privacy. You also get greater flexibility to make renovations without having to go through a pesky co-op board for approval. Nor will you have to deal with a downstairs neighbor making noise complaints. But it’s not all smooth sailing. Townhouse living also comes with maintenance responsibilities, which can be both a pro and a con depending on how you look at it. Here are the pros and cons to consider when buying a townhouse in NYC.
Pros
Lots of living space
Townhouses mean lots of living space. The average width of an NYC townhouse is 18-20 feet. Anything less is considered narrow while anything above 25 feet would be called a trophy property. This makes them perfect for a growing family as you won’t need to rent out storage over time.
It could have excess FAR
If the building has any extra, FAR this can be used to add extensions or additions onto the back of the building. When done right you can reap profits if you choose to sell in the future.
Privacy
Compared to an apartment building you have total privacy within a townhouse as you own the entire unit. You won’t need to worry about neighbors above or below you causing a nuisance with renovations or late night cocktail parties. Or if that’s what you plan on doing, then you won’t need to worry about much noise complaints.
Convenient location
Unlike detached houses, which are found, in the suburbs, most townhouses are located, in the city. Means you get the benefits of your own private space along with all the amenities and conveniences of living in the city.
You own the land
Owning a townhouse doesn’t just mean you own the structure; you also own the ground it’s on. This is great as an investment because if there’s one thing that only goes up in value over the years, it’s land. Perfectly captured in a quote by John Jacob Astor, America’s first multimillionaire. On his deathbed in 1848 Mr. Astor is said to have exclaimed:
“Could I begin life again, knowing what I now know, and had money to invest, I would buy every foot of land on the island of Manhattan.” – John Jacob Astor
Cons
Limited freedoms
Depending on the NYC Department of Buildings and when applicable the Landmarks Preservation Commission, there may be strict restrictions on what improvements you can make both inside and outside the home. If you envision yourself making major renovations, this could severely limit your options and stifle your creativity. Before you buy, check first to see which laws and rules you’ll be bound.
Small yards
While a townhouse can be very spacious the same can’t often be said for the backyard. Don’t expect to have a lot of space for landscaping. However, this does depend on the design of the townhouse.
Searching for a Townhouse
Before you can begin the search, there are a few things you need to organize. The first thing to start with is deciding which part of town you want to live. Begin by seeing as many open houses as you can to familiarize yourself with what’s out there. Secondly, find a suitable buyer’s agent that specializes in townhouses. Once you have a good understanding of your needs, they can provide recommendations and start making phone calls.
Also, educate yourself about buying a townhouse and think about the costs of possible renovations. Learn the details about rent-stabilized and rent-controlled tenancies. Multi-Family townhouses are cheaper but come with less privacy. You’ll also need to have your finances in order. The closing costs on a townhouse are typically 20-40% of the purchase price.
Home Inspection is a must
Once you’ve found a townhouse, you like you might be tempted to move straight to making a purchase offer. Instead, hold out until you’ve had the property inspected by a licensed home inspector. This is usually not an issue with co-ops or condos, but with townhouses, it should be mandatory. Have them check for any structural issues, plumbing or electrical issues. That way, you can avoid any nasty surprises that could be lurking after you’ve bought the property. If you find any problems, you might be able to negotiate a reduced price or ask that repairs be done before you sign a purchase contract.
Negotiating a Townhouse
Your buyer’s agent runs a comparative market analysis then will conduct negotiations on your behalf and work to get the best offer in your favor. If you’re happy with everything, your buyer’s agent will help you draft a purchase offer. T
There may be a bit of back and forth as counter offers are made but once you’ve reached an agreement you can move on to the next step. Once an offer is accepted your broker will introduce you to a real estate attorney, who will then iron out the final details and compose a purchase contract. Remember that nothing is binding until both parties have signed on the dotted line.
Reviewing the Contract
Once an agreement has been reached. The seller’s attorney will draw up the deal sheet. The deal sheet then sent to seller’s attorney who will, in turn, draft the contract for the buyer’s attorney to review. Upon signing the contract, you will be required to write a check for 10% of the purchase price. The cash from this will be kept in an escrow account of the seller’s attorney until the sale has closed. At this point, you are now “in-contract” with neither side able to walk away without legal consequences.
If you’re having the purchase financed now is the time to begin applying to banks for the mortgage loan. You’ll also need to arrange for homeowner’s insurance. If you’re taking out a loan, you won’t be able to close without it. If you’re an all-cash buyer, you will still need to clear title. You can usually close within a couple of weeks if you’re paying all cash.
The Closing
Once the lender is ready the buyer’s attorney will schedule a closing. Be sure to do a final walk-through of the property to ensure it is still in the same condition you first saw it in.
At closing, buyers, sellers, lender and both attorneys will gather in an office to sign the various documents that transfer ownership. The buyer will also write checks for such things as a first mortgage payment, escrow payments, and closing costs.
Congratulations!, you are now the owner of your very own New York City townhouse.
Final Thoughts
If you’re considering buying a townhouse, then your budget will be the main factor. Prices can vary widely depending on the neighborhood. On the Upper West Side, the highest sales prices are in the 70s on the block between Central Park West and Columbus. For the Upper East Side, it’s between Fifth Avenue and Madison. In Chelsea, it’s on 21st and 22nd Street between 10th and 11th Avenue. The West Village also has some of the most prestigious properties.
Townhouse buyers should do their research on average prices and consult a buyer’s agent for advice and guidance. Buying a townhouse in New York City is the best investment one can make. That said buying the right townhouse for the right price in the right location is even better.
Townhouse Financing
Wise Investment – The buyers must qualify for a loan, but lenders look favorably on townhouses as an investment. Townhouses are an excellent investment overall. The tenant’s rent will be income and banks will extend credit for 75% of the present rental income. Homeowners who buy townhouses as investments will not be disappointed. Their rental income can offset the monthly mortgage payment.
Low Mortgage Rates – Mortgage rates for New York City townhouses are as low as for any residential property. Home buyers can get up to 95% financing without Private Mortgage Insurance (PMI). Since interest only products are available for townhouses, home buyers can get affordable mortgages. If a townhouse has more than four units, however, it will be classified as commercial property. Lending guidelines change at that point. Home buyers would have to put down 25%, and the mortgage rates could be higher (approximately .375%). As well, for property evaluation, bank underwriters will emphasize the income more than the buyer’s qualifications.
Closing Costs – Closing costs for a Manhattan townhouse will come in at 3-4% of the loan amount. This amount originates mostly from the 1.75% New York State Mortgage Tax – a requirement. People have avoided mortgage tax by having the seller’s bank do a mortgage assignment. That process would, however, require the services of an exceptional lawyer and the agreement of the seller’s bank.
Townhouse Taxes
IMPORTANT: Different states have different tax procedures for loans, interest, and investments. The Federal government has standard procedures, yet those procedures change. With the ever-changing laws, there is too much room to make an innocent error. It is strongly advised always to consult a tax and investment professional to have all situations handled adequately.
Below you will find a helpful guide to understanding the tax liabilities associated with New York City houses. For additional information, we advise you to seek the assistance of a certified New York state accountant.
What are the yearly taxes for Manhattan townhouses?”
The annual taxes for Manhattan townhouses can vary between $5000 and $6000. Every year, the NYC Council sets the tax rate for different classes of property. For 2009-2010, the tax rate was 17.088% for Class 1, 13.241% – Class 2, 12.743% – Class 3, and 10.426% for Class 4. Homeowners can determine their real estate taxes by applying the assigned percentage to their property’s taxable assessed value.
The property tax assessment is a specific percentage of the market value. The taxable assessed value is the assessed value minus any exemptions.
How does the Department of Finance estimate your property value?
The Department of Finance bases property value on three factors – cost, sales comparison, and income capitalization. The department must estimate all property values by January 5 of each year. This constant reevaluation is meant to reflect the ever-evolving New York City real estate market.
Cost
They use this method for specialty properties including utility properties. They estimate the value of the land and figure out how much it would cost to replace (or reproduce) the existing building on that land.
Sales Comparison
The Department of Finance must check the recent sales of similar properties. Using this method, their officials can determine the ‘probable’ selling price of the property. The value of smaller, residential properties (such as 1-3 family homes) is defined in this manner.
Income Capitalization
This method is used for properties that produce income such as multi-family buildings and office spaces. The value is based on the income possibilities. The department looks into income and expenses as well as the capitalization rate (rate of return for an investor). State law requires that the Department of Finance value condominiums and cooperatives as rental apartment buildings. The value is based on the estimate of income (rent from residents) received by the owners.
How does Finance determine tax assessments
- Tax Class 1 Most residential property – up to 3 units – 1-3 family homes – office with 1-2 apartments – vacant land – condos not three stories.
- Class 2 All other residential property (or primarily residential such as condominiums)
- Class 3 Property with utility company-owned property
- The Class 4 Any commercial or private property that does not fall into other three classes
State law requires that Finance assess the property in each property class at the assessment ratio.
The Department of Finance is required to assess properties in each class at the same percentage of value. The Department of Finance must multiply its estimated market value by the assessment ratio for your property according to its proper property class.
If the assessment ratio is 9% in Class 1, a $100,000 property will receive an assessment of $9,000. If a $100,000 property fell into Class 2 and the assessment ratio was 45%, the evaluation would be $45,000.
The Department of Finance must follow specific assessment rules.
The Department of Finance is obliged by state law to follow specific assessment rules – unless the change is due to a substantial increase (renovation, construction, demolition).
- Class 1 Assessments on a property cannot be increased by more than 6 percent each year (or more than 20 percent in five years).
- Class 2 Assessments on properties with less than 11 units cannot be increased by more than 8 percent per year (or more than 30 percent in five years). Assessment can change on properties with more than ten units, but the changes must be phased-in over five years.
- Class 3 There are no assessment limitations in Class 3.
- Class 4 There can be assessment changes, but they must be phased-in over five years.
Are There Any Exemptions Or Abatements on Townhouses
The Department of Finance offers several exemption programs. To encourage construction and renovations, they implemented 421 A-C, and J-51. Non-profit organizations receive an exemption (420-a). As well, specific individuals can receive an exception (disabled, seniors, veterans, and others).
Condominiums and cooperatives receive an exemption in the form of tax relief. Their taxable assessed value is reduced; this initiative reduces real estate taxes. The exemption reduces the base rate used to calculate their real estate taxes. Abatements are computed in June after the new tax rate is set for the year.
Sample Townhouse Inspection Report
Provided by: Old House Inspection Company NYC.