Cost Comparison: Buying A Turnkey Apartment VS Renovating A Fixer Upper In Manhattan
Buying in NYC but stuck between a move-in ready turnkey apartment and a fixer upper with higher ROI potential? This article will make that key decision much more clear.
When property hunting in NYC, buyers are typically confronted with the age-old dilemma - do you pay up for a turnkey apartment that is move-in ready or search for a more competitively priced fixer upper that requires a renovation?
There are pros and cons to both options but they ultimately boil down to costs vs convenience. While move-in ready properties typically command higher per square foot purchase prices than their dated counterparts, proper due diligence and planning is key to making sure your fixer bupper does not go from a project where you are unlocking value to a senseless money pit.
In this blog we highlight key factors to keep in mind when considering the renovation of a fixer upper and also provide a real life case study of two apartments.
Factors To Consider When Renovating A Fixer Upper apartment in NYC
Time & Planning
Planning a renovation in a NYC co-op or condo takes time. Between the need to satisfy the buildings alteration agreement requirements, obtain management and board approval, and ultimately file and obtain permits from the Department of Buildings, the formalities themselves can take 3-5 months. However, if planned properly, all of your design and pre-construction planning can be achieved during this timeline as well. Some portions of the planning timeline can take place prior to closing on the property, however at least half of the timeline will take place after closing. Keep these timelines in mind as they will impact your carry costs.
Living inside a property in the midst of a gut renovation is ill-advised and oftentimes not feasible. An average gut renovation of an 1,800 sq ft apartment can take 5-6 months - during this time you will need to account for other living arrangements. Make sure to factor these costs into your overall budget calculation.
Building Imposed Costs
All co-ops and condos will impose costs ranging from security deposits to penalties for going over allotted time limits on a renovation. Some buildings may impose a significant percentage of the total construction cost. Although the security deposit is refundable upon completion of your renovation, a large security deposit requirement can put further strain on liquidity.
Other Units in the Building
The selling price of other units of similar square footage, number of bedrooms and bathrooms, and condition is the most ideal way to gauge the resale value of your apartment. Ideally if you can find a renovated unit in the same line that was recently sold then that should give you a good sense of what your units after repair value (ARV) is. This is also a good way to identify your maximum renovation budget. With that said, it is important to consider other factors as well, such as year of when the apartment was old, what floor the apartment is on relative to yours, or whether there were other circumstances that may have impacted that sales price. For example, 2 units of exact square footage in the same building on Central Park West may have very different values just based where the windows of the respective apartments face.
Cost Comparison: A Real Life Comparison Of A Turnkey Apartment vs. Fixer Upper Apartment In Manhattan’s Upper West Side
To help us determine a baseline cost difference between a fixer upper and turnkey apartment in NYC, let’s draw a direct comparison between two units currently on the market from the same pre-war co-op building. One of the units is ready to move-in and the other is a fixer upper that warrants a full renovation.
90 Riverside Drive, Apt 10B. New York, NY
- Status: Turnkey, move-in ready
- Market Price: $6.5M ($2,500/sq ft)
- Size: 3 Bedrooms, 3.5 Baths (Approx. 2,600 Sq Ft)
- Cost To Renovate: $0
- Total Cost Upon Move-In: $6.5M
- Adjustments with respect to unit 7B: 10B is 300 sq ft larger and 3 floors higher compared to unit 7B. Adjusted value of 10B is $5.5M (3% increase in cost for being 3 floors higher plus $750,000 increase due to being 300 sq ft larger in size)
90 Riverside Drive, Apt 7B. New York, NY
- Status: Pre-war estate conditioned apartment
- Market Price: $2.8M | ($1217/sq ft)
- Size: 3 Bedrooms, 3 Baths (Approx. 2,300 Sq Ft)
- Timeline: 9 months (4 months planning, 5 months construction)
- Cost To Renovate: $950,000 (Approximate $415/sq ft to bring to condition of 10B)
- Total Purchase + Renovation Cost: $3.75M ($1,630/sq ft)
- Carry Costs: Approximately $120,000
- Total Cost Upon Move In: $3,870,000
- Unlocked Value of Renovating vs Buying Similar Turnkey Unit: $1,630,000
Buying A Turnkey Apartment Or Renovating A Fixer Upper: Which Is The Better Value?
35% More For A Turnkey Apartment Than A Fixer Upper
In our comparison, the turnkey required 31% higher list value, with an additional 1% per floor (on avg).
Post-Reno, Fixer Upper Still Costs Less
Even after applying a nearly 1 million dollar renovation to the fixer upper, the total cost upon move-in is roughly $1.6M less than the turnkey option.
Evaluating Your Budget and Lifestyle Preferences
While there may be more value in renovating a fixer upper apartment in NYC than buying a turnkey option, the decision ultimately comes down to personal budget constraints and lifestyle preferences. If you’re on the fence, consider the following questions before closing any deal.
Are You On The Clock?
If your move-in timeline is firm, either due to an expected addition to the family or desire to be settled before the school season starts, opting for a turnkey so you can move in immediately may be worth the added costs and settled floor-plan if the alternative fixer upper option cannot be planned and renovated within the required timeline. In our experience however, most clients opt for the fixer upper when faced with cost benefits of renovating the fixer upper.
Is Personalization Essential?
If you’re not on the clock and have flexibility to move in around 6-12 months after purchase, you’re giving yourself the option to fully customize the space via renovation. This means rearranging the floor-plan for your ideal design flow, adjusting rooms to your personal needs, and creating a Manhattan dream home exactly how you’ve always imagined.
Will You Be Reselling?
While many buyers may stay the long haul, others buy with intent to sell. If profit is your prerogative, consider that most turnkey apartments have already maximized resale value and chances you’ll gain value on your initial purchase down the line is unlikely. On the other hand, buying a fixer upper and investing in a fully-customized renovation immediately provides an opportunity to maximize your ROI. For instance, if someone buys our fixer upper above, they'll likely be able to resell that property for significantly more than the $3.8M they invested in full.
How Much Effort Can You Apply?
For buyers less concerned about cost and more restricted by time, consider not every home renovation requires full attention. If you’re hesitant to buy a fixer upper because you don’t want to manage a full-on NYC renovation, finding a reputable all-inclusive design-build firm who will handle the renovation from start to finish can offer the peace of mind needed to ensure new buyers can be hands-off as needed throughout the entire renovation process.
When comparing costs between buying a turnkey apartment in Manhattan versus costs of buying a fixer upper apartment in Manhattan, long-term value favors the fixer upper. However, there are certainly circumstances that may sway your decision for the move-in ready option.
If you’re in the market for a new apartment in NYC and have intentions to renovate upon purchase, consider Gallery. We are an award-winning design-build firm in New York City with a full-service approach to residential renovations in Manhattan and Brooklyn that includes everything from interior design and architecture services to filing permits and construction management. We’re experts in renovating pre-war homes, apartment combinations in NYC, room additions, brownstone renovations, loft restorations and everything in between.
View our full portfolio of New York City renovation before and afters, learn more about Gallery KBNY, or simply contact us today to find out why our full-service approach makes most sense when choosing a home renovation contractor in NYC.