Jonathan J. Miller, the president of the appraisal firm Miller Samuel, says the 2.5 in the equation is more figurative than literal. “If you have two adjacent apartments and they logically connect to a bigger and better layout,” he said, “it’s not uncommon to see a 20 percent premium on a price-per-square-foot basis. And that’s before the renovations are even done. It’s just the fact that they’re put together.”… buyers are willing to “pay more for the potential to enhance the value.”
MANHATTAN REAL ESTATE – In New York City real estate, there is a little-known and somewhat mystifying equation, and that is: 1 + 1 = 2.5. It applies to breakthrough combinations, in which someone buys two adjoining apartments and breaks through the connecting wall, or in some cases the floor or ceiling, to create a bigger place. The equation makes no sense mathematically, but because larger spaces in the city are worth more per square foot than smaller ones, selling two smaller apartments as a potential combination can result in a higher sale price for each unit. That is why, brokers say, more New Yorkers have recently joined forces with neighbors in selling contiguous apartments. Sellers are driven by two things. First, marketing a one-bedroom as both a one-bedroom and part of a potential three-bedroom significantly increases the buyer pool. Second, the market for larger apartments has been strong in recent years, as more New Yorkers have chosen to raise their families in the city rather than head to the suburbs.
By Vivian S. Toy, September 9, 2011 NYT
Illustration Credit: NYT 09/09/11