What's better than living in a beautiful apartment in the city? Living in a beautiful, large apartment in the city. Whether you live in a space-starved metropolis like New York or you simply prefer an apartment living over maintaining a house, you've probably fantasized about knocking down that wall between you and your plays-music-late-at-night neighbor's apartment and creating one large, beautiful space that's all your own.
Buying your neighbor's apartment can be a great way to acquire more space without relocating. And if you do it the right way, it can even be a smart investment. If you're ready to merge the square footage next door with your own, here's what you need to know and the steps you need to take.
Become Friends With Your Neighbors
Whether your neighbor is the type who brings over homemade cookies and never makes a peep or you live next to a "wish I could have been a drummer" bachelor, it's important that they actually like you. If you do get far enough along to make an offer, you'll want to be on their good side and act politely and professionally. Why not start long before you make things official?
Beyond that, it never hurts to drop a few hints along the way. Casually let your neighbors know that if they ever want to sell, they should let you know.
"It sounds simple, but many people don't even know the people on their floor, and therefore won't know an adjacent apartment is available until it hits the market," says James McGrath, co-founder of NYC real estate brokerage Yoreevo. "Once it's on the market, you're competing against all other buyers, and the seller's transaction costs will be much higher due to a broker being involved."
Selling a home can be a headache (not to mention an immense expense), so there's a good chance your neighbors may be interested in skipping those endless open houses and coming directly to you.
Be Sure It's a Good Investment
Of course, before you buy any piece of property, it's important to do your real estate research and ensure you're making a good investment that will retain value over time. But when it comes to combining two apartments, it's even more crucial to figure out whether your new (much larger) space is worth the time and money.
As you look to buy, it's important to remember that "every buyer becomes a seller," says Andrea Geller, a broker at Coldwell Banker Residential Brokerage in Chicago. "Take into consideration the purchase price and construction costs. Down the road will the sales price you would need to get be well out of sync with values in the building or comparable buildings in the area?"
If buying your neighbor's apartment leaves you with a space three times the size and three times the cost of any apartment in the area, it may be a good wise to rethink the idea and buy an apartment in a neighborhood with larger homes. On the flip side, if you own a studio in a land of two-and-three-bedrooms, creating a space large enough for a family or a horde of roommates can be a great investment.
Work With the Right Team
Sure, buying your neighbor's apartment means you can avoid endless househunting weekends with a buyer's realtor in tow. But that doesn't mean you should go it alone. Though there typically isn't a broker involved in these types of agreements, you may decide hiring a real estate agent is a good idea, especially if you have concerns about value and investment.
It's also a good idea to consult a lawyer before you draft up a contract. How will the new purchase affect your taxes? Are there any city ordinances you need to be aware of? What type of inspection will you do and what will you be looking for?
Consulting a contractor and/or a great architect can also help you scope out your project and ballpark the cost of renovations before you make an offer.
If you live in a co-op, you'll probably want to get your building’s board approval before making any moves. Not only will this save you countless headaches down the road, but they can also tell you whether another neighbor has done the same thing—and they can end up becoming a valuable resource for advice.
Make a Good Offer
Working out a deal with a neighbor can be stressful, even if you're on good terms. You should be fully aware of what similar apartments in your neighboorhood go for and how much you can afford to go into the transaction. But McGrath stresses that this may be a time when hardball negotiation tactics just aren't worth it.
"It's important not to be too aggressive with the negotiation," he says. "Combined units usually get a valuation boost. If your apartment is worth $500,000 and so is your neighbor's, the combined unit might be worth $1,100,000, so to get caught up about $10,000 is foolish."
Pay for Those Renovations
When you formulated your offer price, you probably considered the cost of tearing down a wall and creating one large space from the two smaller units. Now, it's time to pay for it. First, you'll want to hire an architect who is familiar with the type of work required. Don't go for the cheapest bid—it's worth it to spend more, especially if combining the spaces will take a little bit of creativity.
Some mortgages will give you more money to pay for the renovations, especially if the value of the home will increase after the work is done. You can also look into home equity loans on your original apartment or short-term loans. Either way, be sure the work you're doing is worth the investment before you sink yourself into more debt.
In the end, combining two apartments can be a great way to create a larger space, especially in large cities where square footage is at a premium. With the right preparation (and maybe a little persistence), buying your neighbor's apartment can, in fact, be done—and can truly pay off.