Peter's Blog

Pleasantville, NY

Pleasantville, NY 5 BR, 4 Bath - $899,000 Lovingly maintained, immaculate home on one of Pleasantville's most sought-after streets. Built in 1963, half acre of property; walk to all Pleasantville Schools, park, train, stores, theater. Over 2,800 sq. ft. - 4/5 bedrooms, 4 full baths; central A/C, 3 zone heat; eat-in kitchen with all new appliances; home alarm system; new windows; hardwood floors throughout; fireplace; seperate walkout on lower level. Exterior painted in 2003, interior painted in 2005. Two screened in porches (not included in sq. ft.) Two car garage. New washer/dryer. Lots of closets/storage space. All window treatments included. Call or email (Peter Nikic) for questions, exact address and directions if interested. Peter (914) 804-0037

For more Photos click here or on any one of the photos above.

How many times have you been in situations where you saw a house that was priced much lower than the same house in another neighborhood or state? I feel that I run into these situations all the time.

So what is it that creates these fluctuations in price? How does the "Free Market" do this?

It's really a lot simpler than most people might imagine.

A house can only be sold for the price that a buyer is willing (or able) to pay. Why do I say able? I say this because most people will pay approximately 1/3^rd of their income on housing. So a buyer is willing to pay approximately 1/3^rd of their income because they are able to.

Yes, there are conservative people out there who buy modest homes in comparison to their income. Needless to say, that these people either have financial security because they're wealthy or because they're just conservative. They most likely will never face foreclosure on their homes.

And yes, there are people who buy homes that they cannot afford. They expect to make more money in the future which may not always happen. They may lose their jobs or sustain other unforeseen losses. These days, we're seeing a lot more of this type of buyer, hence the foreclosures.

If we analyze this middle section of people who pay approximately 1/3^rd of their income on housing, this is actually the Market and what creates the Market Value (or price) of homes.

Let's look at this backwards. If you earn $36,000 per year; you will be able to afford approximately $12,000 per year for housing. This just happens to break down nicely to $1,000 per month. Whether you are renting or buying, your monthly housing costs cannot exceed $1,000 per month. Makes sense so far?

Now with your $1,000 per month you begin your real estate search, knowing your budget, you eventually find a house or apartment.

Let's say that everyone in your town also makes $36,000 per year (or at least let's say this is the average household income). What do you think the average cost for housing is going to be in your town? If you guessed $1,000 per month, you're right. Of course there are always some variations, but it cannot be any higher because the average household cannot afford to pay any more. Also, it will not be any lower because the seller will always hold out for the highest price which in this case is $1,000 per month.

Still doesn't make sense?

In this example, the average household can only afford $1,000 per month for housing. To simplify this, we won't factor in utilities, taxes, etc, but focus on basic housing costs. If the average household can pay $1,000 per month, then the average sale/rent cannot exceed this. This means that the average sale (or rent) cannot exceed a price which will cause the monthly payment to exceed $1,000.

An average house in this neighborhood will most likely be around $200,000. How did I come up with this? If you buy a $200,000 house with 20% down payment, you will qualify for a $160,000 mortgage. At 6% interest, a $160,000 mortgage payment is just under $1,000 per month.

This is the basis of how this works:

If the average household income is $1,000 per month, then the average home will cost no more than $1,000 per month.

One of the factors that can greatly change the price of a home is the interest rate. If the interest rate was 10% (instead of 6%), then average home would only be about $140,000. At an interest rate of 10% the same person would only qualify for a mortgage of $110,000 plus 20% down payment, making the average home $140,000.

What if the average home in this neighborhood is listed at $250,000. What do you think would happen? Don't think too deep, that is exactly what is happening right now. That is why we have more inventory then buyers and until the prices start coming down, sales will be slow.

Basically, the average home is currently greater than the average income, the result is fewer sales.

(The chart was taken from: http://seekingalpha.com/article/123154-housing-where-is-the-bottom it clearly illustrates my point).

Remember, it's not the home that sets the price, but the income of the household. Interest rates, taxes, utilities, travel expenses, etc are factors that also play a major role.

A few years ago, home prices began to rise at unsustainable rates. What caused these prices to rise so sharply? Did you notice what a drastically difference in price of our $200,000 home when the interest rates went from 6% to 10% (down to $140,000)? Without getting into too many details, people were getting mortgages at 3% with a low down payment. This allowed them to buy that same $200,000 home for as much as $250,000. Before anyone realized what was happening, those $200,000 homes were selling for $250,000. If the 3% interest rate was fixed for 30 years, there would be no problem. But the problem become clear when the interest rates adjusted back to 6%, thereby devaluating those homes back to $200,000.

Do you know someone who bought that $200,000 house for $250,000? They probably took out a mortgage of $225,000. What happened? It seems that the value of the house is actually lower than the mortgage. Where are these houses today? Foreclosure?

A town with an average annual household income of $36,000 will have homes that average $200,000 where a town with an average annual income of $72,000 will have homes that average $400,000. Those homes could be identical in every way except price.

The difference? Average household income.

Catching up with a friend, we got into the conversation of real estate. Not a foreign subject to either of us since I am a licensed real estate broker, he is a contractor as well as both of us being multi-property owners. The conversation began when I asked him if he knew of a particular large scale property owner. I mentioned that I was trying to reach him in efforts to buy one of his buildings which he purchased 2 years ago and is now in financial trouble.

He proceeded to tell me a couple of stories regarding people that he knew that ended up losing large multi-family properties only because they were too stubborn to sell them at the right time and at a reasonable price. I chimed in with a couple of my own stories, and then we discussed how a mutual friend is currently in this same position. Though we both feel bad for our friend, there's little we could do to help him.

After a while, my friend asked me "Do you know how to catch a Monkey?"

I responded "How?"

He said put a banana in a bottle. When the monkey sticks his hand in the bottle to pull the banana out, his grip around the banana in a horizontal position, will not allow him to pull it out. Of course the monkey won't give up so easily, he will continue to try and pull the banana out until he is caught.

He added, "That's the problem with a lot of people and real estate these days. They don't know how to let go of the banana."

I thought this was such a great analogy, that I kept using it the rest of the evening. It seems that many of the property owners that each of us had dealings with did not know how to let go of the banana. Their properties fell into disrepair and eventually were lost to foreclosure. After each subsequent story, I would chime in "they didn't know how to let go of the banana."

Then I mentioned the large scale property owner again. I said that's why I need to get in touch with him. If he's a large scale property owner, he should know how to let go of the banana. He agreed that these types of owners usually know.

Do you know a property owner who's acting like a Monkey? Will someone please tell them to let go of the banana!

Many of my friends own apartment buildings in the Bronx. I also owned a building there several years ago. If you're unfamiliar with the area, you're probably saying to yourself "Now why would anyone want to buy a building in the Bronx!"

Well, if you're a real estate investor and live in the NYC area, then buildings in the Bronx technically qualify as real estate. Like anywhere else, the Bronx has a wide variety of real estate including warehouses, office buildings, retail centers, private homes, coops, condos and my favorite, apartment buildings.

This was the building that I once owned. It's a 5 story walk-up building with 19 apartments, 2 stores and as you can see from the photo, 2 billboards. Though a little too small, it was a great building to own. I do regret selling it, but at that time, my circumstances were such that I needed to sell it.

So, what do you think so far? Still think I'm crazy? In all honesty, owning and managing apartment buildings in the Bronx is not easy. I guess you have to be a little nutty to want to do this. Yet from another perspective, it could be very rewarding both personally and financially.

When you own an apartment building, you are housing many families, how could this not be personally rewarding? I don't make it a habit to be best friends with my tenants, but I always maintained good relations with them. For the time that I owned the building, I renovated some of the apartments, installed a new intercom system, installed a new boiler, and replaced the roof. Yes, I spent a lot of money, but I had 19 families that needed to stay warm in the winter. They needed the security of an intercom system. Their lives were more fulfilled with a cleaner more well kept building.

But this is a business, not a charity!

Yes, I spent a lot of money and time upgrading and managing the building, but I had 22 paying tenants. The money I spent came from them (at least from those who did pay their rent). These improvements made them happy to pay their rent, which in turn allowed me to make a profit.

The tenants were happy, the building was upgraded and kept clean and I was making a profit. How else can I view this, other than personally and financially rewarding?

Over the past few years, my circumstances changed, once again allowing me to own and manage apartment buildings in the Bronx. I've been looking for some time now, but so far unsuccessful. It seems that over the past few years, the Bronx was infiltrated by large scale investors and REITS. This caused the apartment building market to falsely inflate. Sort of like the rest of the real estate market across the country.

On the surface, it might seem like a good thing, but the problem with this is that many owners are having a hard time selling their buildings at realistic prices. They either sold some properties or knew someone who sold properties at much higher prices a couple of years ago. They can't seem to accept that those prices were unrealistic. For the buyers who bought at those prices, they either have deep pockets or will inevitably have financial problems. For those with deep pockets, they will be able to survive and make it up in the long run.

What is disturbing to me, is those who don't have deep pockets. Their financial problems will become personal problems for the many families that they are housing in their buildings. There is no need for this. The frenzy that lead them to overpaying, is causing problems for everyone including for those of us who are ready to buy.

Properly managing a building in the Bronx takes a lot of work, but overpaying makes it virtually impossible.

Here are a few suggestions on what to look for:

•Ø      Get a clear understanding of the income and expenses.

•Ø      Know the condition and location of the building

•Ø      Plan to spend more time than you think it will take

•Ø      Plan to make less money than you think you will make

Over the past 15+ years, I've owned and managed apartment buildings which allowed me to gain a lot of invaluable experience. In addition, I've created spread sheets which allow me to evaluate an apartment building in just a few minutes. I also learned to forecast property values, income, expenses and long term growth with excellent precision. My intention is to use this for my benefit as well as the benefits of dozens maybe hundreds or thousands of families.

In the current edition of Realtor  magazine, there is an article written by John E. Grippa. He says as home prices drop, so should property taxes.

After reading the article, all I kept thinking was that there seems to be something wrong with this concept. I don't mean that John E. Grippa is wrong; I mean there has to be something wrong with the way taxing jurisdictions create their budgets.

I was always under the impression that a taxing jurisdiction had a certain budget, a somewhat known and fixed obligation to its area. For example, they would add up all the costs of the services provided (schools, police, town, emergency, roads, water/sewer, etc) then they would tax according to those needs.

It seems to be just the opposite. It seems like most taxing jurisdictions throughout the US assess residential property based on market value. This means that they create their budget based on how much taxes they can collect. So if property values go up, they collect more. John E. Grippa said that as property values go down, we can appeal those taxes and have them reduced.

But if our taxes are reduced, are the services also reduced? Will garbage collection stop? Will the roads not be plowed in the winter? Will some other service stop or be reduced?

So my question is if taxes are reduced, will services be reduced? I can't imagine that the somewhat fixed services will be reduced. But in thinking this, what happened to the extra income when taxes were higher?

Going back to the time when home prices were increasing and taxes were increasing. Why were our taxes increased to begin with if the services provided were already being paid for? What did these tax jurisdictions do with all that extra money?

Besides the possibility of these tax jurisdictions having more money than they need, this becomes our burden in many ways. First, as property values increase, so do our taxes with no effort or control from us. But as property values decrease, we have to spend time and money to appeal those taxes. Secondly, higher taxes make homes less appealing and affordable to potential buyers which force us to appeal.

This doesn't seem fair to me; what are your thoughts?

The year was 1977, New York City, on the verge of bankruptcy, dreary, dark, crime was rampant. It was like a scene of Gotham City from "Batman." Real estate was so bad; the City of NY became the biggest landlord in the city as landlords abandoned their buildings, the city obligated to pick them up and keep them running. 

So how is it that now, just 30 years later, the NYC real estate market is hotter than ever and everywhere you turn you see the slogan "I Love NY". Even if you're not from NY, more than likely you've seen this or a similar slogan such as "I Love John" or "I Love TX". How did this "I Love . . . " craze begin?

We even have a group here on Active Rain called "I Love NY".

You must have wondered how or when this started. 

Last year, I've had the privilege of speaking with the creator of the "I Love NY" advertising campaign. It was a momentous time because it was now 30 years since he originally kicked off the campaign (in 1977). 

New York was running out of money and time. The New York State Tourism Department needed to do something to improve the image of NYC. With a very small budget, they hired a NYC advertising agency headed by Stan Dragotti and Charlie Moss. I had known Stan for several years and was most impressed by him having been married to supermodel Cheryl Tiegs. But when he explained to me how he created and developed the "I Love NY" ad campaign, I was totally mesmerized (sorry Cheryl). 

His idea was to incorporate all of the Broadway actors and have them sing "I love New York". The ad campaign was a success; the jingle became NY State's official song, the "I Love NY" slogan stuck. The TV commercial became one of the greatest commercials of all time. 

In less than 30 years, New York went from being a dark, crime ridden city ranked 8^th most desired city in the US to visit, now the #1 tourist destination in the world. I don't have to tell you that real estate values have reached skyscraper proportions and NYC is no longer the biggest landlord in the city. 

Stan Dragotti also went on to direct several movies including "Mr. Mom" starring Michael Keaton and "Love at First Bite" with George Hamilton as well as others. He also won the Tony Theater Award in 1978 for his "I love New York Broadway Show Tours." As for me, I am honored to know him and that he is of Albanian descent, which is how I got to know him in the first place.

Often I get asked "Pleasantville? Like the movie?" I reply "yes, only in color". With a population of just over 7,000 and an area of less than 2 square miles, Pleasantville is small yet highly desirable. Located in central Westchester, just 45 minutes from mid-town Manhattan. It's small size does not even warrant school bussing, making it a walking community. All children either walk or are dropped off at school. The Pleasantville schools always rank among the best schools in the country, but one of the things that impressed me most is that every morning (rain, shine, snow or sleet) the school superintendent was there to greet each and every child as they were dropped off. Though we only lived 2 blocks from the school, many times we would drive our children to school. Deep down inside, I think we did it because it felt so special dropping our children off and seeing the school superintendent welcoming them with a big smile and a warm greeting.

Each year (in May) this small and close-knit community celebrates Pleasantville Day. The day starts off with practically all village residents parading down Bedford Road, a street lined with old Victorian homes. We were fortunate enough to own and live in one of these old homes and always felt that our front porch was like holding front row seats to this and several other spectacular parades during the year (other parades included the Memorial Day parade, fireman's parade and ragamuffin parade). The parade would be greeted at Memorial Plaza (village center) with games, rides, music, clubs and local vendors. The day usually ends with a spectacular fireworks show or outdoor movie at the sports fields on Marble Ave.

These fields are also home to the annual Pleasantville Music Festival where performers like Joan Osborne, Graham Parker and other less known bands play. Attendance exceeds 6,000 making it like an overgrown family picnic to music.

On not so special occasions, local residents tend to frequent the local gourmet coffee shops, restaurants and even a 50's styled soda shop. In the evenings, one of my favorite things is movie going at the Jacob Burns Film Center - a fine arts film center where it's not uncommon to see or meet famous celebrities like George Clooney, Selma Hayek, Ron Howard, Glen Close and Woody Allen just to name a few. The film center has been so successful, that they are building a 26,000 square foot film production and educational center.

Many people say, "but the houses are so expensive and the taxes so high". I tell them, "if you want to buy a house, you're right. But if you want to buy a home, a community, a great place for your family, you can't afford not to live here". So whether it's the parades, the schools, commute to the city, local shops, music festival, theater or old Victorian homes, I'm sure you will love Pleasantville.

 Pleasantville, it's real and in color!

Pleasantville Links:

My mother is moving in with me, along with my wife and 3 children. Yes, there will be difficult times, but over-all I think it's the best thing. My children will be closer to their grandmother. My wife is very open and understanding with my mom, and as a result I think both will benefit. Me, well, it's my mom, the woman who gave me birth and raised me when I needed her most. How could I turn my back on her now?

This morning, feeling like she may be a burden to us, my mom said "I wish I had enough money to buy an apartment." For me, the money is not as much of a factor as not wanting my mom to live alone. I recently saw a great movie called the "Edge of Heaven" where one character says, "Only God should be privileged to live alone." I have plenty of apartments where my mom could live either rent-free or low rent. And even if I couldn't do it alone, then my 2 brothers would happily help.

It got me thinking about a tenant that I had in the past. I bought a building, and one of the tenants was a very old woman, living alone (I'll call her Eva). I remember her as being a very sweet old lady I would stop by and chat with her every now and then. She spoke so proudly of her late husband and how they emigrated from Poland. She spoke highly of her daughter "The doctor" and her son-in law "The Doctor." Oh! And of course the grandchildren! There were 2 of them, a boy and girl, both attending prestigious Ivy League Universities.

About 7 years later, in 2005, Eva passed away. Her daughter, son-in-law and grandchildren all gathered to collect her belongings. I had only met her daughter in the past, and as I watched them come and go for several days, I felt like I knew them through the stories I was told. I quickly realized that the bond was one sided, as they walked by me with barely a glance. To them, I was a stranger. On the verge of tears, I contemplated talking with the grandchildren (who were now post college) and telling them how proud their grandmother was of them. Only I couldn't because it seemed that they lost (or never had) a connection with their grandmother, so I didn't bother.

For years, I felt really sorry for Eva, but on that day I really felt sad for her grandchildren. They lost so many precious times with their grandmother that they will never be able to recover. How could I not take
my mother in? I owe it to my children and their grandmother. I admire the person responsible for creating the mother-daughter house, only I wish it were called grandmother-granddaughter instead.

You've heard the phrase, "It is better to give than it is to receive". This may be true depending on who you ask. Everyone we know falls under one of these two qualities. They are either "Givers" or "Takers".

So is your real estate agent a "Giver" or "Taker"? If you don't know, then you don't know your real estate agent well enough to work for you. Get to know your agent. Find out if she is a "Giver" or "Taker".

Why is it important to know this and when your real estate agent should be a "Giver" and when should she be a "Taker"?

If you are looking to buy a house, your realtor should be a Giver. Why? Because Buyer's Agents are Givers. I say this, because a realtor, who wants to help someone buy a home, truly gets satisfaction in helping the buyer. This is the person who will agree that it is better to give than it is to receive.

The Giver is the person you want representing you as a Buyer's Agent.

Now that we know that a "Giver" is someone who has your best interest in mind, why on earth would you use a real estate agent who is a "Taker"? Well, if a buyer's agent is a "Giver", then conversely, a seller's agent is a "Taker".

A seller's agent uses their Taker qualities to sell your home because deep down inside, they need to get the best and highest price. Yes, they are in contract with you to do this, but their satisfaction comes from selling the house without regard to the buyer or seller. As a result, you (the seller) just happen to be the beneficiary of a Seller's Agent who is a Taker.

The Taker is the person you want selling your home.