Long game: buying all the shares in a coop over time

[Paul Jump]

I have the opportunity to purchase 2 adjacent one-bedroom apartments in an iconic New York City building. The building is a 6-stories, consisting of 24-units one-bedroom units and is organized as a coop—so essentially the deal is to purchase 1/12th shares in the coop.

I would be purchasing these two units to combine and occupy as my primary residence; however the individual apartments in the building change hands fairly often as pied-a-terre residences.

I fundamentally believe there NYC is changing and that there is opportunity in developing a building to consist of larger units.

I am trying to wrap my head around a long-term investment in a building in which I personally occupy. Is there a world where it could make sense for me to first buy and combine these two units to personally occupy as my primary residence, while picking off every other unit that goes up for sale? How would I begin to think about a business plan here. Remember I’d be in this for the long haul... like forever. Any advice, past stories, or general cautionary tales greatly appreciated.

[Jason Lee]

If you can make a nice apartment out of the two units and you can't find anything existing that's comparable (including the cost to combine), then go for it. Having said that there's a decent amount of inventory of larger apartments that don't need combining, and right now, smaller, more affordable units, are actually trading pretty briskly. Do you know enough about architecture and code to know if combining can even make sense? I've worked on a lot of combination deals and I haven't seen too many 1 beds that could be combined to make a layout that makes sense.

Not sure what the point of owning the entire building would be but it's close to impossible. You won't be around to see all 22 of the other units trade. Even if you were there's the darn co-op board that probably wouldn't let you buy the 3rd unit as an investment. If they did it would probably have to be all cash. Then if you were able to get to your 4th unit you'd make the building unwarrantable and your neighbors would have problems selling because it would be difficult to get mortgages in the building for everyone else because you own too many units. There's a reason no one does this.

I do know of a small co-op in Gramercy where the whole building is being shopped to developers. Shareholders have to vote on it but the co-op has retail units that might make a conversion attractive for a developer. What's missing from your idea is any kind of upside.