Next to B15 site, 497 Dean apartment building (mostly rent-regulated, flipped twice) on sale for $3.4M

TerraCRG listing; click to enlarge

DNAinfo had the scoop yesterday, Apartment Building Next to Atlantic Yards Hits the Market for $3.4M:

A modest four-story apartment building in Prospect Heights hit the market this week for $3.4M, advertised as a great investment in a neighborhood where “in just a few years, rents have risen from $25/SF to $50/SF,” according to a release by the property’s brokerage firm TerraCRG, which added that the prices “are poised to reach $55/SF and above within the next two years.”

While DNAinfo's Rachel Holliday Smith rightly warned that the 497 Dean Street property is next to a construction site for B15, a 27-story tower that will include a school, she missed a couple of key issues, notably that this rent-regulated building has been sold two times, with escalating prices.

Looking at the numbers

From the TerraCRG listing: 

Three of the eight apartments are free market with average rent for the building at $27 per square foot, providing significant upside with market rents in the area achieving above $50 per square foot.

In other words, five apartments are not free market. So the buyer will have a significant upside only when/if current rent-regulated residents are encouraged/pushed to leave.

And if the new owner pays the ask of $425,000 per unit, that owner surely has to get those rent-regulated residents out--and renovate--to make a profit.

And the new owner has to bet on that. There's history here. StreetEasy shows that the entire building sold for $970,000 in 2011 and then $1,660,000 in 2013.

The adjacent building, at 499 Dean, sold for $500,000 in 2004, and the new owner paid/nudged residents out, then rebranded it as a condo building, where a one-bedroom (4A) sold for $405,600 in 2011 and then sold for $685,000 this past April.