Just for fun, our team did an analysis of whether a single-room-occupancy (SRO) property in the Rockaways can actually generate more rent than a 1BR in Gramercy Park, for the same purchase price.
We should note that SROs and micro-apartments are opposite sides of the same coin – although SROs are the original idea, and micro-apartments are the updated version. From a design perspective, SROs are small rooms with shared kitchens and bathrooms. On the other hand, the newer micro-apartment buildings often have a significant density of smaller apartments with tiny kitchens and bathrooms, but with considerable building amenities (which SROs typically lack. Along with regular plumbing and electricity, as times).
However, from a developer's point of view, SROs and micro-apartments both are very attractive because they can generate more revenue – and often higher revenue – than a conventional building. How does this work? On one hand, there is less space lost to common areas in SROs. There is also usually a gap between asking price and price per square foot.
For example, in a SRO, a single 300sq.ft. room might rent for $900 per month – but this works out to $27/sq.ft. annually. If you have five such 300sq.ft. rooms (and assume about 600-700 additional sq.ft. for bathrooms and kitchen and hallways), it would generate 5x$900, or $4,500 per month for a typical 2,200sq.ft. house.
On the other hand, that house might only have two 'official' bedrooms, and if it were rented as a 2BR, it might only generate $1,800-2,200/sq.ft. per month, or $12/sq.ft. annually.
Using this approach, a 1BR in Gramercy Park might rent for $3,500/mo. – or, given that it is a 550sq.ft. apartment, $76/sq.ft. annually). That same apartment would likely sell for about $645,000 (or $1,172/sq.ft.).
Meanwhile, that same price would purchase a 6BR two-family (about 2,000-2,400 sq.ft.) in parts of the Rockaway peninsula. Even assuming just renting each bedroom out as part of an SRO at $800/mo., this would generate $4,800 per month. If the basement and attic were turned into, say, four more rentable rooms, this would then generate an additional $3,200 per month, for a total of $8,000 per month.
So, yes, an SRO in the Rockaways would generate more rental revenue ($6,500-8,000/month) than a 1BR in Gramercy Park ($3,500/mo.) bought for the same price. And that's not even taking into account the monthly maintenance fees of over $1,000 for the Gramercy co-op.
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