The Bubble Sitters: Jordan and Linda Celkupa
A rapidly shifting real estate market, a waterfront apartment with a view of Manhattan and some number-crunching. Those are the factors that Jordan and Linda Celkupa considered before selling their condo and renting a bigger apartment.
"My logic was that renting
is throwing money away into the ether," Jordan Celkupa says. So he resisted
Linda's desire to sell their one-bedroom condo in Hoboken, N.J., and rent a bigger
unit in a high rise she had dreamed about.
He resisted until he ran some calculations. As a financial planner, that's what he does for a living. Jordan realized that he and Linda could lock in a sizable gain on the sale of the condo and seize an excellent rental deal in the Hudson Tea Building, a pair of converted warehouses nestled on a cove in the Hudson River across from midtown Manhattan.
"Based on my calculations, we have enjoyed renting this unit as if it was priced as a $450,000 equivalent condo, even though the market value is worth more in the range of $600,000," he says.
In short, "we never could have afforded living in this home if we had bought it," he says.
The Celkupas ended up renting the apartment through a mixture of circumstance, computation and longing.
Renting a sparkling view
But Jordan said there was no way they would move to a rental-only apartment complex because he didn't want to waste money. But in the aftermath of the Sept. 11 terrorist attacks, he started paying closer attention to the real estate market. He says there was a great flowing of people back and forth.
"The market in 2002 was quite unique," he says. Manhattanites "were rethinking their commitment to both living and working on the island" and moving across the river to New Jersey. The result was a housing boom in a narrow strip of New Jersey that's in sight of Manhattan.
11 causes moves and bargains
In Hoboken, Jordan says, these back-and-forth movements resulted in rising purchase prices for houses and condos, but bargains abounded in the rental market. That closed off one opportunity, but opened another.
They had bought their condo in 1998, and by late 2002, its value had risen 65 percent. The Celkupas considered buying another place and keeping the condo so they could lease it to a tenant. But that wouldn't work: "Despite the gain in market value on our property in the four years we owned it, the equivalent rent had actually decreased during that time," Jordan says. Renting out the condo would have squeezed their finances.
But the weak rental market made the desirable Hudson Tea Building affordable after "some aggressive negotiating." So in October 2002 they sold the condo for that 65 percent capital gain (he's mum on the exact amounts) and moved into the apartment on the river with the nice views out of 12-by-10-foot picture windows.
In hindsight, Jordan says, they could have bought a two-bedroom condo (away from the river, natch) and pocketed even more capital gains. "However, I would not trade this wonderful living experience for an additional 20 percent on our last condo," he says. And in two-and-a-half years their rental payments have been $25,000 less than they would have paid on the mortgage on the condo they owned.
End of rented bliss?
"It's kind of tacitly sending along this message that there's a disconnect between these two markets" -- the purchase market and the rental market, Jordan says. "And there's this issue that maybe we are at a market top and these sophisticated real-estate companies are realizing that there could potentially be a bubble here."
The Celkupas and other renters are holding out for an insider's discount of at least 20 percent: "Our little bubble-sitting game may be over if the inside price is right."