Stretching the budget deep into Brooklyn

All that anyone needs to know about New York real estate can be found in what Darrell Peters did this month.

Peters is finishing his third year at Goldman Sachs, the most white shoe of the elite Wall Street banking firms. Confident about his year-end bonus, he was pre-approved earlier this month for a $800,000 loan to buy his first home. Then, he went shopping.

Unlike other young associates at the firm, the 27-year-old didn’t look for a 700-square-foot studio in the promised land of Manhattan’s Upper East Side or even for one of those overpriced railroad flats on the Lower East Side so popular with the young professionals.

Nor did Peters play it safe in fashionable Brooklyn Heights or newly fashionable Fort Greene, where he now rents.

Instead, he went three stops more on the A-train, deeper into the heart of Brooklyn, to once elegant and desirable neighborhoods that fell victim to crime and poverty but are now coming back. Peters trudged through four-story fixer-upper brownstones in Crown Heights and Bedford-Stuyvesant.

He couldn’t even get into a few basements because the eye-brow-pierced artists who were brave enough to move in when the neighborhood was really bad hadn’t bothered to leave keys. But Peters didn’t care. He has an instinct for real estate -- his dad, a Maryland gym teacher, drew him into many home improvement projects -- and he had a plan.

Wearing a maroon “Stanford Engineering” sweatshirt and torn jeans, Peters spent a recent Saturday looking at homes with his agent, Anthony Morris of Corcoran, a big Manhattan real estate firm that has tentacles in Brooklyn. Morris, himself a new owner in Crown Heights, stuck to neighborhoods that until very recently were described in tabloid crime stories as “the most infamous ghettos in the city.” But Peters perused them as though he were on Fifth Avenue.

“Wow, this place gets both north and south light,” he said of a tumbledown red-brick house in Crown Heights.

By Monday, Peters was ready to make an offer. He’d seen only three places but had fallen hard for a century-old brownstone in Bed-Stuy that will have been renovated into three apartments by the time he closes. The Crown Heights red-brick was bigger for the same price.

But Peters is buying in a more historic and slightly more gentrified area. It already has the requisite bistro with funky art on the walls and a new bakery called “Bread Stuy.” Similar square footage for a good Manhattan brownstone would have cost him $8 million instead of almost $800,000.

“I fell for the location primarily but also for some of the architectural details,” said Peters, who plans to live in the garden duplex that has the old stained-glass windows and original banisters. He’ll rent the two other apartments to cover half the mortgage and taxes.

“I know the area pretty well and have friends around there. It’s close to the train, close to the Akwaaba Cafe and a dry cleaner,” he said. “It just felt more like home than the others ... and most important it’ll rise in value the way Brooklyn keeps doing.”

Betting on the future

For Peters, who is African American, being smarter and wiser has helped him get ahead, including at Stanford University, where he went to graduate school. Now, he’s making another really smart move. He’s plunking down all his savings on an $800,000 bet that will likely be worth double that or more in a few years. He bought a good present and a better future.

“Who wants a completely stable investment at such a young age?” he said, laughing. “If this is a bust, what do I lose? I don’t have kids or a retirement fund to protect.”

Pressed about the risks, he quoted John Jacob Astor, the Manhattan land baron of the early 1800s, who’d wished he’d put more money into New York real estate. Driving around central Brooklyn, he pointed out a small building with a beauty parlor on the first floor. A former Wall Street wunderkind owns it. He lost his job during the dot-com crash but not before buying a place with a couple of tenants.

“I don’t want to lose my home if I lose my job,” Peters said. “If I have a couple of good years to pay down the mortgage, I’ll have some security.”

He has that chance. He already saves bonuses, lives carefully, invests prudently. That everyone else lives big in New York is old news. He is new news -- a sane man in an insanely expensive housing market where the prices keep rising.

People have always bought in this city in the hope that if they could just get on the escalator, it would go up. The market may tumble, but it has always come back. When Roger Bannister was the first to run the four-minute mile in the 1950s, it begged the question, how much faster could a man run?

Similarly, when home prices keep skyrocketing and people priced out of Manhattan are buying former crack houses and pushing deeper into the boroughs, you have to wonder how much more will New Yorkers pay for a home and how much farther will they go? Two million dollars for a studio in the Bronx?

A two-minute mile?

The six-figure bonus

One myth of New York is that Wall Street bonuses drive the real estate market. Really, it’s the economy that drives both, the bonuses and the market, according to the real estate community. But the agents sure like their customers who come around this time of year with six- and seven-figure rewards and an itch to shop. Darrell Peters is counting on an extra $100,000 or so. But the masters of the universe, the guys in the suspenders and blue shirts with white collars who get chauffeured around with their wives in skinny designer jeans, are bringing home additional millions in their paychecks this Christmas.

And as of this fall, you need at least a million to matter. Both co-op and condo prices seem to jump in $1-million increments: Every additional room in a decent co-op costs $1 million; studios in a new Richard Meier-designed tower are being sold for a cool $1 million.

Are there bargains? Sure, 50-square-foot maid’s rooms, good for storing broken-down bicycles and high school yearbooks, get snapped up for a mere ... $200,000.

Wanda Bailey, a high-end Corcoran agent on the Upper East Side, recently sold such a room in a Park Avenue co-op. It was on the first floor. It came with a sink but no toilet. When that co-op was built before the turn of the last century, first-floor rooms were used for staff working on the upper floors. Now they’re coveted for home offices and extra storage. “This is an island,” Bailey explained, “and people pay for space.”

With their bonuses, Bailey’s clients either try to ratchet up their status by moving into better buildings or get more space by moving, say, from a “classic six” (three bedrooms, living room, dining room and kitchen) that goes for $3 million to $4 million to a nine-room spread, with an extra bedroom, study and maid’s room, that sells for another million or two.

These days the Manhattan housing market is so tight, Bailey can hardly find anything to show. Real estate agents all over the city are so desperate for inventory that they’re calling old clients to, uh, wish them a happy holiday, find out about the kids and, you know, check in. Are they thinking of a transfer to London? Perhaps they don’t need so much space now that they’re empty-nesters?

“This is not the frenzied market we’ve had when bonuses were really, really great a couple of years ago, when you had three couples at one appointment and they wouldn’t even ask prices, they’d just make offers,” Bailey said.

Don’t think she’s complaining about the market today. It’s so good that “it’s squeezing out a lot of great families to the ‘burbs. These aren’t poor people; these are people who the rest of the country would consider very wealthy.”

When told about Peters’ new Bed-Stuy townhouse, Bailey is impressed by him but not necessarily his purchase. “I still think he would be better off buying on the Upper West Side or Upper East Side in Manhattan, which is going to appreciate more and is a sure bet.”

That said, however, she admires a guy who lives within his means and cautiously invests. “What’s his number?” she inquired. “That’s a guy I want managing my money.”