NEW YORK CITY—There are only 814 1-4 family homes in Manhattan, which accounts for about 2.5% of the total building stock, making them rare and highly coveted. There could soon be many more, as it seems anything that can be converted to a singlefamily is being converted to one. For instance, a one story 50' warehouse in the West Village was sold last year for $32 million for development into a single family.

Nearby, we recently sold a 25' wide, seven family townhouse at 70 Bank St. for $13.8 million or close to $2,000 per square foot. The property was delivered vacant, so it will be converted back to its highest and best use, single family.

It was an easy decision for the selling family to make. At the time, they were only grossing about $300,000 per year on the property, so after expenses they were only netting about $225,000. Thus, they sold at a 1.6% cap rate, which even here is unheard of. They will likely triple their cash flow by exchanging into a larger apartment building.

There are only about 100-150 1-4 families that sell each year. The average pricing has ranged from $6.7 million to $7.6 million over the last few years, but in 1H14 they made a 44% jump to $10.9 million. This figure equates to over $2,097 per square foot up from $1,436 per square foot in 2009. It's hard to believe that the average house in Manhattan sells at this level, especially when many of these required gut renovations that can cost another $5-10 million, or upwards of $1,000 per square foot.

When considering coveted neighborhoods like the West Village, where there are nine homes on the market asking over $20 million or $3,000 per square foot, it would seem the averages are justified by the high end. Twenty-seven out of the 58 townhouses that sold there in the last year and half did require renovations, so it would seem that half of the houses require upgrades.

Throughout Manhattan, StreetEasy counts 260 townhouses in contract or on the market compared to 4,206 condos and 3,445 co-ops. Keep in mind that these townhouses likely include 5-plus families and mixed use properties, but it does show there is inventory out there.

Townhouses with rent regulated tenants are also getting attention. 37 West 10^th St., a townhouse we recently sold, contained three rent regulated tenants and sold for $9,500,197 or $1,298/SF. Currently, we are offering 77 Washington Place for sale for $8.25 million. This 22' wide townhouse is currently configured as 5+ family of which four units are rent regulated, but it provides for an owner's duplex with double height ceilings. A buyer will pay up for this to, hopefully, one day occupy the entire house either through tenant buyout or taking what is known as owner occupancy.

Even if the average townhouse sells for over $2,000 per square foot, they seem to be a good value proposition seeing how luxury condos can sell for double or even quadruple this level. Buyers give up the full services a building provides, but they receive privacy in return. Like condos, many of these buyers are now foreign investors looking to “park” their money in NYC. Thus, this single family conversion trend should only continue to increase.

James Nelson is a Partner at Massey Knakal Realty Services. Since 1998, he has been involved in the sale of more than 250 properties and loans with an aggregate value of over $2 billion in the NY Metro Area. He can be reached at [email protected] or 212-660-7710. To follow James on Twitter, please go to http://twitter.com/JamesNelsonMKRS or LinkedIn at <a title="blocked::http://www.linkedin.com/in/jamesnelsonmasseyknakalView public profile" href="http://www.linkedin.com/in/jamesnelsonmasseyknakal">http://www.linkedin.com/in/jamesnelsonmasseyknakal. The views expressed in this column are the author's own.