Real Estate Investment in NYC Overview:
[*Please note that while certain aspects of the NYC market have changed since this article was written, this still represents a good primer for folks interested in NYC real estate investment.]
I have been helping people buy properties with an eye for investment for a long time in NYC and over my 20+ years in the city I have lived in Manhattan, Brooklyn and Queens. I love helping investors, landlords and end-users find properties that fit their needs and this article is meant to help people learn some of the basic considerations when thinking about real estate in NYC from an investor’s perspective.
Having access to both residential and commercial databases, I and my team can provide clients with a list of opportunities across all price ranges in both residential and commercial real estate. Before you take advantage of the investment opportunities in New York City real estate it is important to have an understanding of the current market and the context of the market.
Real estate investment in NYC has been on the rise for years. Here is a great article from The Real Deal (NYC’s top real estate publication) discussing how NYC ‘s relatively low prices (when compared to cities like London and Hong Kong) and stable market have made it a very attractive city -maybe the most attractive city in the world- for real estate investment in recent years:
“The notion that the New York market is a “safe haven” for foreign investors fleeing economic turmoil has become a guiding ideology for developers, investors and brokers from the Bronx to the Battery. Regardless of whether that claim actually has merit, it’s based on an undeniable trend: the significant growth in foreign investment in the Big Apple’s real estate market in recent years. And, many of these new investors are drawn here by the city’s comparatively stable prices, relative liquidity and easy accessibility.”
Click below to read the full article:
https://therealdeal.com/issues_articles/nyc-vs-the-world/
On the commercial real estate end of things, last year NYC surpassed London as the top city for commercial real estate investment and that was before Brexit happened. Read this short article in The Real Deal regarding NYC’s ascension to the top spot here: www.therealdeal.com/2016/10/05/nyc-overtakes-london-as-top-city-for-global-cre-investment/ (and here is an article I put together on the effect of Brexit on NYC real estate ).
Capitalization Rates (cap rates):
A standard and relatively easy metric for real estate investment cash flow is a cap rate. Cap rates are determined by dividing the Net Operating Income (“NOI” or profit after all expenses) from a rental property by the cost of purchase. So a $5,000,000 condo that nets $150,000 a year in profit = 3% cap rate.
Good guidelines for cap rates in NYC are about 1-4% in Manhattan and 4-6% in Brooklyn or Queens. You can read more about cap rates here: http://www.investopedia.com/terms/c/capitalizationrate.asp
Advertised cap rates of over 4% in Manhattan and over 6% in Brooklyn should be viewed with suspicion and carefully vetted.
Manhattan Real Estate Appreciation:
The Manhattan real estate market is a very efficient market with stability and good long-term appreciation. Over the last 10 years, apartments in Manhattan have seen on average about 28% appreciation and Manhattan townhouses have seen an even greater return averaging about 58% appreciation over 10 years. Here is a good article from Curbed about Manhattan home prices over the past decade:
https://ny.curbed.com/2017/2/2/14483418/manhattan-home-sales-market-reports
It is important to note for aspiring investors in Manhattan that about 75% of the apartments are co-ops which are generally very unfriendly towards investors. So if your goal is to buy a property and rent it out, condos and townhouses are far superior for investment purposes for a number of reasons. Here is a good article about the difference between Coops and Condos in NYC: http://www.huffingtonpost.com/greg-jacobs/coop-vs-condo-what-you-ne_b_3460551.html
Manhattan Premier Neighborhoods:
Central Park South, Tribeca, 5th Ave South, Gramercy Park, Upper East Side, Upper West Side.
Manhattan Neighborhoods with “buzz”:
Hudson Yards, Chelsea, NoMad (North of Madison Square Park),
Inexpensive Lower Manhattan Neighborhoods with better than average growth potential:
Upper East Side (east of 2nd Avenue), Lower East Side –Essex Crossing, Chinatown – Extell’s One Manhattan Square: https://ny.curbed.com/2017/8/21/16178656/lower-east-side-extell-skyscraper-construction-photos
Lower Manhattan vs Upper Manhattan:
Generally when we speak about “Manhattan” real estate we are talking roughly about real estate below 100th st in Manhattan. “Upper Manhattan” -above 106th street or so on the west side and above 98th street on the east side- have real estate qualities and prices that are more like Brooklyn than the rest of Manhattan. While all the neighborhoods are cheaper, certain parts of Harlem and Washington Heights are more likely to appreciate quicker than others. Here is an example of a neighborhood review in upper Manhattan Hamilton Heights.
Here are some target investment properties in Manhattan (Please note that available real estate listings can come on and off the market quickly, so for an up-to-the-day list of investment opportunities, please contact me here).:
Brooklyn Real Estate:
Generally speaking, the farther out in Brooklyn you go from Manhattan, the riskier and potentially higher returns you can get. Close-in Brooklyn neighborhoods like Brooklyn Heights, Carrol Gardens, Williamsburg and Park Slope are already solid bets with higher prices that reflect the maturity of those markets.
As you get farther east from Manhattan to neighborhoods like Bushwick, Bedstuy (Bedford-Stuyvesant), Crown Heights, single and multi-family brownstones become cheaper with some multi-family buildings going for as low as about $1.5mm with potentially better returns on investment but are riskier as well and more sensitive to economic downturns.
It is very important to choose your properties smartly in Brooklyn and with an idea of what kind of risk/reward ratio you are looking for. For the risk averse, stick to Manhattan or Brooklyn neighborhoods that are close to Manhattan. For the investor with greater tolerance for risk or a longer-term perspective on their investments, emerging neighborhoods like Bushwick, Bedstuy, Crown Heights, Sunset Park, and Flatbush may present good opportunities.
Median prices in Brooklyn went up 27% in the last year. Here is the 2017 Q2 market report from Corcoran: https://media.corcoran.com/pdf/reports/2017_Q2/Brooklyn_Q22017.pdf
And parts of Brooklyn are the hottest real estate market in the country like Bedstuy (Bedford-Stuyvesant) which appreciated 194% from 2004 to 2016 (highest in the country). Read the article in Brownstoner here: http://www.brownstoner.com/real-estate-market/brooklyn-real-estate-bed-stuy-home-prices-increase/
There are a number of parts of Brooklyn that are still poised for growth. The impending L train shutdown will probably create good opportunities for buying multi-family buildings (brownstones) along the J/Z subway line in Bedstuy and Bushwick and eventually may be creating some opportunites in Williamsburg itself. Here is a short article of mine about the L train shutdown: https://therealestatenerd.com/absorption-report-l-train-shutdown-free-money/
And more importantly, here is a pretty thorough article on investing in multi-families along the J/Z line: https://therealestatenerd.com/investing-in-bedstuy-and-bushwick-real-estate-along-the-jz-line/
New construction projects abound in Wiliamsburg and Greenpoint has a few new developments coming online that are looking to be very successful. Brooklyn Heights and downtown Brooklyn as well are tried and true and always have various new development condo opportunities.
Here are some currently available target properties in Brooklyn:
If you are interested in buying or investing in Queens- from Long Island City and Astoria to Sunnyside and Jackson Heights there are good real estate values to be found and rapid growth. Click here for an article on buying in Long Island City.
For more info or questions email Cary Tamura: ct@corcoran.com or go to www.carytamura.com
To see some of Cary and his team’s current listings: https://www.corcoran.com/ctamura