How do I get a good deal on Real Estate? This is a question potential buyers ask all the time, yet it is a red flag to the best real estate agents in NYC. They know the person asking the question is just window shopping and not serious. To get a good deal on NYC real estate one must put in effort.
The first step is to define what a good deal is to you. Real estate investment opportunities do not pop up on a Google search. You must work for them by understanding the market and the benefits of investing in real estate.
Is rental property a good investment? It might be for you if you are looking to diversify your portfolio. There are plenty of stories about the friend who purchased at a price which was a deal yet there is always a reason for that price. In rare instances they happen to be at the right place at the right time and willing to commit to additional investments to improve the property.
To find a deal, here is what you need to do:
What is a good deal on NYC real estate? The problem is that a good deal is subjective. Did you want your monthly housing payment to simply be less than the rent you are paying? Many people have an adverse visceral reaction to, “throwing money away on rent” because you are building wealth for their landlord and not themselves.
Are you evaluating the deal based on cash-on-cash returns or even CAP rates? Plenty of would-be-buyers get caught in analysis through paralysis, asserting that buying is not a good idea while attending open houses every Sunday to find the one based on unrealistic criteria!
While investing in real estate may pale in comparison to other financial instruments, at the end of the day you need a place to live. One cannot discount the emotional benefits inherent in the stability of owning a home with a predictable monthly cost. Landlords can raise the rental substantially when demand allows for such increases.
Sometimes owners rent only to decide later they want to move back in forcing you to move when the term of your lease expires. For many homeowners, the security of homeownership is a foundational pillar, grounding them as they go off on a daily basis pursuing other financial dreams.
In a high interest rate environment, you are likely to get a lower purchase price than you would when rates are higher. “Date the rate and marry the house” is an often-heard phrase referring to the fact that you can always refinance to get a better rate in the future. So, if a low purchase price is your definition of a deal, be brave and buy when others are not.
While understanding what a good deal is in real estate to you is a crucial first step, no matter how you define it, you must remember that real estate is an illiquid investment. You get into the market slowly and out of it slowly with substantial closing costs on either end.
Time is a crucial factor in the transaction and especially in NYC. If you are thinking of purchasing a condo, fixing it up and flipping it, NYC might not be the market for you. If you are purchasing for a seven-to-ten-year term, then your chances of doing well with the investment increase.
Are there any deals in NYC? The answer is, “yes and no.” A buyer was recently looking at a beautiful 1,000 square foot new development condominium, in a building designed by the famed architect Robert A.M. Stern. At a list price of $2,000,000 the apartment is a bargain as other RAMSA designed buildings in New York City have traded at a significantly higher price per square foot and are making headlines for their multimillion-dollar price tags well above $50 million. This buyer mused that for only $600,000 he could buy a lovely house in Provence. Yet he has decided he wants to live in NYC for the remainder of his life and simply only visit Provence.
So, NO — there are no deals compared to other lovely places in the world, there are only deals compared to other parts of Manhattan. If you are searching for property as an investment throughout the United States, you will find plenty of other places where the yields are higher.
Still, NYC is known for being somewhat of a safe haven because over time it offers unparalleled stability compared to many other markets. Even those who are more transient, defined as planning on living in the city for only four to five years, find that if they focus on purchasing a condominium which they can rent out later, they still accrue the advantages of owning real estate.
So perhaps the story of your friend who got a deal means they are simply lucky. Or maybe not if you define luck as the intersection of preparation and opportunity. The real estate business is unlike many other investment markets where it is easy to transact.
Once you define your investment goals then learn the market as it pertains to your goals. That time and preparation is what allows you to identify the deal. The story of the “deal” usually focuses on the purchase price. Where do you typically get a good purchase price? In a neighborhood or building where there is lower demand. Look at Upper West Side condos for sale versus condos for sale in Harlem. You will notice a big price gap.
Additionally, you may find a condo which has lower taxes. What about Yorkville? When the transfer station was built on East 93rd Street a few years ago, prices plummeted as owners sold quickly out of fear that the neighborhood would somehow be destroyed. Spoiler alert. The neighborhood is fine.
Looking in a high demand neighborhood? Perhaps that deal is all about finding a distressed seller which is exceedingly rare and requires local knowledge.
Apart from defining your investment goals and considering neighborhoods you may not have considered, the third step is to partner with an agent who understands the market in depth. Anyone who has purchased property as investment knows that real estate is hyper local. Having local in-depth expertise is crucial to your success. Finding the right agent to help you is all about getting out there and having conversations to see who understands the market and brings value to your search.
Just bear in mind that the role of the agent may be different than you realize. They bring even more value to the transaction when you get to the negotiating phase so choose wisely. There are always twists and turns in a NYC real estate deal you cannot anticipate, and you will need a local expert to guide you through them.
Your agent can also help you analyze the transaction from a number of angles. What is the potential rental price of your property? What has happened to values in the neighborhood over the past 10 years and what is likely to happen with prices in the next decade. What about monthly building charges and taxes? Are those likely to increase and if so, why? How will they compare to other properties you may choose to purchase?
Partnering with a top NYC real estate agent will make the difference when it comes to getting a deal on NYC real estate.
So, are there good deals in NYC real estate and can you get one? Ultimately getting a deal will depend on you and your choices. Most buyers do not feel they have a deal until they have owned for a few years and view the transaction through the light of current property values. Because of course hindsight is 20/20.