When it comes to investing in real estate it is all about location, location, location. What better location than one of the best cities in the world, New York City which is investor friendly?
A diverse and ever changing economy is one of the hallmarks of this global hub. Finance, the arts, technology and higher education are always evolving and growing. And while the work from anywhere trend has certainly changed where many people live, make no mistake that New York City and its stakeholders intend to stay on the forefront of economic developments keeping our home city vibrant and appealing to businesses, transplants and tourists alike.
For all these reasons, demand for rental housing is consistent. There are many well known benefits to investing in real estate from diversifying your portfolio, to accessing leverage, the cash returns and growing equity. Is rental property a good investment?
Read our top reasons and benefits for investing in the big apple and decide for yourself. Depending on where you are in your journey, investing in a NYC property might be a great idea with benefits you had not anticipated.
1. A Strong Rental Market – If you are looking to purchase property as an investment New York City offers a long history of a consistent rental market. Over the past few decades it has been sought out by average New Yorkers and wealthy international investors as a safe place to invest.
While demand for housing has always been strong, in the past few years in particular demand has outstripped supply making it a great time to be an investor. Average rental prices have increased and remain stubbornly high. It takes time to build new buildings to accommodate the demand so this shortage is not likely to be abated any time soon.
While rental prices may fluctuate over time, New York City has always been a magnet for those seeking new opportunities.
2. A wide variety of choices. You want to begin by understanding what type of property is appropriate for investors. While some co-ops are investor friendly, you ultimately want to stick to condominiums and townhouses.
Developers turned to building condos over forty years ago and have been quite prolific expanding the supply of available apartments for purchase. Before that time the housing stock was largely co-ops which are known to have many rental restrictions, making them an unsuitable option for investors.There are plenty of condominiums to choose from in Manhattan regardless of how much you want to invest. You can find a studio for $500,000 or invest many millions.
Regardless of your investment goals there is likely to be a property which is appropriate for your strategy. You can find a simple walk-up building with very low maintenance all the way to amenity rich condominiums with shining glass facades and cutting edge interiors. There are even upper west side condos for sale with rooftop swimming pools while Waterline Square boasts over 100,000 square feet of amenity space.
3. Convenience of Owning- One of the biggest benefits to purchasing a condo is the management agent is already hired working on the building and the cost to you is included in your common charges. A superintendent will either be on call or live in the building so you don’t have to be on call for repairs. In general your superintendent should be able to fix minor problems.
You don’t need a managing company unless you want a higher level of service than the onsite team can offer. In that case you may want to reach out to a company like XL Real Property Management who specialize in high end luxury property management for absentee owners.
4. Stability and Appreciation – To understand how your investment may perform over time it is helpful to look at historical trends. Of course the past can only inform and not predict the future but the best real estate agents in nyc will not only be able to give you historical research but also provide context for the market today sharing the granular trends only a local expert has.
For example, the Corcoran Group has a thirty year study from 1993-2023 which tracks the price per square foot and average sale price of all Manhattan apartments and adjusts them for inflation. This is an excellent report for gaging your investment opportunity as it relates to time. One of the advantages of real estate is that it is a slow moving market so you won’t experience the wild highs and lows you can experience in other financial markets.
5. Global Appeal – Whatever your thoughts are about the current state of life and the economy in the United States, the fact is New York City remains a cultural and entertainment center. Supporting the arts from street performance to Lincoln Center and Carnegie Hall, it is baked into the fabric of the city. It is art centric. The hub of creativity and entertainment includes a diverse collection of museums from the Bronx to Brooklyn. While world class dining and the performing arts are well known, helping connect the diverse performance centers is a transportation infrastructure which caters to every economic strata.
6. Leverage and Tax Incentives – Approximately half of all buyers in NYC pay all cash for their real estate purchases. If you are an investor and decide to finance, you can put down as little as 10 percent and finance the remainder which can lead to substantial growth over the long term. Mortgage interest and certain property related expenses are frequently tax deductible. Take it a step further and you can find condos for sale in Harlem with tax abatements some up to 25 years.
These lower tax payments will increase your return on investment (ROI) significantly. For example there is a condo in Harlem where the current monthly taxes are only $76 a month. According to the offering plan, those same taxes unabated would be $1,715 a month.
7. Portfolio diversification – There are many advantages to owning real estate. It is a classic hedge against inflation which is why it remains particularly attractive today. Many investors like knowing a portion of their wealth is preserved by the stability of New York City and the consistent steady growth of prices experienced over the past thirty years.
As financial markets witness more dramatic highs and lows it can be comforting to many to know a percentage of their portfolio will stay strong and steady over time. The trick is to never be in a hurry to sell your property. Of course the real estate business isn’t for everyone but if you are thinking of purchasing an investment property in New York City understand that the real value is capital appreciation with very low risk as CAP rates are likely to pale in comparison to other high risk markets across the United States.
8. Real Estate Investment Opportunities – New York city offers real estate investment opportunities. You may find other real estate investment opportunities which have a better year over year cash return but NYC is resilient. The large diverse economy has proven itself over time and is far more cushioned against economic downturns than other areas which are dependent on only one or two industries. For those seeking a higher return on their investment, teaming up with a local developer to provide equity can be rewarding but the risk matches the potential returns. It is not for the faint hearted.