Warren Buffet famously said it’s wise for investors “to be fearful when others are greedy and to be greedy only when others are fearful”. While he was referring to the stock market, the same can be said of real estate investing.
In New York City, many buyers looking for a home have been nervous to move forward this year with interest rates for a 30 year fixed mortgage holding steady around 7%. The fear stems from having so much money at stake and concern over making the wrong choice and being locked into the wrong investment. This has put downward pressure on pricing, creating opportunity for purchasing.
While you can always refinance in the future when mortgage rates come down, you cannot easily sell your property and buy a new one. We recommend buyers focus on the long-term.
If you are planning on residing in the property or simply being an investor, this is a good time to get into the market as prices are compelling. It’s a good time to be greedy.
1. Will property values appreciate? Understanding the fundamentals of investing in real estate is important because it is different from other financial markets. Many buyers are faced with analysis paralysis right now. Yet doing nothing at all also has financial consequences.
You cannot build long term wealth by paying rent every month. You must be in the game. Gains in real estate are the opposite of a meme stock strategy and over the long term New York City properties always appreciate.
Find a home you expect to stay in for 7 to 10 years, even if that means buying a condo at a slightly higher price instead of co-op so you have the flexibility to move elsewhere and rent your home out while you wait for different market conditions.
2. Understanding investing in real estate: Investing in real estate is very different from investing in other financial markets. This is largely true because condominiums and townhouses are not commodities. Typically no two are alike unless you are purchasing a new development. Additionally they are illiquid investments with far more time and expense associated with getting in and out of the market. Partnering with a local real estate expert is the best way to add context to the properties you are considering purchasing. The other tip? Be patient and deliberate.
3. Building long term wealth: Real Estate is a great way to build long-term wealth. There are some professional Real Estate Investors who even shun the stock market and prefer something that they can touch and walk through to grow their money.
Real estate’s popularity comes from the fact that it is a hedge against inflation. Individual owners and investors alike lock in their monthly housing costs when they purchase. As costs increase over the years, homeowners may notice that the amount they are paying is less than if they had continued to rent. With housing, a large percentage of most people’s budget, the predictability of how much they will pay is helpful.
4. How to own rental properties: If you are an investor, it is a good time for you to get into the market with lower prices and high rents. You will find many other articles in this blog that go into detail about investing. Experienced investors tend to have their own approach to analyzing markets and individual properties. Many use a capitalization rate (CAP) or a Return on Investment (ROI) formula.
A simple apples to apples comparison is the CAP rate. In New York City anything from a 3% to 4% cap rate is good.There are many ways to analyze the numbers but find some formulas which work for you and consistently apply them to all the properties you are considering.
Apart from formulas, you also need a strategy aligned to your investment goals and cash on hand. You want to be cognizant of down payment requirements, closing costs, understanding the potential rates in various neighborhoods across New York City and ensuring that you have enough cash set aside for vacancies.
5. Passive income and cash flow. The Internet is awash with ideas for passive income and cash flow with real estate standing out as one of the big winners. Be aware that while real estate can create passive income, it is not a passive investment. You will be required to pay attention from time to time. Properties need to be maintained in order to preserve their value.
6. Best Websites to Find Investment Properties: Thanks to Silicon Valley there are no shortages of websites who offer property searches. For New York City, I like CitySnap the best. Here is why: New York City doesn’t have an MLS (Multiple Listing System). Instead they rely on the RLS (Residential Listing Service). The RLS acts similarly with listings shared among Real Estate Board of New York members; other websites such as StreetEasy require agents to input their listings manually. As a result you may find inaccuracies.
Citysnap is a search portal which gets its data directly from the RLS. Many trusted brand- name websites frequently have incorrect or outdated information for New York City. They may even have an unscrupulous agent offering a property at a very low price trying to entice you to be represented by them as a buyer. I work with buyers from all over the country and sometimes they will send me a link, which is either suspect or severely outdated.
7. What neighborhoods are best for rental properties: Which neighborhood to consider largely depends on your investment strategy. Right now condos in Harlem are worth considering as many of them still have time left on their tax abatement. The monthly savings can be as much as $1,000, making these compelling investment opportunities for homeowners and real estate investors alike.
Upper west side condos also offer a wide variety of choices. Over the past few years a number of new developments have been built from Waterline Square up to Claremont Hall in the heart of Columbia University. The wide variety of choices make it interesting regardless if you are looking for a simple walk up building with low monthly charges to a spectacular jaw dropping tower with amenities beyond your expectations.
8. How to find top NYC real estate agents: Finding the right agent in any market is challenging. You can go on Google to see who is the top ranked agent in the neighborhood you are interested in. Yet be aware that some agents rank simply because they have more reviews than agents who are busy helping buyers and sellers and forget to ask for reviews.
Instead take a look at which agents show up most frequently in the neighborhoods in which you are searching. Go ahead and reach out to a handful of them. You want to find an agent who communicates well with you and is responsive. While you may have done a great deal of research, when you have that initial conversation with them, ask yourself if they are adding helpful local details to your analysis you would not learn online. Do you have the sense that they truly understand the market?
There are plenty of agents who will respond quickly and set up appointments for you, but you will need more than responsiveness in order to understand the market and get to the negotiating table. There’s nothing wrong with going out with a new hungry Agent, simply make sure they are backed by a senior agent who is mentoring them and overseeing the process.