Investing in New York City Real Estate
We help clients diversify, protect, and grow their real estate investment holdings.
Investors seeking to purchase New York City real estate investment properties need undivided loyalty and experienced guidance; that is what we provide ELIKA Real Estate. We are New York’s leading exclusive buyers’ agent, which means we work solely for the buyer’s interests.
Our primary focus is on residential real estate investment properties. Our goal is to help clients navigate the buying process as well as finding the best deal with the least amount of risk. With an Elika buyer’s agent by your side, you can be sure of receiving excellent service and expert advice. We provide comprehensive services to make sure you meet your goal.
New York has always been an attractive location, and that is not changing anytime soon. This popularity has lead to a wide variety of properties being available; new developments, resales, single and multi-family properties. For investors, New York City, a classic example of supply and demand. For those with investment capital, much can be gained. Market fluctuations may be frequent in real estate, but you can be less severe when choosing the right real estate investment property.
Could I begin life again, knowing what I now know, and had money to invest, I would buy every foot of land on the island of Manhattan.
John Jacob Astor
Not all properties are worth buying.
Supply and demand aren’t consistent across the city. That’s because investment potential varies from one neighborhood to the next. Finding the right property and best terms mean knowing the local market, what changes may be coming, as well as the buying process.
We’re Here to Help
ELIKA provides New York investors with an end to end investment solution, from buyer’s representation to property management when needed. We help you through the buying process with 20 years of service excellence and resources.
Our focus is on helping clients identify and acquire quality properties build to outperform. Our agents guide you through each property type, highlight the pros and cons of each, building, and broader neighborhood. Once found, we’ll estimate the fair market value and strategize on an offer to negotiate, handle negotiations, take care of all the paperwork, and conduct the final walk you through to closing.
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Let an ELIKA Expert search, filter, and send you the best available New York City real estate investment properties. Request a Custom Search, Schedule a Call, or feel free to contact us at your convenience; 212-590-0540. — Services Free for Buyers.
Guide to Buying an Investment Property
Table of Contents
Reasons to Invest in New York City
Global and well-known perhaps the most crucial city in the USA. When people talk about America first, they think of New York as the financial capital. Then L.A. as the entertainment capital of the U.S. Thus, investing in New York City, which is diverse in industry and population with a rich history, provides the perfect location and backdrop for housing. From leading educational faculties to too many company’s headquartered, there makes it a magnet for economic and job growth.
- Well located globally
- Diversified industries
- U.S. dollar
- Political stability
- Safe Jurisdiction – The Swiss bank of Real Estate
- Foreign Buyer friendly
- Transparent Ownership rights
- Supply and Demand
- Portfolio diversification
- Resilient Market
- Return on Investment – a Proven track record of outperformance
Real Estate Investment Considerations
Buying an investment property is a big decision. As such, you’ll want to know all the significant considerations you’ll need to make before starting. Real estate investing can be a scary business at first, which is why having a trusted buyer’s agent by your side is so such a great help. Our agents have the experience, knowledge, and training to make it as easy as possible for our clients.
However, we can only give the right advice when we know what our client is looking to accomplish. That’s why we work closely with you to understand your needs and find the property investment that’s just right for you. Additionally, we work with each of our clients on an individual basis. By listening to your needs, and working closely with you from the beginning, you can be sure of receiving nothing but the best advice.
Strategies for Real Estate Investing
For our investment clients, our preference is for free-standing, architecturally exciting buildings developed by well-vetted developers and interesting, accomplished architects. We look for a uniqueness that will mature gracefully, quality of construction and finish, walkability, building services, and the lifestyle it offers potential tenants, and if we were to live there with family. The unit mix is also a key metric we assess. Preferences can differ depending on our client’s investment profile. However, we adapt to position our clients as best as possible to accomplish each of their goals.
- Locate investment properties that will outperform the market
- Buy what a New Yorker would want to live in
- Buy and hold
- Capital Appreciation
- Desirable Architecture
- Superior Product
We believe the best neighborhoods, streets within, and the property is where a New Yorker would want to live. Our preference is a hyper-local approach concentrating on areas that have fascinating histories and well-positioned to provide for current housing demand and capture future growth. A particular neighborhood might be great, but then it comes down to the street and building type.
The type of property use will have a significant impact on its investment potential. For instance, many co-op apartments restrict property owners subletting rights. Elika agents can help you understand subletting requirements and avoid those properties that don’t fit your needs. Applies for all property types, whatever the pros or cons, you can trust us to give you an accurate, real picture of what to expect.
Specific real estate investment properties will attract stable long-term tenants. You should know how to avoid residential properties with a high turnover. Our agents can help you pinpoint those properties which are more likely to attract long-term tenants.
In NYC, a property’s value is tied as much to the building and neighborhood as it is to the specific unit. Neighborhood amenities, transportation, property age, and community features will affect investment potential. Through a range of different sources, we’ll gather all the intel needed to make the right decision.
Property costs, yield, and capital appreciation vary from street to street and from one building to the next. When investing, you’ll need a real estate buyer’s agent who has access to all properties and independent market analysis. Every investor wants a property in a neighborhood that is seeing high capital appreciation. Our job is to find you in that neighborhood.
Working with an Investment Advisor
Before buying an investment property, you’ll need as much information as possible about its long-term potential. Research and experience make a big difference. As such, you can significantly improve your real estate investment portfolio with strategic property acquisition. Elika Real Estate can help. Whether you already own a property or are looking to diversify, our investment experts will help you gather accurate information that you can use to make responsible decisions.
Tailored Investment Services
Our agents don’t just stop on finding you the right property. We like to go the extra mile and provide a tailored service to suit each client’s individual needs.
Comprehensive Needs Analysis
To spend your time wisely, you’ll need an exclusive buyer’s agent who understands your goals. At Elika, we gather vital information from you before showing properties. Our dedicated agents will know which options will work well with your portfolio and needs. As such, by extensively analyzing your needs, we’ll never waste your valuable time with unsuitable properties.
If you want your investments to be a success, then you’ll need accurate information. Our experts work exclusively as buyer’s agents. Due to this, they understand the investment potential and know-how to see past the listing agent’s sales presentation. We always provide unbiased, accurate information about the properties that we show. That’s because we have a strong incentive to help our clients avoid lukewarm investments and find only the best.
Comparative Market Analysis
You also need to know how each property compares to the rest of New York City’s real estate investing market. We provide a comparative market analysis so that when you start the purchasing process, you’ll have confidence and complete peace of mind in your decision.
We’ll help you understand the buying process in its entirety. When you’re ready to make an offer, we’ll negotiate on your behalf. The purchase price is your Investment’s single most controllable variable. By understanding your budget and goals, our experts will help cut costs significantly. There may be a bit of back and forth in negotiations. But by having one of our agents by your side, you’ll feel much more confident as you proceed.
Buying investment properties requires the help of several professionals. Finding these people and knowing who to pick can be difficult if you’re unfamiliar with the local market. As an exclusive buyer’s agency, Elika has access to some of the top attorneys, accountants, and mortgage bankers in New York. We can refer you to superb companies that’ll save you money while providing top-tier services.
Investment properties take work to keep running. If you need help with the management aspect, then we can help with that also. Our management team will handle everything from finding and screening tenants to handling tenant requests, to overseeing any repairs or maintenance. We know that many investors can’t be on hand all the time to handle the little details of property management. That’s why we provide management services to take care of all those details for you.
Elika Real Estate ensures a hassle-free process when investing in the largest real estate market in the world. We maintain every aspect of buying, leasing, and managing a property in New York City. As such, you can be sure of enjoying a successful and hassle-free experience.
Diversifying your portfolio with New York real estate investments is a safe, smart financial move when you’re working with a qualified agency. With a unique knowledge of the New York housing market, Elika Real Estate gives you unbiased information, advice, and a wealth of resources that you can use to make an appropriate purchase.
One of our agents will be with you shortly to discuss your needs and set up a meeting to plan out your investment strategy.
Guide to Buying Investment Properties
No doubt, there are a lot of people out there who have dreamed of owning an investment property one day. Unfortunately, many New Yorkers stop there and don’t look into it as a real possibility, misbelieving, that it is an avenue only open to the super-rich. It’s time we eradicated that myth. Investors come in all shapes and sizes, and, believe it or not, some properties found at reasonable prices.
While owning your own home has many benefits, there is a way to invest in real estate that can also produce a steady flow of income. Be prepared for a lot of research and planning if that’s to become a reality. To help you get started, here’s a full list of all the considerations you need to make before investing in New York real estate.
Consideration Before Buying
Approximately 45% of the New York City Housing consists of rental units, according to the U.S. Census Bureau’s American Community Survey. Source: National Multifamily Housing Council. The highest among cities in the United States. For instance, Los Angeles has 39% of its housing devoted to rentals, while San Francisco’s was 37%. Other sources estimate that about 67% of Manhattan’s housing stock are rentals. At present, there is a high source of demand, and the economy is performing well.
Why it’s Not About Yield
Imagine this; it’s currently baseball season, so you take a seat to watch your favorite team. The star player is at the plate, and as he gets ready to hit, you see he’s holding a cricket bat. Of course, this scenario is ridiculous, but that’s how experienced investors see many new arrivals in the NYC investing game. They’re playing the right game but with the wrong tool. Here, the wrong strategy is focusing too much on yield. Instead, it’s a capital appreciation that is the main game in this city.
The yield, or cap rate, is your net cash flow divided by your purchase price. As a beginner investor, it’s natural to think this is what matters most. In this city, it has historically been 3%-4%. Much lower than yields across the country. Multi-family properties in Atlanta and Chicago are about 4.75% at the low end and over 6% in Indianapolis, according to one study.
Many cities offer a higher yield, making rents an attractive source of steady income. However, despite the high rents commanded in New York City, this is not the primary factor generating returns and naturally leading to the question: why invest in New York City? After all, an investment in the ten-year Treasury note currently has a 3% yield. But this has been an unusually low period for rates.
Since backed by the full faith and credit of the United States government, repayment of the principal is considered risk free. Unlike real estate, it’s a passive investment that doesn’t involve inconvenient calls for emergency repairs and unruly tenants. Since there is more risk, there must be a higher potential return. As you’ve probably guessed, there’s a missing piece to the return equation.
The answer is that reak estate investors have generated a large portion of their gains from rising prices. For instance, real estate appraisal and consulting firm Miller Samuel examined Manhattan prices for 100 years, from the 1910s through 2010s. In the 1970s, the sales price was $45 per-square-foot for luxury properties, rising to $1,200 in the 2000s.
In a narrower period, covering 2004 to 2013, the median sales price for Manhattan rose from about $606,000 to $855,000. A 141% rise or a 3.5% compounded annual growth rate. There’s a couple of things to note here. The 2004-2013 period includes part of the build-up during the bubble and the sharp contraction during the recession. But over a decade, these large swings balanced out to a 3.5% annual gain.
Return on Investment
Measuring profitability is essential. However, in isolation, it means very little. Rental income, minus monthly expenses such as maintenance, repairs, and financing costs, give net income. Should be compared to the amount invested. The percentage should be examined, to other investments.
For example, if you have a 2% return, and the ten-year Treasury bond is yielding 2.8%, you would be much better off with the latter. Especially faithful since the risk of losing your principal is extraordinarily small (most consider it a risk-free investment). There are a couple of other considerations. Although the purchase price is typically determined based on square feet, renters usually look at the number of bedrooms.
Therefore, if extra bedrooms added, a smaller unit may command a higher rent while costing less to purchase. Also, it is crucial to analyze sales and rental data. The two do not always move in lock-step, and there have been instances where sales prices have risen faster than rents. In real estate, leverage, or borrowed funds, is often used. Potentially increases returns since you can purchase a property with a down payment and pay the balance over time. Of course, it also increases risk and magnifies losses in a downturn.
Real Estate Investing 101
One strategy for real estate investors involves renting out commercial or residential property. You can actively monitor and manage the property yourself or hire a specialized company to do so on your behalf. Either way, it is essential to accurately budget your cash inflows and outflows and measure your return.
Collecting rents should be the fun part of real estate investing. Each month a rent check is expected to come in. However, there are also challenges in measuring your expected incoming cash flows in advance.
There are monthly rents, and your income should merely be this amount times the number of units you own. However, this does not take into account vacancies, factor into your calculations. You can also choose to be more conservative and use a higher vacancy figure, particularly given the economy has been growing recently, and the rental market has been active in New York City over the last several years.
For example, if you own a building with ten units, each with a monthly rent of $10,000, that is the monthly cash flow of $100,000. Assuming; a vacancy rate of 10%, your budgeted monthly income is $90,000.
Of course, you can also have a more conservative rent figure in case you can’t receive the same amount from a new tenant. Keep in mind; New York City has one of the most favorable laws for tenants in the country. Me you may be stuck with a non-paying tenant for quite a while.
While there are difficulties in budgeting for rent collections, doing so for cash outflows presents even more significant obstacles. You will know certain expenses such as your mortgage payment, assuming the interest rate is a fixed term. However, taxes and insurance tend to go up annually.
There are also monthly expenditures for utilities (the property owner is responsible for certain ones such as water and gas). Then there are standard maintenance or common charges if you own a co-op/condo. More difficult to estimate because these tend to increase over time. Should you hire someone to manage your real estate investment, there will be a fee. Lastly, maintenance is an unpredictable but omnipresent cost.
While you can cover individual repair costs with your monthly standard common charges, that is not the case for all of them. For instance, broken appliances such as a refrigerator or stove may fall under your umbrella. In a condo, you own the airspace, meaning you’re responsible for fixing anything that’s in the interior of the building.
In real estate parlance, the annual return is called the capitalization rate, or cap rate. Ideally, your budgeting process should be reasonably accurate, and your properties should generate positive cash flow. Dividing your net cash flow (income fewer expenses) by the purchase prices equals the cap rate.
Even before purchasing a real estate investment property, you can determine your estimated cap rate, providing your budget is based on reasonable assumptions. You can decide whether or not the return is adequate. A buyer’s agent can help you examine historical cap rates to put the figure in context. Over an extended period, the cap rate has typically been 3%-4%.
In Sum – Income Taxes and Depreciation
So far, we have not factored income taxes into the equation. IRS rules allow you to deduct depreciation on your rental property, providing you own the property, use it for your business or income-producing activity, the property has a determinable useful life – expected to last for more than one year. If you rent your co-op, the IRS allows you to depreciate your stock. This deduction serves to reduce your taxes and increase your after-tax cash flow.
You will also have to consider potential capital appreciation. While the cash flow should provide a steady income stream, there are also possible rising real estate values that can increase your wealth. However, focusing on the cash flow basis is the first place for investors to start.
We don’t mean to dismiss the rent collection. Hopefully, it will provide you with steady annual cash flow. However, for those who are patient and astute, capital appreciation can be the real wealth generator. To get started, here is our comprehensive guide to help you begin planning your NYC property investment.
Hire an Attorney
You will need to protect your assets in the event of bankruptcy or litigation—many from a limited liability company (LLC) or limited partnership. There are ways to do it online, or you can consult an attorney. One area where it may pay to ask an expert since the cost of not doing it right could be catastrophic to your finances.
Choosing a Location
As a cultural and commerce powerhouse, investment properties in New York have desirable characteristics. Unlike the 1970s, the city now has a reputation as a safe city. Be sure to check out other posts on this blog for a better explanation of the attractive characteristics of New York’s real estate climate. But your first decision should be on what neighborhood to choose. Your primary considerations should be economic factors such as income growth, proximity to transportation, and neighborhood characteristics such as the types of shops and restaurants.
A well-informed agent can assist with this task. For a risk-averse real estate asset, we recommend thinking about micro-markets within New York City. We won’t repeat the maxim about the three most important rules for real estate, but location matters for your Investment.
Just like any investment, your decision on which neighborhood to invest in comes down to the risk/reward. If you have a high tolerance for risk, an up-and-coming area should provide you with a higher price appreciation potential and a higher capitalization (cap) rate. Or, you may feel more comfortable purchasing an investment property to rent in an established neighborhood.
In our experience, below 23rd street offers the best rental demand. There you’ll find a lot of amenities that draw people, such as excellent restaurants and cafes. You can also take comfort in knowing that it’s been this way for decades. The more established an area is, the safer the choice, particularly in today’s market.
Choosing a neighborhood a New Yorker would like to live.
While more speculative properties should have a more capital appreciation upside, you’re in for a wilder ride when the housing market corrects. The rental yields aren’t necessarily higher than you could expect to receive in a more secure area. Our simple rule is to invest in areas where New Yorkers want to live, and there is a lack of competition from rental buildings. Know the market trends for the neighborhoods you’re looking in and research other rental buildings and inventory nearby.
Find out if anything new is coming to the area that will make it more desirable, such as a new subway station or grocery store. Research the property tax rates and school zones, especially if you’re purchasing a two-bedroom apartment, ask a professional in real estate about which neighborhoods in NYC are anticipated to grow, and why.
What type of real estate investment property?
Factors that go into choosing the right residential property Ioutperform as a rental (e.g., neighborhood, building). But there are also other considerations since this is an investment property. For a start, will your purchase be a residential property? If so, will it be a single condo or co-op unit, or the entire building? If it’s a co-op, the board may have restrictions on subletting. Multi-units or multi-family townhouses may have more upkeep, but you’ll still have good cash flow even if some of the units remain empty.
In general, condo units are more accessible to rent than co-op units. The former typically has less restrictive rules regarding renting, with some placing a complete ban while others limit the amount of time. It’s also likely to take longer to purchase a co-op since you’ll have to receive approval from the board. Even if you’re willing to bear this hindrance, the extra time means a more extended closing date and a delay in rental payments.
Knowing the difference
Delving deeper, you’ll find one, and two-bedroom units are more accessible to rent than three-bedroom condos. Three-bedroom units tend to be in the same competitive league as single-family homes. If you choose a studio, your unit may be vacant for a more extended amount of time since the tenant may leave for a bigger apartment.
Always see the property for yourself, even if virtually, before you buy. If you’re purchasing a condo, get in touch with the building’s management to learn about what changes are coming up in the future. If you can, get a copy of the buildings subletting policy and leasing application. Check it to see what fees you might be responsible for paying. Some buildings even offer tax abatements or temporary tax reductions.
Sales Versus Rental Rates
You don’t want to end up paying more for an investment property than what you’ll be receiving in rent from tenants each month. Compare sale prices for properties in similar neighborhoods against typical rental rates to gauge the potential rental yield for the property. Currently, rental return in NYC is between three and five percent. Be sure you know what the rental rates are and stay competitive so that your units will always have tenants. If you’re flipping the property, you’ll still need to know this information for potential buyers.
Hold Time Frame
As with most investments, your time horizon is an important consideration. You can buy a fixer-upper, in the hopes of making a reasonably quick profit. However, this can be a high risk as hidden problems could arise, or the real estate market may change direction. That said, the potential rewards could also be high. Conversely, your time horizon measured in decades. Leave you free to collect stable rents while potential appreciation could be substantial, given the longer time frame.
Decide how long you want to hold your real estate investments and study market trends. Are you going to hold onto the property for a decade and always keep it occupied, or are you going to renovate and flip it? Whether it’s long-term maintenance or renovation costs, the length of time you intend to own the property should factor into your budget.
A broad category to consider, but an important one. If there are existing tenants in place, that provides immediate income, but contemplate whether the rent is market-rate. Also, it’s important to remember you haven’t personally done a background check and vetted of the tenant. Troublesome tenants can sometimes lead to more significant losses than no tenants.
If you choose to become a landlord, you will be working with rental agreements, liability concerns for tenants, possible evictions, and more. Be sure to have an attorney on your side who can help you navigate these scenarios as they arise. Be aware of your rights as a buyer and seek advice when encountering contracts, titles, and other legally binding documents.
Identify what costs are involved in acquiring and managing an investment property. If you’re purchasing a condo with the hope of renting it out, review the rental applications at your desired building. That way, you’ll be informed about any fees involved for owners and tenants. You may want to consider paying a company to maintain the property for residents if you rent it out. Cover you in case something breaks or needs to replace.
For individual condo management, 5% of the gross monthly rent is the average rate. Most condominiums collect standard common charges for the building’s operational and maintenance expenses.
Outside Management or Go Alone?
If you want to make things easier, you can hire a management company that will lessen your burden. Typical tasks include collecting rent and dealing with troublesome tenants. However, this comes at a price. Most charge a fee that is a percentage equal to 4-5% of the monthly rent.
When it comes to taxes on real estate investment properties, this can be a complex area, with many rules. For instance, you’ll need to think about deducting non-cash items like depreciation. Investors should also be mindful of tax reductions. These buildings have had property taxes lowered for a specified period to help revitalize an area through development. The cash savings will increase your take-home income, and your property could experience price appreciation. Of course, that’s providing things go according to the city’s plan.
If you’re investing in a condo or co-op unit, financial stability will be crucial. There should be sufficient funds put aside for wear and tear items, such as a new roof. Otherwise, maintenance fees could increase, which you might have to bear until you can raise the rent sufficiently. In a multi-unit building, examining the financials is also essential to see how the returns are derived. For instance, if there is a large unit that generates a disproportionate share of the rent, this is an essential factor.
Goes beyond examining structural issues like the condition of the roof. Since it will be a rental, the apartment must be clean. Beyond that, it might need sprucing up, so it includes items such as modern appliances. It could require additional cash outlays and may cause a loss of rental income until the unit is ready.
Our guide gives an outline for investors to consider. Real Estate Investments can be profitable through rental income as well as price appreciation. It would be wise to investigate and consult a buyer’s agent before a significant property investment. It’s essential to budget your cash inflows and outflow and calculate how a potential vacancy affects your finances.
While not a get rich scheme, rental properties can provide a steady source of extra income. If you choose, you can use your income stream to buy additional real estate investment properties as time goes on.