Thinking about buying a new condo as an investment property, but aren’t exactlysure what makes a great rental? With the yearly pied-à-terretax plan scrapped, you may be breathing a sigh of relief and looking to move ahead on buying.
In this week’s Buy Curious, Seth Levin of Keller Williams Tribeca and Diane Kantzoglou of BOND New York tell you which neighborhoods to look at, whether one bedrooms or two bedrooms are the way to go, and what amenities renters are willing to pay for.
The question:
I'm thinking aboutbuyinga new condo in New York City as an investment. What should I keep in mind, in terms ofbuyingsomething that will be easy to rent out?
The reality:
These days, "new development condos are the most vulnerable part of the market,” Levin says. Because there's so muchinventory, "developers are, for the most part, very willing to negotiate and offer concessions.It won’t be this way forever.”
According to Douglas Elliman's latest salesmarket report for Manhattan, there were 157 new developmentsalesin the first quarter,a drop of 39.4 percent year over year, representing the lowest number of salesin 4.5 years.
What should youlook for in a new condo?
Multiple bedrooms, higher floors with views, and buildings with more amenities should be every investor’s goal. “Get as much of that as you can afford,” Levin says. “Prime units in blue-chip locations in top buildings will be the ones to see the most appreciation when the market turns around.”
Kantzoglou adds that renters in New York City expect the most for their money, so she recommends looking at neighborhood amenities, such as proximity to the subway.
What should you avoid?
Avoid high monthlies such astaxes and common chargesas much as possible. “This is not a high-rate-of-return city, and high monthlies really eat into the return,” he says. As such, he recommends looking into buildings with tax abatements.
Kantzoglou agrees, but notes that you should stay away from buildings with especially short abatement terms since “after the abatement lapses, the taxes could be enormous,” she says. So big that it might be a hardship to pay them off each month.
Which neighborhoods are indemand?
In Manhattan, Levin proposes looking at the Lower East Side. “It’s one area that has been in high demand recently due to new inventory and neighborhood-improving amenities.”
New condo developments there include 150 Rivington St., which has a 1,570-square-foot, landscaped roof terrace, a fitness center, bike storage, and individual storage; 196 Orchard St., which has a two-story, 30,000-square-foot Equinox Fitness Center, a 4,400-square-foot rooftop terrace, and a 24-hour attended lobby; and 242 Broome St., which will includeEssex Street Market, parks, a movie theater, and the Market Line, a marketplace modeled on classic European food halls.
Other suggestions are the Flatiron area, where you can look atMadison Square Park Tower, which has five floors of amenities, including a fitness center, a golf simulator, a basketball court, a children’s playroom, and a terrace with an outdoor grill; and Nomad, home to the NOMA, which has a 120-foot-wide landscaped terrace, an outdoor kitchen, library, and fitness center.
Additionally, there is a lot of interestinHudson Yards, Levinsays. Condos at 15 Hudson Yardshave five layout options, ranging from High Line-facing one-bedroom layouts to duplex penthouses withcity views, and over 5,000 square feet of living space. Condos at 35 HudsonYards range in size fromtwo- to six-bedroom residences andstartat about $5 million.
Where to look in the outer boroughs?
If you’re more interested in the outer boroughs, Kantzoglou suggestsLong Island City and Astoria “since you can get more for your money and [the apartments will be] easily rentable,” since they’re so close to Manhattan with short commutes.
“My advice to buyers who are buying strictly for investment is to buy in up-and-coming areas that will appreciate greatly in three tofive years,” she says.
Also considerBushwick, Flatbush, Greenpoint, and East Williamsburg in Brooklyn; Riverdale in the Bronx; and Forest Hills, Fresh Meadows, and Flushing in Queens.
What can you expect in terms of rental income?
It all depends on the neighborhood, the size of the unit, its condition, and a number of other factors. According to Levin, “NYC is a mature market that is incredibly safe and historically appreciates very strongly. There are some small swings, but the overall trajectory is consistently up. If someone is seeing a 4 percent return on a cash investment in Manhattan on a rental property, they are doing well.”
One bedrooms vs. two bedrooms?
The bigger, the better, say our experts.
“I’ve been in NYC real estate for over a decade and a half,” Levin says. “I have seen time and time again that two-bedroom apartments are betterinvestmentsthan one-bedroom apartments. The difference in rent between the one and two bedrooms eclipses the difference in purchase price. It also allows for a wider range of renter profile—shares, couples, families.”
What amenities should you look for?
“We are in a market where investors should be looking to maximize what they can get and take advantage of a new development market that is saturated with supply,” Levin says. As such, he suggests going for buildings that are chock full of amenities.
“Renters love doormen, gyms, and roof decks. Put yourself in the enviable position of having those.”
Kantzoglou adds that on-site laundry is a definite plus, as is any kind of outdoor space—whether private or shared. In addition, an available parking spot is especially important in areas where you’d need a car to get around.
Check out these units that would make great investments:
111 Murray St., #22B, Tribeca
Listed for $4,400,000, this 1,581-square-foot, split two-bedroom, two-bath apartment has high ceilings, south and east views, a formal entry gallery, great room, open kitchen with white oak cabinetry, and floor-to-ceiling windows. It’s in a new condo building with amenities that include two pools, a 3,000-square-foot fitness center, residents’ lounge, patisserie, private dining room, wellness suite, hair salon,children’s playroom,teen room, media room, and landscaped gardens. Common charges are $1,794 a month. Taxes are $2,434 a month.
15 Hudson Yards, #30G, Hudson Yards
Priced at $4,360,000, this 1,464-square-foot, two-bedroom, two-and-a-half-bath unit has a large entry foyer with a powder room, a sunny great room, open kitchen with a marble island and oak wood cabinetry, large master suite with lots of closets and a master bath with a double vanity, and a second bedroom withen suite bath. It’s in a new condo building with over 40,000 square feet of amenities on three floors. There’s an aquatics center with a 75-foot swimming pool, 3,500-square-foot fitness center, yoga studio, fitness classes, spa, andbeauty bar. There are also two corner private dinner suites, including wine storage,lounge with Hudson River views,club room,screening room,business center, andgolflounge. Common charges are $3,440 a month. Taxes are $47 a month.
31-10 28th Rd., #D3, Astoria
This 524-square-foot, one-bedroom, one-bath condo is asking $628,500. Ithas red oakflooring, white lacquer and oak two-tone cabinetry and white quartz countertops in the kitchen, and an in-unit washer and dryer. It’s in Anchor House, a newly built, five-story condo building with a rooftop lounge, first-floor gym, bike storage, storage units, and parking. Common charges are $251 a month.
109-19 72nd Rd., #6E, Forest Hills
Listed for $998,000, this 1,060-square-foot, two-bedroom, two-bath condo has high ceilings, large windows, solid oak floors, and high-end appliances. It’s located in The Sunrise, a new pet-friendly condo development with a doorman and an elevator. Common charges are $543 a month. Taxes are $573 a month.
575 Fourth Ave., #3B, Park Slope
Priced at $695,000, this 653-square-foot, one-bedroom, one-bath condo has an open kitchen withwalnut cabinetry, lots of closets, custom floor-to-ceiling double-paned noise-isolating windows, oak wood flooring, individually controlled multi-zone heating and cooling systems, and an in-unit washer and dryer. The apartment is in a condo building with two landscaped greenspaces, including an outdoor courtyard with a dog run, children’s playground,and fire pit; anda rooftop terrace with a dining area. There's alsoa fitness center;children’s playroom;music room; and a residents’ lounge. Common charges are $844 a month. Taxes are $591 a month.
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FAQs
What you need to know about buying a NYC condo as an investment property? ›
Most people can't afford to buy a New York City condo as an investment property, but for those who can swing it—and can handle the responsibilities of being a landlord, such as vetting potential tenants and dealing with midnight plumbing emergencies—it can be a good way to make some extra cash each month, hedge against ...
Is buying a house in NYC a good investment? ›The property is almost certain to appreciate, so it is an investment. Owning a piece of the NYC housing market gives them a place to stay if they have to flee their home country. The money invested in the NYC housing market is typically not reported to their government, and it is almost guaranteed not to lose value.
What are the cons of owning a condo in NYC? ›In addition to monthly mortgage payments, taxes, and insurance, condos will also charge a monthly fee to unit owners for the maintenance, expenses, insurance, and other general upkeep of the building. HOA fees can and will go up periodically as the cost of maintenance and building expenses go up.
What is a good return on investment for a condo? ›A good return would depend on a number of factors such as your target earnings and your risk profile. You may aspire for a 10-15% ROI on your condo investment, but others may want more. Also, if you're willing to take more risks, you might expect a higher ROI.
What is the rental yield on a Manhattan condo? ›The current rental yield or cap rate for a Manhattan condominium is between 2 to 3 percent. This is based on the gross rents less common charges and property taxes as a percentage of property price.
Is buying a condo in NYC worth it? ›It really depends on your personal situation. Buying a condo can be a great way to get into the housing market if you don't have a large down payment saved up. However, it's important to be aware of the monthly fees and other costs associated with homeownership, as they can add up quickly.
Is buying a NYC condo a good investment? ›Most people can't afford to buy a New York City condo as an investment property, but for those who can swing it—and can handle the responsibilities of being a landlord, such as vetting potential tenants and dealing with midnight plumbing emergencies—it can be a good way to make some extra cash each month, hedge against ...
Do NYC condo owners pay property taxes? ›Condos are assessed separately, so owners receive a bill from the city, he explained. Usually condos have higher property taxes, Mr. Zinkovetsky added. They are often more expensive, and in newer buildings with more elaborate amenities, which push up the market value of the property.
Is it hard to sell a condo in NYC? ›Given the high demand and intense competition in the city's real estate market, figuring out how to sell a condo in NYC can be complex and challenging. However, with the right strategy and preparation, homeowners can successfully navigate this market and sell their condos for a fair price.
Do NYC condos appreciate in value? ›Prime Location Condos: Condos in prime areas such as Manhattan's most desirable neighborhoods (e.g., Upper East Side, Tribeca, Greenwich Village) and waterfront locations have generally demonstrated strong appreciation over time. These locations attract high-end buyers and have a consistent demand for luxury housing.
What is the 2% rule in real estate investing? ›
2% Rule. The 2% rule is the same as the 1% rule – it just uses a different number. The 2% rule states that the monthly rent for an investment property should be equal to or no less than 2% of the purchase price. Here's an example of the 2% rule for a home with the purchase price of $150,000: $150,000 x 0.02 = $3,000.
Is 7% ROI on rental property good? ›Generally, a good ROI for rental property is considered to be around 8 to 12% or higher. However, many investors aim for even higher returns. It's important to remember that ROI isn't the only factor to consider while evaluating the profitability of a rental property investment.
Do condos lose value over time? ›Even though condos generally appreciate at a slower rate than single-family homes, they're still likely to increase in value over time. Some of the factors that can impact appreciation include: Location. Walkability.
Which city has the best rental yield? ›As of the end of Q1 2023, Bengaluru has the highest rental yield among the top 7 cities, at 4.1%, followed by Mumbai at 3.9%. Prior to the pandemic, Bengaluru had the highest rental yield at 3.6%.
Is it profitable to own an apartment in NYC? ›Buying a NYC apartment has the following benefits: Apartment value appreciation. Every year, the NYC property market is seeing new records being broken. The value of real estate continues to appreciate year after year, as developers have not been able to keep up with the growing demand.
What is rental yield in NYC? ›Among America's big metro areas, New York came in last place. The gross rental yield averaged just 2.40% in Q3. By comparison, smaller markets — like Rocky Mount, North Carolina — offer gross rental yields up to 41.57%. In these markets, investors could earn huge amounts of income on their investments.
What salary do you need to buy a house in NYC? ›That means the average person would need to earn around $76,500 to consider comfortably purchasing a home in the U.S. The data shows that New York City's median home price is $578,100 — and the salary needed to afford a home in the Big Apple comes in at $129,500.
What salary do you need to live comfortably in NYC? ›According to a report by Business Insider, the minimum salary required to live comfortably in New York City is around $95,000 per year. This includes a comfortable one-bedroom apartment, food, transportation, other basic expenses, and some discretionary spending.
Is it smarter to rent or buy in NYC? ›Rent: To live large without overextending your budget
If buying means you have to sacrifice too much to enjoy living in New York City—renting makes a lot more sense, whether you're young and single or have a family that needs a larger space than you can afford to buy.
Yes, it is generally considered expensive to live in New York City compared to many other cities in the United States and around the world. The high cost of living in the city is due to a combination of factors. Including high housing costs, taxes, transportation costs, and other expenses.