10 Tips For Buying A Manhattan Investment Apartment
1. Buying an investment apartment in Manhattan makes good sense since Manhattan is a place where the majority of people rent. 2/3rd of Manhattan’s housing stock is rental and 75% of the owned properties are co-ops that for the most part do not allow rentals. That leaves us with condominiums that make up roughly 25% ownership. The job market outlook is very good here and there has been an under 5% rental vacancy for the past six decades. Right now, the luxury rental market is a bit soft with landlords offering concessions to attract renters.
2. Where should you buy? I always recommend prime classic neighborhoods such as the Upper East Side, Midtown, and Greenwich Village, Tribeca, SOHO and the financial district. Of course, you will pay higher prices in prime neighborhoods. If you are willing to take a risk and buy an investment apartment in non- prime areas such as Inwood or Harlem you will collect cheaper rents at first but will be happy when you learn how much you will earn if the neighborhood becomes popular more popular
3. Here is what to look for in emerging neighborhoods!
- Is there increased investment of infrastructure such as expanded transit, renovated parks or a new school?
- Is there a lot of construction and conversion going on? Developers spend a lot of money gathering information. You can capitalize on their findings
- Are the number of days on market for properties declining in the area you are researching?
If all of the above is true chances are that, the neighborhood could be ripe for investment.
4. What size apartment works best for an investment apartment? One or two bedrooms are generally easiest to rent. Prospective tenants looking for rental apartments make up the largest sector of the tenant population. Larger apartments will command higher rents however; their vacancy periods can be longer due to less tenants looking for larger apartments. One thing to note is that tenants tend to stay multiple years in larger units because they usually are families and are less transient. Personally, I like the idea of buying a few studios instead of a single one, two bedroom or three-bedroom apartment. It spreads your risk around and you can more readily count on a steady rental income. That said buying a studio or one bedroom is a highly competitive sport due to the high buyer demand at this end of the market. You need to be a very savvy negotiator!
5. Will you be able to live off your rental income? Probably not if you are just buying one apartment. Most investors pick up one or two apartments so it tends to be a source of a second income. You have to buy a big portfolio of investment apartments in order to quit your present job. In order to get to a six-figure income you need a portfolio of about 15 apartments. If you buy an entire building then perhaps you could for give up your career.
6. How much will I make a month from my investment apartment? The net rent that you will make will be the amount you have left after you pay the mortgage, common charges, and taxes. Make sure you charge enough rent to make a profit after paying these costs.
7. Do you have the mindset of being a landlord and the challenges that go with the job? You need to have a solution for about every problem that arises. Not everyone is cut out for the job. You need to find and vet tenants, collect the rent and deal with any issues that your tenant has with the apartment. You need to have a remedy for any of the situations that come up.
8. Can I get help with my responsibilities of being a landlord in order to take some of the load off? You can hire an excellent broker who has great expertise in marketing your investment apartments. The tenant typically pays the broker fee unless it is a soft rental market where you may need to contribute towards the tenants’ broker fee. Also you can pay the broker a fee for helping to manage issues that may arise such as hiring painters, cleaners etc.
9. After owning your rental investment property for a number of years, you may find that the value of your apartment has increased significantly to the point that you can make a nice profit from selling it.
10. What do you do with the profit? You can decide to take the profit that you made from the sale and roll it into buying another investment apartment or another investment vehicle.