Friday, December 25, 2009

Foreign / Overseas buyer tax rate of Manhattan New York investment property

Perhaps the first question foreign or international investors ask about buying Manhattan New York property is the tax rate.  Understandably, countries like Hong Kong and Singapore have low tax rates and people hear horror stories about the high taxes in New York.  This is why having a great team is crucial in your efforts for wealth creation.  Anyway, here is the summary:

Capital Gains Tax:
Long term capital gains tax (for property held more than 1 year) is 15% for US residents.  For foreigners, it can be as high as 30 percent.  However, there are ways for a foreigner to qualify for US resident status and hence get the benefit of the 15 percent long term tax rate.  This is where we would recommend our foreign clients to the right attorney and CPA to properly handle tax strategy.

Cantonese Chinese speaking agent, Manhattan New York condo

I am a Cantonese Chinese speaking property agent in Manhattan, New York serving foreign and international investment property buyers.  Our clients include investors from Hong Kong, Singapore, China and Malaysia.

Our clients usually purchase investment condos in new developments in Manhattan because Manhattan has shown to be an asset that sustains its value, despite the current recession.  For example, Manhattan prices decreased by about 20 percent during the current recession.  This decline is much lower than the declines at similar major cities such as Los Angeles and San Francisco where prices declined by 40 to 50 percent.  Manhattan prices are also more stable relative to stocks where in 2008, prices declined by 40 percent.

Saturday, December 19, 2009

Manhattan Office Market Oct 2009

October 2009
Manhattan average asking office rent    $50
Midtown                                    $56
Midtown South                          $42
Downtown                                 $39

Office tenants getting deal a great deal which they can lock for the next 10 - 20 years.  Asking rents down 20% but including free rents and improvements, net effective rents down a whopping 44%.  However, landlords are filling buildings and not dropping rents as rapidly as before.

Manhattan #2 in nation for distressed commercial property

Manhattan #2 in distressed commercial real estate.

1.  Las Vegas $17.7 billion in commercial properties that are in default, delinquent, foreclosed.
2.  Manhattan $12.3 billion
3.  Miami $7.6 billion

As reported by the Real Deal.  Data by Real Capital Analytics.

Sunday, December 13, 2009

Foreign buyer financing, Manhattan New York investment property

In Manhattan, New York, many foreign and international investment property buyers purchase in cash.  Buying property in cash in Manhattan will save the buyer the mortgage tax, which is about 2% of the loan amount.  In addition, the cash buyer saves various bank related fees. 

Financing allows the ability to leverage funds, thereby being able to buy more property.  For example, if you buy one condo at $1 million in cash, you only get the appreciation benefit of 1 condo.  Buy if you finance at 50%, you actually get to buy 2 condos and hence benefit from appreciation (or price decrease) of two investment properties. 

The two ways of arranging financing are:
(i) Financing from US lender:  This option is easily arranged through a mortgage broker or a bank that STILL lends to foreigners.  We have connections to both.  The requirement is usually a 40 percent downpayment (60% LTV).  Also, the buyer needs to show liquid assets that is usually based on a multiple of the monthly payments.  Since financing is in the US, the buyer would have to pay ~ 2% mortgage tax.

(ii) Financing from home country:  This refers to getting financing loan from the home country.  Hence from the US's perspective, it's a cash transaction.  The main difference is saving the mortgage tax and various bank fees.  But of course, there may be other fees associated with the financing bank. 

Ultimately, the foreign or international investor needs to do a cost benefit analysis.  It's a matter of comparing loan terms, amortization period, interest rate, costs etc.  Many buyers don't really understand things like amortization period and just take whatever the bank offers.  I find many offer adjustable rate products.... Big mistake.

Visit Our Foreign Buyer's Guide

Wei Min Tan is a real estate broker and investor focused on investment property in Manhattan.  Formerly, he was a Vice President at Citigroup and managed a $500 million portfolio.  He can be reached at

Disclaimer:  The above is not meant to be financial advice.  Always consult your CPA, banker or attorney on financing matters as individual situations may differ.

Friday, December 11, 2009

Buyers backing out

Buyers fighting to cancel contracts (The Real Deal)

Where buyers are backing out (The Real Deal)

W Union Square acquired for $2 million

My investors would love this.  W Union Square hotel acquired for $2 million.  But very important note - buyer has to assume $212 million in debt :)

Nov 2009 Manhattan New York rental report

Article as reported by The Real Deal.  Manhattan residential vacancy rate 1.8%


Castle Avenue Partners - Manhattan property agent

Manhattan New York property buyers from Malaysia, Hong Kong, Singapore

Many have asked about whether we focus on foreign / international clients from Asia purchasing property in Manhattan to take advantage of the weakened dollar and economic downturn.  Answer is yes, 50% of our clients are high net worth individuals from Asia, specifically Malaysia, Singapore and Hong Kong.

Reasons include growing up in Malaysia, familiarity with the cultures and expectations, ability to speak Chinese Cantonese, Hokkien and Malay.  We are familiar with the property buying process there and can put the process of buying Manhattan, New York real estate in context.  Further, we can discuss the ROI, yield and appreciation potential of Manhattan property relative to those at the home countries of our clients.

We are expanding our client development efforts in Malaysia, Hong Kong and Singapore.  Also, we continue to see increased interest, especially from savvy investors looking to take advantage of the economic downturn.

Visit Our Foreign Buyer's Guide
New York historical price appreciation
Buying New York Property
New York Property articles
New York investment property overview

Contact Wei Min at to discuss how we can help you grow wealth through Manhattan real estate.

Thursday, December 10, 2009

Top New York High Schools rated by USNews

New York High Schools that made US News and World Report's Top 100 America's Best High Schools, December 10, 2009

Newcomers High School Queens County, Long Island City, NY
Gold:#6 of 100

The High School of American Studies at Lehman College Bronx County, Bronx, NY
Gold:#19 of 100

Stuyvesant High School New York County, New York, NY
Gold:#31 of 100

Townsend Harris High School Queens County, Flushing, NY
Gold:#33 of 100

Staten Island Technical High School Richmond County, Staten Island, NY
Gold:#34 of 100

Baccalaureate School for Global Education Queens County, Long Island City, NY
Gold:#35 of 100

Yonkers High School Westchester County, Yonkers, NY
Gold:#41 of 100

South Side High School Nassau County, Rockville Centre, NY
Gold:#46 of 100

Jericho High School Nassau County, Jericho, NY
Gold:#48 of 100

Horace Greeley High School Westchester County, Chappaqua, NY
Gold:#51 of 100

Capital Gains Tax on Property in Manhattan New York

Primary Residence:The IRS allows a seller to sell his primary residence in which he has lived 2 out of the past 5 years and take capital gains tax free of up to $250,000 (for single) and $500,000 (for married filing jointly).

The 2 years out of 5 years rule does not have to be continuous as long as it was used as primary residence during that time. One way an investor can capitalize on this is to buy property, rent it out and move back in for the last 2 out of five years prior to sale.

Investment Property:
Investment property held for more than 1 year will qualify for long term capital gains tax treatment. This means a maximum tax rate of 15% at the federal level. If held less than 1 year, the maximum federal tax rate is about 36%. However, I strongly discourage buying property with the intention of selling in less than 1 year. Buyers should intend to hold at least 5 years.

Many investors use the “1031 exchange” to defer payment of taxes. This requires exchanging the old property for a like-kind new property within a set period of time. Effectively, this strategy uses funds that otherwise would be used to pay taxes to leverage and buy more property, magnifying the return potential.

We will recommend our preferred CPA and attorney to clients so that they receive the best advice.

New York historical price appreciation
New York property articles
New York investment property overview
New York investment property search

Contact Wei Min at on how we can help you grow wealth through Manhattan property.

With the regulatory and legal environment, I need to provide this disclaimer:
The above serves as a general overview, not by a certified tax or legal professional. Always consult a CPA or attorney for tax matters as individual situations differ.

Wednesday, December 9, 2009

FAQ Foreign / International Buyers of Manhattan New York Property: Condos, Mortgage Financing, Expenses, Broker Fee

Can foreigners buy property in Manhattan, New York?Yes. Many foreigners buy property in Manhattan because of the brand value and appreciation potential. They often purchase as a pied-a-terre (vacation home), or investment property. A large percentage of our clients are international, from countries like Malaysia, Singapore, Hong Kong and China.

What type pf properties are popular amongst foreign or international buyers?
There are two categories of apartments, condos and co-ops. We recommend condos because of the higher appreciation and investment value. Co-op buildings often restrict ability to rent and perform renovations and do not make good investment property. The process of buying a co-op is subject to board approvals which dramatically prolong the buying process. The value of a condo, on a per-square-foot basis, is about 20 to 30 percent higher than a co-op. However, the appreciation potential and demand are higher as well.

Besides apartments, our international clientele also purchase townhouses, mixed use buildings and commercial buildings.

What are the expenses associated with owning a property in Manhattan?
For apartments, the main monthly expenses are taxes, common charges, insurance and depending on whether financing was used, mortgage principal and interest.

New development buildings often have a tax abatement which dramatically reduces the monthly tax amount. Without abatement, annual taxes are often between 0.5 to 1 percent of the property’s value. Common charges average $1 per square foot per month and it goes up or down depending on number of units and amenities. Insurance is roughly $500 to $1000 per year and on a monthly basis, a relatively smaller expense item.

Is financing available for foreign or international buyers?Yes, mortgage loan financing is available and can be obtained either through a mortgage broker or directly from the bank. Since the credit crisis, lenders have tightened credit criteria and will require about 40 percent as downpayment from a foreign buyer. Most mortgage products for foreigners are ARMs (adjustable rate mortgage) but some lenders offer 30 year fixed mortgage to foreigners. We will refer our foreign clients to reputable mortgage brokers or banks to help arrange financing.

What are closing costs?Closing costs are roughly 3 to 5 percent of the loan amount. This includes mortgage tax, transfer taxes if purchasing a new development, attorney fees, recording taxes and other administrative expenses.

Who pays the broker fee?
In New York, broker fees are paid by the seller. When the seller’s broker agrees to list the property for sale, a certain percentage is agreed upon as commission. If the buyer is represented by a broker, this commission will be split with the buyer’s broker. If the buyer does not have a broker, then the seller’s broker keeps the entire commission. Hence, it is in the best interest of the buyer to have broker representation to help identify the right property and negotiate the best price.

Visit Our Foreign Buyer's Guide
New York historical price appreciation
Buying New York property
New York Property articles
New York property search
Contact Wei Min at on how we can help you grow wealth through Manhattan property.

Wednesday, November 25, 2009

Priced 5th Avenue apartment on TV

Priced a Fifth Avenue apartment on Manhattan's most popular property show NBC's LXTV Open House NYC alongside real estate celebrity Barbara Corcoran.  The price difference between what the other broker and myself suggested vs Barbara's was probably the lowest ever on the show.

This 5th Avenue apartment is more than 2000 sf located in the Flatiron neighborhood.

Fifth Avenue 5th Avenue apartment

Tuesday, October 20, 2009

Reasons to Buy Manhattan Real Estate, published in

Manhattan residential real estate has performed better than that of the US and comparable major cities such as San Francisco and Los Angeles.

For potential buyers including those who are recently married, having an expanding family or the investor who is looking for a hedge against the coming inflation, now is the time to shop. We are in an uncertain period where the Dow is at 10,000 without justifying fundamentals. Unemployment is at 10 percent, dollar is weak and inflation is coming. Relative to the stock market and comparable major cities, Manhattan has performed well. Here are reasons why and why it should continue to do well in the next 10 years.

The Numbers:
While cities like LA and San Francisco have declined more than 40 percent relative to peak, Manhattan’s decline has been much less. Miller Samuel reports that the peak price per square foot was $1,289 in the first quarter of 2008 and declined to $996 in the third quarter of 2009. This represents a 23 percent decline or about half the decline of comparable large US cities.

Third quarter 2009 data shows prices are now declining at a lower rate while transaction volume surged 46 percent, a sign that the Manhattan market is already finding its bottom. I expect it to decline another 10 percent with an eventual U-shaped recovery. But the duration of decline and magnitude have been less than at comparable major cities.

Wall Street firms are expected to pay a record $140 billion in bonus this year, attributable to the stock market, an easing credit market, an increase in deal making and government programs, according to the Wall Street Journal. This is despite the recession and an unemployment rate at a high 10.3 percent in New York City. Regardless of whether these bankers deserve the lavish bonus, this will boost Manhattan real estate prices.

Manhattan is a landlocked island. While developers in most cities keep expanding outwards, developers in Manhattan do not have this alternative. Yes, we can expand upwards but with such stringent regulations, it is easier said than done.

Capital of the World
Manhattan is a global must-see destination. Emerging markets like Brazil and China are creating wealth at a very high rate and churning out millionaires perhaps by the week. New York is often the first international destination these new millionaires from emerging countries would want to visit. It’s also one of the first places where they would buy investment property or a pied-a-terre.

Diversity of Industries:
While Finance was the dominant industry in New York a decade ago, the current economic landscape is more diverse. Beside Finance, New York is established in Media, Hospitality, Advertising and Professional Services like Legal and Accounting. These industries will be selling to emerging market economies and will benefit the local New York economy in terms of job creation and housing demand.

The City’s unemployment rate was at a high 10.3 percent in August. If not for the diversity of the current New York City economy, the unemployment rate would be even higher. Eastern Consolidated reports that the securities industry lost 1000 jobs in August and a cumulative 31,200 jobs since November 2007. However, sectors like education, health, leisure and hospitality gained jobs which partly offset the negative impact of the financial job losses.

Quality of Life
The air in Manhattan is pristine compared to air in China or Hong Kong. Transportation, although via a 100 year old subway system, is still efficient and dramatically reduces commute time for those living in Manhattan. The legal system is established and there is better work-life balance, again compared to China. These are major considerations for attracting global talent.

What To Do
For the investor expecting the coming inflation, gold is at a high of $1060 an ounce. Of course it could increase to $2000 as per Jim Rogers. However, gold is not income producing. Manhattan residential real estate, backed by the points above, has a net rental yield of 4 percent and still benefits from rental income and price increases. Similar to gold, real estate prices and rental income will increase with inflation. One can live in real estate. There is no practical use for gold.

For the primary residence buyer who is still renting, the value of your saved dollars is getting weaker. The US Dollar Index is now at 75, down from 88 in March, reflecting the world’s pessimism about our currency. Rents will increase. Start shopping for real estate. It’s better than sitting on a pile of cash with weakening buying power.

Contact Wei Min at on how we can help you grow wealth through Manhattan property.

CBS's Chataboutit, The Political Chick radio show

First the talking heads said we were in a “W” recovery, and not a “V” recovery, and all were anticipating another shoe to drop in the economy. Now that the Dow Jones crested over 10,000, those “experts” are telling us the economy is on its way back. We all know that the primary underpinnings of the economy are employment and real estate, and both of which are still abysmal. But this sure could be a great buying opportunity for an investment property, right? Wei min Tan, CEO of Castle Avenue Partners ( will help make sense of where the real estate market stands and where we are headed.

Sunday, October 11, 2009

Mortgages Under 5% - CNN Money

Oct 8, 2009

Freddie Mac said 30yr rate slipped to 4.87%.
Bankrate said 30yr now at 5.2% compared to 6.2% last year.
Mortgage apps surged by 16% last week.

Thursday, October 8, 2009

Manhattan Real Estate Still In Flux

My article published in
Note Jim Cramer's comment !

Third quarter Manhattan market reports recently released by the city’s top brokerages showed a slowing rate of price decline while transaction volume increased. Manhattan has lagged the nation in real estate price declines. The ongoing question is when Manhattan would hit bottom. Nobody knows because when we do, the bottom would have been over. Consensus seems to be that the rate of decline is slowing. However, a recovery is still not on the radar.

Manhattan 3Q’09 Market Reports

The reports showed that prices declined compared to a year ago. The declines were less or flat compared to last quarter. This shows the rate of decline has slowed. Prudential Douglas Elliman, Corcoran Group, Brown Harris Stevens and Halstead report that average apartment prices declined between 10 to 16 percent compared to the same period last year.

Dottie Herman, CEO of Prudential Douglas Elliman, even said that the worst is over for Manhattan. Prudential’s market report showed that transaction volume, at 2,230 units, increased 46 percent compared to the prior quarter, signaling buyers are back in the market. The median sales price of a Manhattan apartment is now $850,000, a 1.7 percent increase compared to last quarter but still 8.4 percent lower than the same period last year. The average price per square foot is $996, a 16.5 percent decline compared to last year and 5.7 percent decline compared to last quarter, another example of a slowing rate of decline.

Brokers attribute the increase in activity to declining prices, the stock market, improved consumer confidence and the first time homebuyer credit. The increased activity also shows that the steep post-Lehman drop in prices has ended.

These market reports depict closed sales for 3Q’09 and have a lag relative to real time activity. It takes roughly 2 to 3 months to close after a price is agreed upon. Hence, prices reported are those that traded in June or July of 2009.

Since then, my real time observation is that prices have declined further and by the time the 4Q’09 report is published, I won’t be surprised if they are 3-7 percent lower than 3Q’09 numbers. But transaction volume has indeed been increasing.

Buyer’s Market

Yes, brokerage firms paint a picture of an improving market. However, there are negatives which include unemployment hitting 10 percent, expiration of the first time homebuyer credit in November and of course, the glut of new development units in Manhattan. Inventory in Manhattan is around 8,400 units, which is higher than the 10 year average of about 7,100 units.

Every week, we hear news about a developer announcing potential bankruptcy or something related to inability to repay loans.

For the buyer ready to get into the market, now presents the advantages of low interest rates and a buyer’s market because everyone seems to be running away from real estate. The current market obviously favors the buyer and here are suggestions to effectively negotiate the next deal.

Winter will be a great time to buy because it’s a dead season. This means developers will be more willing to extend better deals.

Be aggressive when negotiating. You want to be the beneficiary of the downturn, not the victim of it. Even before potential buyers ask for a better price, sellers are already offering a lower price compared to the listed price. Prudential’s 3Q’09 report shows the average price per square foot for a condo as $1101. But we’ve observed even very nice new developments selling at 10 to 20 percent lower.

Cash buyers should be even more aggressive when negotiating. If you’re a cash buyer, you’re gold because no credit is required and closing is a lot faster. We have seen buyers who offered to purchase multiple units at a substantial discount and wanted a response on the spot. Of course, the seller gave in because despite a lower price, these are units that will very likely close. Each additional signed contract increases the developer’s credibility with the bank and with the next potential buyer.

Do the numbers. Compare the price per square foot you would be paying relative to what has closed in the same building. It’s all public information. Also, look at the number of units for sale and for rent, both of which will tell you a lot about the demand for the building.

The cap rate of a Manhattan condo is about 3 to 4 percent while for a mixed use building it is around 5 percent. The cap rate is the net rental yield assuming no financing involved. Hence for investors, it
can be compared against a stock’s dividend yield, a bond’s coupon or a bank CD.

Finally, get a fixed mortgage! With the Obama stimulus plans, we will have higher inflation ahead. This is one reason why gold prices shot up recently. With inflation, prices of all things increase and this includes property value and rental income. In residential real estate, mortgages could be fixed for up to 30 years while in commercial, up to 10 years. By fixing your mortgage, you are essentially repaying the debt with weakened currency over time. If you’re renting out the property, rental income will rise with inflation while mortgage payments stay the same. This leads to a larger cashflow over time.

Inflation is the reason why buildings in Manhattan today that are worth $300 million were only $10 million thirty years ago. The successful landlords understand and practice this concept of using real estate as an inflation hedge and letting inflation do its work over time.

Wei Min Tan is a real estate entrepreneur focused on investments and brokerage. He is CEO of Castle Avenue Partners and lives in Manhattan.

Thursday, July 9, 2009

Manhattan Housing Affordability Index

The National Association of Realtors publishes a monthly housing affordability index to give a sense of national housing prices vs median income. For example, an index of 150 means the median family income is 150% of the income needed to qualify for the median priced house.

The index was started in 1971 and at that time, it was around 150. In May 2009, it was 171, close to the high of 179 set in April 2009. This means that the median family income in the US is 171% of the amount needed to qualify for a mortgage at the median price. Yeah - sounds good right?!

The index does have flaws.
1. Real estate is local - this means we need a localized index.

2. It tracks median family income. More members of the family may be working now compared to back in the 1970s.

But this index does give a sense on the median house price in the US.

For Manhattan, I'm going to do a quickie calculation. Let's say the median income is $100,000 (the most recent data from is $64K back in 2007). The median price is $836K based on the latest 2Q'09 Miller Samuel report. From analysis, qualifying income is about 21 percent of the median home price which means the estimated qualifying income for Manhattan is $175,560. This leads to my estimate of housing affordability index for Manhattan of 56 (100,000/175,560 X 100) . The median income in Manhattan is only 56% of the income required to qualify for the median priced apartment.

Not even close to the national level of 171? Of course not. This is Manhattan.

Friday, July 3, 2009

New York Real Estate News

Manhattan apartment sales down 50%
CNN's report started by saying the real estate bust has finally "clobbered super-pricey Manhattan home prices." Second quarter market reports released by the city's major brokerages show sales volume declined 50% compared to a year ago. Miller Samuel reports average price per square foot at $1,056, representing a 16% decline compared to last year. The median price of an apartment is now $836,000. Upside is that sales activity increased compared to the first quarter. This is driven by sales of studio and one bedroom apartments, both of which gained market share. A higher conforming loan limit of $729,750 and historically low rates helped as well.

Luxury market dives
The luxury market in Manhattan, defined as the top 10 percent of apartment sales, slummed. Compared to last year, average price per square foot declined 19% while number of sales declined 50% . Median price of a luxury apartment is now $3.66 million, down from $6.59 million in the first quarter. Currently it takes half a year to sell a luxury apartment.

Renters getting scammed while seeking a deal
While renters are seeking better deals from this down market, scammers are stealing from them. One such scam is called cash-for-key where the scammer takes photos of a legitimate rental and reposts it at a much lower price. The scammer then requires cash from eager renters in exchange for application form or keys. Sometimes, the scammer just takes application fees from multiple potential renters, all too eager to get the non-existent two bedroom for $1500. Students and out of town renters are particularly vulnerable.

Manhattan Rents
Rents in May 2009 are now lower than they were in 2007. Here’s a snapshot of rents at doorman buildings in May 2009 as compiled by the Real Estate Group.
Studios $2,332
1 Bedroom $3,299
2 Bedroom $5,112

Thursday, June 25, 2009

Manhattan Midtown East

Midtown East: from Fifth Avenue to the East River, from 42nd to 57th streets.

Midtown East is the combination of corporate headquarters and residential living. Citigroup, Chase, Boston Consulting Group, Unilever, Ferrari, Mercedes, Bloomingdale’s and Saks are amongst some of its corporate residents. In terms of residential, Midtown East is the location of prominent addresses such as The Plaza, Trump World Tower, Trump Tower (building in The Apprentice), Jumeirah Essex House, Beekman Place and Sutton Place.

Grand Central Station and the United Nations overlooking the East River are additional Midtown East icons. Many foreign consulates and permanent missions to the United Nations are in Midtown East because of proximity to the United Nations. Hence be prepared to see diplomats walking around the neighborhood dressed in their best walking on 2nd Ave and 3rd Ave.

Many Midtown East residents have the luxury of walking to work, to 5th Avenue for shopping, to Central Park for summer picnics.

Don’t want to be too close to corporate offices? Most residential buildings are east of 3rd Ave. Being an island, one block can mean the difference between being smack in the middle of Corporate America’s headquarters and a quieter residential neighborhood. There are even secret gardens with waterfalls that makes one forget being in midtown Manhattan.

The area has an abundance of restaurants and entertainment. NBC’s Today Show and CBS’s morning show both are in Midtown East. Other well known corporate residents are the Apple Store, Ferragamo and Prada.

Why live anywhere else? I too call Midtown East home and I love it here.

Saturday, June 13, 2009

Start Up science - graph

Start Up science from Y Combinator.
Ha ha ha .... quite accurate


1. Tech crunch of initiation
2. Wearing off of novelty
3. Trough of sorrow
4. Wiggles of false hope
5. Acquisition of liquidity
6. Spike of misconfigured Google analytics
7. Public - selling to biggest fool

Monday, May 18, 2009

Interior Design for Small Spaces, from Observer Living expo

I attended the Observer Living 2009 event held at the Puck Building last Thursday 5/14/09 and greatly enjoyed the panelist session on Interior Design for Small Spaces. Interior Design is not my forte but I did take some good notes on pointers shared by panelists including Simon Doonan and Jonathan Adler.

* Best item to brighten up an apartment: Pillows, pillows, pillows.

* Get things off tables and onto walls via wall racks.

* Use screens to separate space. This creates segments in your apartment and makes it look bigger. Instead of backing your furniture to the wall, you can use furniture as separators.

* Splurge on throw carpets, sofa and mattress. These are the main items for an apartment. You can save on others. A throw carpet is probably the single most impactful item to make a statement.

* The easiest "green" activity to do are to (i) use flourescent bulbs (ii) remove your shoes when inside the apartment. Removing shoes leaves all the toxic and unhealthy particles outside.

Saturday, May 2, 2009

Streeteasy Manhattan Market Report Q1 2009

Streeteasy's report for Q1'09 breaks the numbers down by neighborhood. Similar trend as reported by Miller Samuel. Condos down 7.5% while coops down 16.7% compared to a year ago. I like the many details - by neighborhoods, most searched, most expensive etc.

Streeteasy Manhattan Market Report Q1'09

Tuesday, April 28, 2009

Ownership by property type

Cooperatives used to be about 70% of total. It's now 59%, driven by the new developments which are all condos. Got this from Brachablog.

1Q'09 Market Report

Manhattan may start getting affordable and not just for the rich? Median Re-sale price declined 20%.

Miller Samuel Manhattan Market Report Q1'09

New York price to rent ratio

Price to rent ratio for New York (blue line) still has room to fall as compared to Miami and LA.

Case Schiller report

New York Metro area declined 10.20% vs 1 year ago and -1.20% since January

Thursday, April 23, 2009

A Rough Analysis

Based on the numbers in the prior postings, a condo in Manhattan has a 45% premium over a coop. The traditional benchmark has been around 30%. The 45% premium is likely influenced by the more expensive new development sales.

A coop in Manhattan is about double the price of a condo in Brooklyn on a PSF basis.

Brooklyn 1Q'09 Market Report

Avg sales price $531,889, -7% vs 1yr ago
Avg price per Sf $475, -11% vs 1yr ago
Number of sales -57% vs 1yr ago

Manhattan Market Report 1Q'09

Miller Samuel's 1Q'09 Manhattan Market Report

Condo 1Q'09:
Median sales price $1.227 million, + 5.8% vs 1yr ago,
Price per SF $1,413, -0.2% vs 1yr ago
Number of sales -39% vs 1yr ago

Coop 1Q'09
Median sales price $587,500, -22% vs 1yr ago,
Price per SF $968, -14% vs 1yr ago
Number of sales -59% vs 1yr ago

Saturday, April 4, 2009

Manhattan Real Estate Declines

The 1Q’09 Manhattan real estate numbers were published last week. Overall, number of transactions declined by 48 percent compared to a year ago, accordingly to Miller Samuel Appraisers. Median price increased 3 percent to $975,000. However, this is largely influenced by the sales of new developments. Excluding new developments, the median price declined 21 percent to $675,000. Recall that this was my prediction back in 4Q’08 and the media is now all over about Manhattan’s real estate downturn.

The median price of a coop apartment was $587,000, 22 percent lower than a year ago. The median price of a condo increased by 5.8% to $1.23 million but this is influenced by the new developments. Number of transactions for coops decreased 59 percent while transactions for condos decreased 39 percent.

Prices will continue to go down because the data we are seeing now are from contracts signed 6-9 months ago. The data for current transactions is very likely to be even lower given the overall pessimism in the economy over the past several months. In 2009, the Dow went to the 6000s and the debate about taxing bonuses of bankers does not increase enthusiasm.

The number of transactions shows the dramatic decrease in activity in the Manhattan real estate market. While the rest of the country started their real estate downturn reports a year or more ago, Manhattan’s turn is just starting now.

Based on the average price of housing relative to household income, prices in Manhattan are still much higher than the historical average. But the key point from the released data is that the official downturn has started in Manhattan.

Brokers are now turning into “buyer brokers” because there are virtually no sellers or sellers with realistic asking prices. The brokers and brokerage firms are now telling clients it is a good time to buy. During the bubble, it was a good time to buy because prices kept going up. Now, it is a good time to buy because prices are coming down. Obviously, the interest of the broker is with the commission and not the buyer. However, sellers are still not bringing their prices down enough for buyers to bid.

Sellers are still adamant with their asking prices, unwilling to accept the fact that prices in Manhattan has declined. Buyers obviously do not want to offer anywhere close to the asking prices. As result, a lot is on a stand still.

The buyers are the market because they represent the demand side of the equation. They are the ones forking out the money to make a transaction happen. Without buyers, there is no market because sellers will be left asking their non realistic prices.

Hence to make the market move again, the buyers need to see prices they think are reasonable. This basically means asking prices have to come down further. There are buyers whose current strategy is to offer at 20 to 40 percent lower than asking price. However, not all buyers choose to do this given the time and resources involved in making offers.

To buyers, I would advise starting the search process and tracking data closely. Sellers will get more flexible over the months. The correction period may take another 1 year but at least the market has acknowledged that prices do come down in Manhattan.

This is the time for buyers to be demanding. This includes asking for the seller to pay for closing costs, cash at closing to make renovations and asking for escrow reserves to be paid by the seller.

Friday, April 3, 2009

My views on 90% bonus tax

The 90% bonus tax is RIDICULOUS. High bonus is the market rate for bankers. Bankers have a choice of London, Hong Kong etc. With this tax, New York (hence the US) will lose talent to other countries and the US would no longer be the financial capital of the world.

Hong Kong's tax rate is 15%. New York's tax is 40%+. Add that crazy 90% bonus tax, who wants to work here?! On bailouts, the government should let banks fail and start over. Bailouts will result in major inflation and weakening of the US dollar. The 90% bonus tax was annouced AFTER the bailouts were received. it shudl have been announced as a criteria BEFORE the bailouts were handed out. Recall that some companies did not want the bailouts.

Finally, who owns the Federal Reserve? It's owned by the consortium of banks that make up the board of directors. These are the same banks getting the bailouts. Hence, the bailouts were given by the Fed to it's own owners. Of course the banks would take the bailouts in the first place. But the employees get penalized after the fact.

Wednesday, March 25, 2009

2009 First Time Home Buyer Tax Credit

The 2009 First Time Home Buyer Tax Credit is part of the American Recovery and Reinvestment Act signed by President Obama into law on February 17, 2009 to revive the housing market. By providing a $8000 tax credit to first time home buyers, this credit aims to increase the number of buyers and consequently stimulate the slumped housing market in the US.

This 2009 Tax Credit differs form the 2008 Tax Credit in two major ways.
(i) The 2009 Tax Credit allows for a credit of up to $8000 while the 2008 credit allows for only up to $7500
(ii) The 2008 credit has to be repaid over 15 years, effectively making it a loan. The 2009 credit does not have to be repaid

Essentially, there was a tax credit introduced in 2008 but the 2009 version of the tax credit is even better. The key points for the 2009 Tax Credit are below:

Credit Amount:
The 2009 Tax Credit allows for a credit of 10 percent of the home value to a maximum of $8000. For example, if the property value is $75,000, the credit is only $7500. But if the property is $200,000, then the credit is the $8000 maximum.

First Time Home Buyer:
The credit is for First Time Home Buyers, which is defined as someone who has not owned a primary residence the past 3 years. The home has to be purchased between January 1, 2009 and November 30, 2009, inclusive. The home buyer has to live in the home for 3 years or the credit will have to be repaid.

How to Claim the Credit
The credit is claimed along with filing your tax return. This is a refundable credit which means that if your total tax liability is less than $8000, the IRS will send you a refund for the difference. For example, if you purchase a home that qualifies you for the total $8000 but your tax liability is only $7000, then the IRS will refund you $1000.

Who is Not Eligible
The following categories of buyers are not eligible:
(i) Your Modified Adjusted Gross Income exceeds $170,000 for joint filers and $95,000 for single filer. The credit phase out starts at $150,000 for couples and $75,000 for single filers.
(ii) You buy your home from a close relative
(iii) You stop using your home as your main home
(iv) You sell the home before the end of three years
(v) You are a non-resident alien

For those who bought their home in 2008, the old $7500 tax credit applies which means it has to be repaid.

Since the average price of a home in the US is about $200,000, this means that the US government is contributing $8000 or 4 percent of the purchase for the home buyer. In the New York City metro area where the average price is around $500,000, it means buyers get a 2 percent contribution from the government.

Friday, March 20, 2009

Dubai Real Estate Burst

CNN video talks about Dubai real estate bursting, declined 25% recently. People losing jobs, more For Rent signs...

Thursday, February 19, 2009

Am I a real estate agent?

When I started buying property, I'd make appointments with real estate agents who will be take us on tours to view properties. They'd spend a lot of time and effort to answer questions and hope to get a sale. When viewing with these agents, I'd think to myself that I would never want to be a real estate agent. Simply because majority of the people they bring around are not serious buyers and that means 90 percent of their time is wasted. In simple statistics, they have to show as many as possible because the conversion rate is only 10%. This is why you see real estate agents running around all the time.

But a few years later, I found myself taking the real estate broker test! The reason is so I can represent myself on my own deals and make the buyer commission that would otherwise go to the buyer broker. If I knew a market better than the broker, my reasoning goes, then I may as well represent myself. Consequently, I spent 1 week to study for and to take the Salesperson exam. And another 2 weeks studying for and taking the Broker's exam. That was in November 2007. I became a Broker after 3 weeks of exams and test taking.

The difference between a Salesperson and Broker is that a newbie needs to take the Salesperson exam and work under the supervision of a Broker. After the Salesperson has completed about 10 transactions, he could take the Broker exam and become a Broker. Being a Broker means he can work for himself or start his own firm. Hence, the Broker license is the higher level license.

In my case, I could take the Broker's license without first becoming a Salesperson and selling X number of properties because New York State allows experienced developers and investors to go directly for the Broker's license. Less than 5 percent of Brokers get their license this way.

This is why I never see myself as a real estate agent. I don't like showing properties to strangers and have never done it. I don't like wasting time with people who are not serious. I don't like talking about granite countertop kitchens or marble bathrooms. I hate being viewed as a salesperson because I'm not one.

However, what I enjoy is buying property as investment. I enjoy bringing friends to view property and giving them an honest opinion about whether I think their long term net worth will increase as a result of buying a property. I enjoy looking at price per square foot. At potential rent increases. At whether real estate prices increase with inflation and to what extend. I enjoyed speaking to investors about investing in real estate compared to gold, both tangible assets with different attributes. I enjoy looking at cashflow projections of real estate and comparing the yield to Johnson&Johnson's dividend yield. And of course, I enjoy the high end show rooms of luxury Manhattan condos. I enjoy working with my international connections, going to country clubs and having a good time.

Based on the above, then why not become a commercial broker? Well, it's because I am not a salesperson. And commercial brokers, all very financially savvy, are even more sales-like than residential brokers. They just push numbers while their residential counterparts push granite countertops. Most commercial brokers make 50-100 cold calls a day to solicit business. This is something I can never do.

Hence, using the extra free time available now that the market has slowed down, I've narrowed the focus of my real estate advisory business. Note that I called it an advisory business instead of a brokerage business.
1. Help clients grow wealth through real estate
2. Only accept referrals
3. Leverage my financial analysis strength
4. Focus on my international clientele

These will be guiding principles as I re-brand and reposition my firm for the next phase of growth. My good friend told me yesterday that the key is to speak as if you've already achieved your dreams. In the present tense. By doing this, one's brain becomes wired to make the dream a reality. Hence, I now have a firm that is focused on real estate advisory and that caters to an international clientele.

Wei min

Sunday, January 18, 2009

Let Inflation Work For You

An investment strategy for these times is to buy real estate with borrowed money, let inflation raise rents and property value over the years and pay off your fixed mortgage with weakened dollars. Assuming you put 30% down and property values increased 60% over five years because you’re getting a good deal now and there’s inflation, you could double your money just from the appreciation alone, rental income increases not considered. The recent 2009 Forbes Investment Guide talked about this strategy in its editorial letter.

A key assumption is that the US will face inflation in the coming years because the government is now printing money excessively to fight the recession. Where do you think the bailout money is coming from? It’s coming from the printing press and the government is creating money out of thin air! When the supply of dollars increases, its value decreases. Maybe not now because of the recession but it will happen after the recession, when a dollar is not worth what it was 2 years ago. Simply because at that time, there will be a lot more dollars out there, as result of the printing machines running round the clock these days.

The Bretton Woods international monetary system in 1944 fixed the value of the dollar to gold. Effectively, this maintains an intrinsic value for the dollar because its value is based on the value of a real asset. However, this peg to gold was removed in the 1970s. Without pegging the dollar to a real asset, the dollar’s value is now just based on the government’s promise to pay. Our government is creating money out of nothing, money that is backed by a government’s seal and strong words of promise to pay. We now know that merely promises and reputation, whether those of the US government or those of the formerly powerful financials companies, is not enough to maintain value. Value has to be based on a real, productive, in demand asset.

Economics tells us that when there is too much supply, value decreases. This is expected for the US dollar. The US government is now printing billions and perhaps trillions to bail out companies and stimulate the economy. These days, numbers like $700 billion is thrown around like it’s a small amount. In the near future, numbers thrown around will be in the trillions. The resulting inflation means prices will increase. Prices of eggs will increase because of inflation. Prices of milk will increase because of inflation. Rents will increase because of inflation. Prices of real estate will increase because of inflation.

Why buy real estate instead of stocks, bonds or simply keep your money under the mattress? I’m proposing real estate because it’s a real asset and prices of real assets keep pace with inflation. Buying a stock is just buying a promise that you own a piece of a company. We’ve seen 5 years of stock market wealth vaporize in 1 year. High dividend paying stocks, ones that because of low stock prices, are yielding 7-9 percent divided, still do not escape inflation. If inflation is at 5 percent, a 7 percent dividend is only 2 percent in real terms. The same applies to bonds.

But with real assets, whether real estate or gold, prices rise with inflation.

Fixed Mortgage Payments Will Stay the Same

If you purchased a property with a fixed mortgage, the monthly mortgage payment will stay the same. While you benefit from increased rents and higher property values because of inflation, the lender that lent you fixed rate money gets paid back the same amount for the next 30 years. In real terms, your income increases because of inflation while your debt payment decreases because a $1000 mortgage in 5 years is worth a lot less than $1000 now.

How to Proceed?
Another key assumption is that you have to buy at the right price, not at the bubble price. You need to buy in areas where property prices have declined significantly and where the values are justified. A rule of thumb is that prices are reasonable if, with 30 percent downpayment, your rental income can cover your carrying costs. Otherwise, prices are still too expensive. Using this formula, prices in New York City are still too expensive. You may find better deals in places with a ton of For Sale signs and where prices have decreased 30 to 40 percent from its peak. Do your homework.

The savvy investor buys now to take advantage of the large supply of For Sales out there. At the right price, your rental income will at least be able to cover your carrying costs if not generate a positive cashflow.

This is an opportunity of a lifetime and if you believe the US will see inflation in the near term, this is a strategy worth considering. Most people know real estate is about location. Few know it’s also about inflation and currency valuations because real estate is a real asset, not just a piece of paper with a fancy seal and promise.

Weimin Tan is a real estate entrepreneur with businesses focused on investments, property management and brokerage. He can be reached at