Saturday, January 30, 2010

New York Investment Property

New York investment property is becoming popular especially amongst investors from China and Hong Kong.  This is partly driven by overinflated property prices in China/Hong Kong and desire to take advantage of the US downturn.

By New York investment property, I'm referring to investment properties in Manhattan, New York.  New York City is divided in Manhattan (the central business district), Brooklyn, Queens, Staten Island and Bronx.

The average asking price of a investment condo property in Manhattan, New York  is about $1200 per square foot.  Trades are usually at a discount to the asking price.  The gross rental yield is about 5 percent while the net rental yield (after common charges and tax) about 3-4 percent.

New York investment condo property are popular especially amongst international / overseas buyers because of the simplicity of ownership. Condo ownership requires minimal maintenance as the monthly common charges paid basically covers the required maintenance activities. A tenant or renter who has issues while staying at a condo can easily call the building staff to fix the issue at hand, eg leaky toilet or ineffective heater. Comparatively, if an investor owns a building, the investor needs to address issues like the roof, boiler, heater etc that may need repair.

New York investment property is an appreciation play, not a yield play.  This means the investor buys for value appreciaiton, not to expect a high rental yield. 
Here are links to learn more:
Buying New York Property
New York Investment Property Search
Foreign / Overseas Buyer FAQ
New York Property FAQ
New York Property Price Appreciation History
How to find good investment property - MSN
Are you ready to buy an investment property - WSJ
New York Investment Properties on Loopnet

Selected articles from New York Property FAQ

8. What are the risks?
* Owning property is like owning a business but with a better risk profile. Key risks are vacancy and unexpected repairs. Unlike a traditional business whose value can decrease to zero, real estate is a tangible asset whose value usually does not decrease significantly.
11. New York Property Buying Process
Below is the process for buying a condo in Manhattan, New York. The process is similar for those buying the condo as an investment property or as a residence. Main difference is that for investment property buyers, downpayment required by the lender is usually much higher.

Estimated Time to closing after identifying property:
With Financing: 10 to 12 weeks
All Cash: 2 to 3 weeks
1. Obtain pre-approval from lender (1-5 days)
Lender can be US bank or overseas bank
2. Identify Property (2 days - several months)

Property viewing can be a pleasurable or tiring experience. Make sure you work with a broker who will filter the properties to maximize productivity of your time.
3. Make offer and negotiate price (1 week)

Your broker's negotiation skills are critical. Experienced negotiators will obtain many favorable financial and non-financial terms for the buyer.
4. Execute contract (1-2 weeks)

The agreed upon terms are provided to both parties' attorneys who will prepare the contract. The buyer's attorney will perform due diligence on the property prior to the actual contract execution. Once everything is agreed upon, the contract is executed. At this time, a 10% deposit will be required from the buyer to be held in escrow by the attorney.
5. Apply For Mortgage and Obtain Commitment Letter (6-9 weeks)

The buyer applies for a mortgage and the lender will perform its due diligence, including appraisals etc. Consequently, the lender will issue a commitment letter.
6. Submit condo package to condo board for approval (1 to 4 weeks)
7. Schedule Closing

At closing, all parties - buyer, seller, bank, attorneys, brokers, will come together at a table. A lot of paperwork is signed and funds will be provided to the seller in exchange for the buyer getting legal title to the property. The deal will be completed at the table and usually no future follow-ups are necessary.
13. Expenses associated with owning a condo property in Manhattan, New York

* For condo apartments, the main monthly expenses are taxes, common charges, insurance and depending on whether financing is 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.

14. Expenses associated with owning a building (residential or commercial) in Manhattan, New York
* The major expenses for a building are property taxes, insurance, repairs and property management fees. Property taxes and insurance are lower relative to a condo when comparing size and value vs the amount paid. While a building does not have common charges, there are repair expenses. For example, the owner would have a large repair bill when repair of the roof, facade, heater, boiler or windows are required.
19. New York Property tax
Every month, an owner pays property taxes, which is part of the city's way of generating revenue. Property taxes amount to about 0.5 percent to 1 percent of the property's market value per year. This tax is paid regardless of whether the investment property is profitable.

Read more at New York Property FAQ

New York investment property

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