5 Tips For Investing In A New York Apartment

As an investor and investor-focused property broker, I have invested in single family houses, multi-family buildings and condominium apartments over the past 10 years.  Each asset class has its pros and cons. 

For the passive property investor who wants to invest for diversification, investing in a prime Manhattan apartment is perhaps the most practical and hassle-free.  Upside is the appreciation potential and ease to manage.  Downside is that it's expensive, a studio condo starts at $500,000.  But this is relative as Manhattan is inexpensive by global, big city standards. 

Here are tips to keep in mind if you're contemplating investing in a NewYork apartment.

  

1.  Coop vs Condo

Apartments in Manhattan, New York are divided into Cooperatives (70%) and Condominiums (30%).  An investor should buy a condo because a condo does not require board approval when buying or selling.  In addition, it allows the owner to rent out without restrictions.  This is why a condo is more expensive than a coop.  Starting price for a Manhattan condo is about $500,000 while a coop's entry point is probably half of that.  A one-bedroom condo ranges from $1million to $1.5 million while a two-bedroom ranges from $2 million to $4 million. 

2.  It's Not Just Location

Location is just one part of the investment equation.  The right building and the right apartment within the right building are very important factors.  An apartment that faces a wall in a run down building, despite being in a hot neighborhood, will not command a high rent and will even have months of vacancy. 

3.  Cheap Price Gets Cheap Rent

A cheap apartment gets cheap rent.  A more expensive apartment in a newer building gets higher rent and even stronger appreciation.  Hence it's not about getting something cheap.  It's about buying the property that will maximize return on investment. 

4.  Most Transparent Market

In New York (and the U.S.), the property inventory is open and accessible by everyone -brokers and consumers.  Consumers can access listings through websites like Streeteasy and Trulia while brokers usually access listings through the cleaner broker system.  As such, the role of a broker is to filter properties and not to provide access to properties.  Through the real estate websites, consumers can even look at active and closed comparables. 

5.  Carrying Costs Are Important

The main expenses for a condominium are common charges (maintenance) and property taxes.  Invest in an apartment that has reasonable carrying costs.  Certain apartments are priced lower because carrying costs are high.  It's better to buy a higher priced apartment with lower carrying costs because they do much better in terms of appreciation.   

Wei Min Tan is a residential condominium specialist in Manhattan, New York focusing on investor and foreign buyers.  He is often interviewed by the media such as CNN, The New York Times and The Wall Street Journal on the topic of Manhattan apartments.  Wei Min can be reached at tan@castle-avenue.com