Thursday, July 10, 2014

Top mistakes when investing in Manhattan apartments

Property investment is a subject that has been written about in so many books that following the advice to the book can be risky.  Given the large amount of money involved, especially with a Manhattan, New York apartment, it's important to make decisions at a local level.

Here are top mistakes we observe (and correct) with our investor clients.

1. Assume it's all about location:
The old saying of location, location, location holds true for the most part, but not always.

Location alone can be the driver if budget is not a constraint.  Then of course, having the best location in a top building with a good view is the safest bet.  But when there is a budget constraint, location can't be everything.

Keeping in mind we're talking about residential property, having a good location but in a run down building with a bad view is not a good investment.  It has to be the combination of location, building and apartment within the building.

2.  Not deciding based on market's demand:
If a client intends to buy and rent out the apartment, understanding renters' demand is important.  For example, in New York, proximity to the subway is important because 80 percent of Manhattan residents do not own a car and almost everyone takes the subway to work.

Let's say having a water view is the best thing in your home location.  Having a water view in Manhattan usually means the apartment is by the river and hence further from the subway lines.  This makes it harder to rent out.  Living by the water may be good as a primary residence or vacation home but if the objective is to rent out, it may not always be the best decision.

3.  Not looking at the numbers:
It's easy to be wowed by a fancy lobby and great amenities.  We like beautiful things but decisions should be based on both beauty and facts.  A building may look great but if there is an abundance of supply, it means the market demand is not there.  Look at the numbers, not just the beauty.

4.  Buying without local expertise:
Real estate is a local game, even in New York because 70 percent of buyers are local New Yorkers.

Foreign investors who are buying through property trade shows in their home country do not have local expertise to guide them because agents at these trade shows represent the seller.  Select a buyer's agent such as Castle Avenue specializing in investors who would be able to provide unbiased advise.  A buyer's broker has access to the entire inventory and represents the interest of the buyer.

In this technology driven global market, access is a few clicks away on the Internet.  Prudent due diligence and having the right people on your team will make the difference between having a great long term investment or a burden with heavy carrying costs.

Wei Min Tan is a Manhattan condominium specialist focusing on global investors interested in Manhattan apartments for long term returns and diversification.  He is often interviewed by top media such as CNN, CNBC, WSJ Marketwatch and New York Times on Manhattan properties.  Wei min can be reached at

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