Whenever I meet a new buyer client, especially a foreigner
wanting to buy an apartment in Manhattan for rental income, the client often has
certain pre-conceived ideas. This is
understandable because it is impossible to understand a market from researching
on Google from a few thousand miles away.
The pre-conceived ideas are as follows.
Not necessarily good or bad, but without proper advise, they could be costly
mistakes.
Assuming
popular tourist areas are best for investment
Foreign buyers usually assume Fifth Avenue, Central Park,
Times Square, Wall Street are the “good” areas for investment. This because these are tourist destinations
the media associates with New York. I
totally understand and if I were planning on investing in a different city, say
London, the only areas I would know are the tourist destinations. Naturally, I would also associate investment
stability with these locations.
Truth is, New York is a local-focused market because 70
percent of buyers are locals buying to live in the property, as a primary
residence. Hence it is important to
know what drives the local market. For
example, a foreign buyer wouldn’t know that many locals feel Times Square is
too noisy and congested. Times Square may
be perfect for a buyer wanting a vacation home in the midst of Broadway shows
but it may not be the most easily rented out location to locals who want to
avoid the crowd.
It’s perfectly fine investing in tourist destinations, but
it has to be in context with the client’s overall investment objective. A foreign buyer is making a mistake if he wants
to invest in Wall Street because he thinks the major banks are there. That may be the case 100 years ago. Currently, the only high finance institution
on Wall Street is the New York Stock Exchange.
All the major banks have moved out of Wall Street long ago because of
need for more space.
Making
decisions based on wow factor
Building amenities such as a swimming pool, fitness center,
fancy residents’ lounge, have the power to wow buyers.
Let’s use the swimming pool as example. Some foreign buyers absolutely want a
building with a swimming pool. I
understand that because in countries like Singapore and Hong Kong, all top
buildings have a pool and the pools are used by residents. In Manhattan, pools are seldom used. This is because swimming is not popular in
Manhattan. Pools in buildings tend to be
so short that one gets to the other end with 3 strokes. They are also narrow, 2 lanes usually, 3
lanes at the most.
Yes, having a pool is a plus, a nice to have. But it certainly should not be a deciding
factor. In addition, most of the buildings with the
best facilities are usually located further away. This is because the land was cheaper when the
developer purchased and hence the developer could afford to build bigger
buildings full of amenities.
We can
just call an Uber
When I bring buyer clients to view properties that are
further away from the subway, the seller’s agent often downplays the importance
of proximity to the subway by saying they can just call an Uber.
Reality is that proximity to the subway is important
because someone who is renting your $1m to $3m apartment will be taking the
subway to work and back each day.
Because travel by subway is predictable while traveling by car means
getting stuck in traffic and not knowing when you’d get there. Traveling by subway is one of the equalizers
in New York City, everyone takes the same mode of transportation during
weekdays.
Traveling by car is a lot less predictable. For example, it’s sometimes faster to walk
crosstown than to take a cab/Uber because crosstown traffic is terrible.
Where
is the garage?
Related to New York being a subway city, know than 85
percent of Manhattan residents do not own a car. Hence having a garage in or next to the condo
building is less important. This is
because a car is seldom used. If we were
to drive our car out for dinner, it would take 15 minutes to find a garage, $30
an hour to park in the garage and another 30 minutes to check in/out of the
garage. May as well just call an
Uber.
Manhattanites who own cars use them maybe once a month,
when driving out of Manhattan (which is also something Manhattanites seldom
do).
Not
deciding based on facts and data
Being a finance person, I can appreciate facts and data
being the great equalizer for decision making.
Numbers don’t lie. For the
foreign buyer, there is a lot of noise when venturing to New York to
invest. Friends give their opinions,
brokers give theirs and there is information overload on Google.
Just go back to facts and data. Look at how the building has been performing
historically and rental potential. These
give a good sense of any property as an investment.
I have several numbers-type clients who understand
Manhattan so well simply by looking at the facts and data. They didn’t even have to come here and would
make decisions based on my showing the property on skype.
Of course, easier said than done because facts and data is
more boring than a wow swimming pool or huge fitness center.
Read more:
Wei Min Tan is a Manhattan, New York buyer’s broker serving investor buyers
globally interested in Manhattan residential condominiums. Wei Min has been on CNBC, CNN, Wall Street
Journal and New York Times on the subject of Manhattan property. He can be reached at tan@castle-avenue.com
No comments:
Post a Comment