Condo Purchase in NYC

[Sven Simon]

Hi all,

Wondering if a few of you NYC specialists could share some information on purchasing a condo in NYC. I'm specifically wondering if it's a worthwhile investment. So, I'd love to know a little more about breakdowns of upfront cost when buying, all holding cost, and selling cost, as well as appreciation rates, etc.

I'm basically looking to put together a case study to present to another investor to purchase or not to purchase a condo in Manhattan.

Thanks in advance!

Sven

[Matt Payne]

Hi Sven,

I'm a RE agent in NYC and I think I can provide a little insight on this. Right now the condo market in the city is super hot and condo are being frequently bid above asking with all cash buyers.

I'm working with a BP member now who's looking to possibly invest in a condo in the city and some of what we're finding is that the cap rates are just too low for some of the units to make sense. In NYC you have to basically think of a condo (co-ops are a whole different beast) as you would a single family home in other markets. Condos are priced here using the Comparable Sales Approach and not the Income Approach, because most people are owner occupants. And while rents are extremely high in the city (there are some 1 BR apts for $5000+) it doesn't necessarily mean you're going to cash flow.

To answer you more specifically:

-Upfront costs - If you're using financing you can expect $15,000+ in closing cost with mortgage taxes (and possibly a mansion tax if purchase price is over $1million) + a lawyer (required in NY) which runs about $2500 for a good one.

-Holding cost - regular cost of maintaining a condo apply. There is monthly Common Charges and monthly tax payments, plus any mortgage you have. Also, you've got to expect some maintenance and capital expenses too.

-Selling Cost - Typically the buyer pays most of the charges and fees in NY, although a few smaller things are paid by the seller. Biggest expense typically though is the RE agent commission, which is entirely negotiable. I can't talk numbers, per NYS law, but my office charges a competitive rate.

-Appreciation rates - This is hard to predict. In Manhattan in general, the market is steady and consistent. But on a more pinpointed scale, it's very fickle. So a neighborhood may pop for a year or two or three, but then become blasé overnight. For my money, you either go with a long time gainer neighborhood like the UWS (high but not outrageous prices, good inventory, perennially desirable without too much trendiness) or somewhere on the upswing popularity wise (right now I think Harlem and Washington Heights are hot, with lots of new development and businesses going in). In general though, Manhattan real estate is desirable and there's only so much of it.

I think the smart investors are patient and diligent with the market. You really do have kiss a lot of frogs before you find your prince in this city, and if you do you can make it work. Just make sure the numbers are right before you jump in!

Hope that helps! - Matt