New York City

[Charles Kagahastian]

with cap rates on l o o p n e t . c o m between 5 and 7 how is it possible for anyone to make any profits i've currently been playing with numbers from a couple of properties and it seems like their prices always end up with negative cashflow with the standard of 20% down and a 7% interest rate. should i completely negate cap rates like MikeOH says? should i just propose a price that would allow for cash flow? or is it that these properties are just bad deals. also some of the properties i've been researching are mostly vacant and the agent will use this info as a way to sell a condo conversion. are mostly vacant properties not good for rental properties? is the short term profit just not there?

I just started playing with numbers after reading frank ginelli's book "what every real estate investor needs to know about cash flow and other calculations" and i guess you can say i am overwhelmed. The examples in the book are just that examples and they work because of that. when i plug in these real numbers i just can't seem to find any good properties when cap rates are this low. is new york commercial dead or stagnant cause from what i've read places like astoria and brooklyn as well as the lower east side have a huge market and low vacancies. i need some help please

[Alexander Szikla]

Been a while since this topic posted, but I think an update makes sense here. Cap rates came all the way down to 3% (or below!) during the "boom" times but COVID has loosened everything up and now 5% can be had in Manhattan, 6%-7% in Brooklyn and even 8% in the Bronx. The kicker here is that rates are much lower than the 7% that OP noted. Today nationwide rates hit a low of 2.7% - so there has really never been a better time "spread" wise. 

Long term, I think NYC will come back as it always has time and time again. I am also a great believer in investing when there is distress and deploying capital when you can.

Personally, I have had the best luck purchasing co-ops from estate sales. They are less desirable than condos and families typically just want to move on and don't wait around for the highest and best offers.

Even purchasing at the peak, my units still have plenty of equity (albeit less due to COVID-19).

The only downside is (typically) high monthly maintenance costs and (currently) a tough rental market.

If you are looking for yield in the short run, Manhattan may not be for you. However, it is certainly the most attractive it has been in years from a cash flow perspective. If you are seeking out asset accumulation and equity appreciation over the long term then there are certainly fortunes to be made.