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Why we don't invest in New York, even though we're based here
People frequently ask me why I don't invest in deals in New York, even though we're based here. The reason is simple: it's too hard to make money for your investors in New York. That's a huge reason why we invest in the Southeast, along with more owner-friendly laws, a growing population, etc.
But this Real Deal article I just came across says it all: Data shows that New York County (i.e., Manhattan) is the least profitable county for owners in the entire United States.
http://therealdeal.com/blog/2014/04/01/least-profitable-county-for-rental-landlords-new-york-data-shows/
Thanks for that. I invest here in Brooklyn and Manhattan. So far, I've done quite well but I've been lucky in getting in areas BEFORE the rush of gentrification.
NYC is a value play area over the longterm. I went to a SPONY meeting once and it was scary how thin some people's operating margins were.
Jonathan -
Gonna have to disagree here - I think New York generally and Brooklyn specifically (especially the HOT areas like Prospect Lefferts Gardens, Flatbush, ParkSlope, ProspectHeights/CrownHeights, Gowanus and of course WillyBurg, Bushwick, B-Stuy, etc..) are incredible places to invest. It's just that one has to actually know what they're doing is all. I say F'k what TheRealDeal says... Prices are expensive if you try to buy a property off of MLS or from a Broker (Brokers are absolutely useless to anyone who really knows a local market.)
Buying off-market, buying at auctions, foreclosures, or buying fixer-uppers and renovating & flipping - especially now that we can borrow so easily thanks to crowborrowing sites like PatchofLand.com and others - is the best way to generate very respectable profits even in NY.
I won't even look at a NY (or Brooklyn) opportunity unless I can realistically expect a Net Cap rate of around 9 to 9.5% +
It's doable.
I was born and raised in the Hudson Valley just north of NYC. Twenty seven years as a business owner, builder/developer. I relocated to Charlotte NC this year for tat same exact reason. No freedom, too high overhead, poor economy in NYS. I held public office there. Gave up a run for NYS Assembly this year just to get out of a sunk ship! NYS has the the highest mass exodus of population in USA history over the last decade from a single state! It will continue and more than likely pick up speed!
Originally posted by @Ed Kahle:
I was born and raised in the Hudson Valley just north of NYC. Twenty seven years as a business owner, builder/developer. I relocated to Charlotte NC this year for tat same exact reason. No freedom, too high overhead, poor economy in NYS. I held public office there. Gave up a run for NYS Assembly this year just to get out of a sunk ship! NYS has the the highest mass exodus of population in USA history over the last decade from a single state! It will continue and more than likely pick up speed!
Yeah I'm also considering leaving as well. I don't even do any of my real estate in NY state, it's all virtual. I originally tried Orange County and Queens, but they both proved unsuccessful.
Ed
Not sure what the above has to do with New York City... The point is that New York City remains amongst the most desirable places to live on earth... For good reason: It's an awesome, fun place where opportunities abound. (Can't speak intelligently to upstate NY)
Real-Estate in New York City is and should be tricky - There's no rule that says Real Estate investing in NY is easy and should be for everyone.
But if one truly knows what they're doing and truly knows and understands their local market (be it Manhattan or Brooklyn) then opportunities exist and solid profits are possible.
Interesting article. I'm looking hard at the southeast as well even though I have a lot of knowledge of the Manhattan market. My principal reason is to reduce my risk.
Investing in Manhattan (not as familiar with the other boroughs) is inherently risky since you really need to count on appreciation to make the numbers work. Luckily, Manhattan has delivered over the long run, however it's difficult to make the numbers work simply on cash flow (the transaction cost and tenant friendly rules are no picnic either).
@Louis Leone Down south, in addition to a very pro-landlord environment, you also have time to do real due diligence on properties, unlike with commercial properties in Manhattan, where you get to see some pro forma financials and must close in 30 days.
Its all in the off market deals for NYC especially Brooklyn, Queens. There is plenty of $$$$ to be made on fix and flips, buy and holds, etc. I see it all the time. Smart investors will pay a commission/finders fee to those who are keyed into the off market and can bring them winning deals. Whether that is a tuned in agent, bird dog, wholesaler, etc.
What's a Bird Dog?
Ok - Someone just told me what Bird-Dog is... I usually just call them Buyers Brokers, but no need to split hairs..
Anyone who considers themselves to be a qualified Brooklyn Bird Dog should contact me ASAP. I have a lot of business to give you.
This what you mean Brooklyn R?
http://www.brownstoner.com/blog/2014/11/house-of-the-day-192-park-place/
Yup. Exactly. That's definitely one way to do it. (But not the only way).
I agree with @Jonathan Twombly and partially with @Michael G.
I live in Manhattan and I'm an agent here but also an investor in other states. Manhattan is a "safe deposit" for real estate investors and foreign buyers because of the strong market but steady income. You are very lucky if you find a building with a 9 CAP in the city. NYC is for investors who likes to hold for a long term and sell for a high margin; years later. Investors who prefers high ROI in short time prefers to deal outside of NYC. Definitely the price point is a bit high for me right now. That's why I'm investing in Fixer Upper in other states with high ROI and still earning high commissions for the deals I broker in NYC. Best of both worlds!
Most of the best deals come through brokers. I rarely hear stories about an investor meeting a seller and finding the best deals. Of course, when you are dealing in 100M+ deals, the community is small there so they call each other and trade properties.
@Michael G. I've sold some few off market deals in Brooklyn to local investors. Let me know if you are in need of a "Bird Dog" or local agent. I got a good one for you.
Believe me if I tell you London is worse!
@Jonathan where exactly in the Southeast are you looking at?
Something out of the article doesn't sound right.
"Calculations based on the fair-market rent for a three-bedroom home–$1,852 a month–show that building owners on the island get only 3 percent in annual gross yield."
In Manhattan we're talking apartments. Any three bedroom apartment in any not full out slum area (and there aren't many of those left), will likely go at least $3,500/month, and can go MUCH higher (five figures for better areas.) Of course purchase prices are also similarly high. But something in the article sounds way off.
@Jonathan Twombly agreed - there are money markets and deal markets. We live in a money market so we match up the money here with markets that have deals. That said, there are ways to make money in NYC but it's just not my business model.
I'll have to go with @Parish Pradhan - if you're in it for the short term and have a weak stomach, NYC might not be for you. :) But hey, if that's the case, NYC might not be for you for many other reasons...
NYC is pretty desirable and has longer term value. Not for everyone, for sure.
@Michael Wolffs has some great points too, even in BK in the desirable areas, it's mostly apartments. You'd have to do your research on rent control laws, etc. so multiplexes can have much thinner margins but there are still good deals to be had out there.
@Jonathan Twombly where in the southeast do you invest?
@Jimmy Moncrief Right now, it's all the Upstate in South Carolina, though we will start expanding into other markets in the Carolinas in the next year or two.
What is everyone's opinion on investing into upstate NY?
Starting even with Dutchess County property seems more affordable and is still easily accessible from NYC.
I just moved out of NYC but if I were going to invest there, I'd be looking hard at Spanish Harlem. Seems like Brooklyn, alphabet city, etc are already saturated. Spanish Harlem and the South Bronx are the next logical areas to go.
@David DuCille what do you think about Queens?
it's a lot like Brooklyn and those other neighborhoods in Manhattan but not quite as developed I imagine there's probably still some decent opportunities and Long Island City and Sunnyside but it's really all about having close proximity to Manhattan so people can get to work
Spanish Harlem and South Bronx you can get all the way to Wall Street on one train without having to transfer that's huge opportunities in my opinion my last apartment was on 114th between first and pleasant right near that newer shopping center I absolutely loved it it was still very neighborhood E and a couple of great local restaurants and shops if not for my fiance's opportunity to keep her in New York base salary and move to Tampa Florida we would still be living there