New York City is one of the most expensive real estate markets in the world, and it regularly tops lists of the most expensive markets in the United States. It is known for its powerful tenants' union and difficult eviction process. What then makes NYC real estate investment attractive? Why do so many invest in NYC real estate market?
The truth is that NYC real estate investment is not one thing. There are radical differences between over-priced and over-built luxury areas and the relatively affordable neighborhoods where people compete for apartments and homes. And there are neighborhoods where people want to live and pay a premium to do so. That’s why all real estate is, ultimately, local.
NYC real estate is most likely to be a profitable investment when rented out over a long holding period. If you are looking to make a profit, you don’t want to buy the most expensive property on the NYC real estate market and expect to make a good profit on rents. Perhaps you are looking for a slightly different hold-over, an investment property in NYC that you might move into or sell at retirement in the future.
If you looking to buy a home, you should consider a thing called a tipping point. Nationally, the median tipping point is around two years but in New York, it’s 5.8 years. The higher a home is priced, the longer you’ll need to stay in it to make the investment pay off relative to renting.
Strong job growth is another factor for investing in NYC real estate. New York City has been the driving force behind employment gains in New York State. Job growth in the City has outpaced the State (and the nation) every year since the end of the recession. New York City has become less dependent on the securities industry for economic growth. Other industries such as tourism, tech, health care, and business services are driving job growth and reducing the unemployment rate to record lows.
NYC Real Estate Investment: 6 Best Neighborhoods For Investment
New York City is composed of five boroughs. Each borough is coextensive with a respective county of New York State. Here are the top neighborhoods in NYC for investing in real estate. These neighborhoods have been selected from all the five boroughs.
The Upper East Side or UES is a desirable area where almost no one can afford to buy real estate. It is a neighborhood in the borough of Manhattan in New York City. One publication found that the Upper East Side had a tipping point of 30 years. The tipping point is a measure of how long you have to live there to be better off buying than renting. Yet the area is home to a surprising number of relative bargains, and a good place for investing in NYC real estate.
The building boom of luxury apartments has led to a glut of inventory. This is why the average home price remains around 1.8 million dollars, the price it was five years ago. And there are people trying to move properties to get out from under the mansion tax. If you think this area is going to rebound, this is a great time to buy.
But which neighborhoods are ripe for NYC real estate investment? Yorkville is experiencing a boom because the Second Avenue subway has just arrived. Yet it remains less expensive than “blue chip” Upper East Side neighborhoods. Expensive is relative when you want to invest in NYC real estate.
For example, the apartments west of Lexington Avenue go for 2,500 to 3,000 dollars a square foot, while those in Yorkville are closer to 1,500 dollars a square foot. The entire Upper East Side is, on average, safer than most of New York City. And because it is so expensive, you can find many amenities for families with children.
Inwood is more affordable than other Manhattan neighborhoods. For example, buying is a better choice for potential residents after five years. For comparison, the tipping point for all of Manhattan is twelve years. Another point in favor of this area is that it isn’t seeing a wave of new development that hurt home values in Murray Hill. All of this is because Inwood is located at the very tip of Manhattan.
Why would we suggest NYC real estate investment in a community that is literally on the edge of New Jersey? The area is low-rise. It is a mix of single-family homes and apartments up to eight stories high. They are proposing zoning changes to allow much taller buildings, but that hasn’t happened. This results in a shortage of affordable high-density apartments and steady appreciation. The home prices in Inwood have gone up 14 percent in the past five years.
And if you buy property now that could be redeveloped into high-density housing, you will see significant returns on that investment. If high-density development doesn’t come, the numbers still make sense for real estate investors looking to invest in New York City. The median home costs just over half a million dollars, while median rents are a little over two thousand dollars a month.
The area won’t lose its green space. Inwood Hill Park is known for its somewhat natural forest, and it is laced with walking trails. Yet you can easily commute to downtown, as long as you aren’t trying to get to the East Side. A side benefit of the Inwood area is the close-knit community and its generally family-friendly atmosphere.
Washington Heights is another Manhattan neighborhood that provides some great real estate investment opportunities. It is seeing steady appreciation because it is more affordable than the alternative. The average person can justify buying over renting if they will live there for more than five years. It is also a great opportunity for NYC real estate investment because you can find condos that cost less than a thousand dollars a square foot.
Another point in favor of Washington Heights is that there are tax abatement condominiums that offer excellent rental rates with a lower overall tax bill. On top of that, there are several expensive colleges in the area. That results in a larger than average renter population that is almost insensitive to rental rates. Because there are several such schools in the area, you don’t have to worry about a diversified real estate portfolio out of fear that the student market will collapse if the main campus closes.
The Washington Heights area is benefiting from slow, steady appreciation. The average two-bedroom home sells for 650,000 dollars; these properties sold for 550,000 dollars five years ago. That’s twenty percent appreciation over five years or four to five percent annual growth. It is also far better than the flat property prices for Manhattan as a whole.
Brooklyn is one of the more affordable areas in the New York City metro area. The average tipping point for Brooklyn is 4.17 years. And Bay Ridge is cheaper than average, though that will soon change. We’d recommend buying real estate in Bay Ridge before the inventory is snapped up by first time home buyers being advised to buy here.
Why invest in Bay Ridge? Bay Ridge has a suburban feel. That’s because the long commute to Manhattan prevented dense development. It is going to see a boom in valuation because it now has direct ferry service to Wall Street. This is in sharp contrast to the temporary deals you might find in brownstone neighborhoods like Brooklyn Heights, Clinton Hill, and Fort Greene.
Property has become very cheap in these areas because of the uncertainty about the Brooklyn-Queens Expressway as well as the fact many don’t want to live there during construction. We don’t recommend buying apartments for as little as 100,000 dollars that may be hard to rent out and may not sell for much in the future. Brooklyn's Bay Ridge is much more stable.
The average two-bedroom apartment sells today for a little over half a million dollars, 100,000 dollars more than it would have five years ago. That’s roughly ten percent annual appreciation for five years. Bay Ridge received a C from Niche.com on its crime and safety, but that’s close to the NYC average. Its public schools get a B. It has better than average amenities for parents aside from the fact they can afford to live here. All these factors make it a good neighborhood for NYC real estate investment.
Bedford-Stuyvesant in Brooklyn has a number of advantages over other Brooklyn neighborhoods in New York City. The older housing stock tends to be cheaper to buy, and you can dramatically increase its value by renovating it. The area is starting to appreciate as high-end cafes and stores move into the area. And the area offers far lower property tax rates. This is on top of the areas in New York City where you can find cheaper real estate for investment.
For example, homes in Bedford-Stuyvesant have an average cost of 1.4 million dollars, while the same classic brownstone costs 2.5 million in Williamsburg and 3.5 million in Cobble Hill. This means there is plenty of room for appreciation. A side benefit of NYC real estate investment in Bedford-Stuyvesant is how many of the properties have already been subdivided, allowing you to pay the same price for a single-family home while enjoying multi-family rental income.
This area has several points in its favor for those considering NYC real estate investment. It is a slowly appreciating, stable market. For example, it has seen roughly 16 percent appreciation over the past five years. That’s two to three percent appreciation a year for the building itself. Yet you can rent out a single bedroom apartment for a little over two thousand dollars a month, while two-bedroom yields 2,500 a month in rents.
Long Island City is arguably the best real estate investment opportunity in Queens, New York. The average home price is around 1,200 dollars a square foot. This means the average home costs more than a million dollars. However, the east side of the neighborhood costs much less. Eastern neighborhoods in Long Island City cost just over half a million dollars and less than eight hundred dollars per square foot.
The area is seeing appreciation as people move here as they’re priced out of Brooklyn. However, the area doesn’t have the same access to the Long Island Rail Road. This is why appreciation remains strong but is not skyrocketing. For example, the average home price in the area has risen from 640,000 dollars to just over 900,000 dollars over the past five years.
That’s nearly ten percent growth year over year for five years. But there is still room to go higher. Is Long Island City a good place for families? It is given a B by Niche.com on crime and safety, and that’s pretty good for New York City. Schools are a B, as well.
Is NYC Real Estate A Good Investment?
As with any real estate investment, the more you know about the location, the better off you’ll be. NYC real estate investment has a track record of being one of the best in the nation. That is why it is no surprise that despite being an expensive real estate market, a lot of people want to buy investment properties in NYC. There are abundant opportunities & neighborhoods to choose from when investing in New York City.
The best neighborhoods for NYC real estate investment are not just relatively affordable. They’re considered desirable to New York City's residents and seeing appreciation in property values as a result. They allow you to charge market rents regardless of the property’s value, and you aren’t taking a risk with the money you’re investing. Before you begin, it is important to have a well thought out plan in place.
Let’s learn more about New York City and find out why one should invest in this real estate market. These things make NYC real estate investment stand out from the rest of the nation.
What Makes NYC Real Estate Investment Attractive To Investors?
NEW YORK CITY'S DEMOGRAPHICS
NEW YORK CITY'S ECONOMIC & JOB GROWTH INDICATORS