3 things to consider before investing in Manhattan property
Posted by Wei Min Tan on June 4, 2021
What are the top 3 things to consider if you want to invest in Manhattan property? Investing in property abroad is a bold move. Investing in one’s own neighborhood is already super challenging. To make the leap to investing internationally means having to consider so many new rules, regulations, expectations etc.
Well, you’ve taken the first step, which is reading this article. I tell clients that over the 2-3 months in our property shopping relationship, I will be their guide and teacher. By the end, they will know more about Manhattan property than 99 percent of Manhattan residents. It’s not a joke. Just because people live here doesn’t mean they view property every weekend. In fact, locals may not even view property every few years. It’s only those who are actively looking who will learn the market. This is regardless of whether the buyer is local or foreign.
Condo vs Coop
Majority of apartments in New York City are Cooperatives. This means you own shares in the building as opposed to real estate title. Coops are unique to the New York City market (not U.S. market in general). Coops require board approval and a board can reject a transaction without reason and without consequences. In addition, Coops have restrictions when renting out and are focused on people who are buying to live in the apartment themselves. This is why Coops are less expensive than Condos.
With a Condo, there is also a board approval process, but a Condo board operates on different rules. If a Condo board rejects a transaction, the board would need to buy up the apartment from the seller. This is never going to happen because doing so entails using the building’s reserve funds to buy up an apartment. As such, Condo boards will approve 99 percent of the time. Condo owners are also free to rent out the apartment as they wish.
From an investment perspective, a Condo is the way to go.
Deal example: Client’s 3 bedroom apartment with dual exposure in Tribeca. Location opposite Goldman Sachs headquarters (the green building opposite).
The market is open
In the U.S., the inventory is open to everyone. You can view the same inventory as a broker by going to a website like streeteasy.com, zillow.com or even the search page of our website. There is no need to engage multiple brokers to get access to property inventory. Just go online. The value of a seller’s broker is to present the property for sale in the best possible way to get the highest price for the seller. Meanwhile, the value of the buyer’s broker is to guide the buyer objectively on what is a good buy amid the sea of inventory out there and negotiate the best deal for the buyer.
Weimin’s commentary on, Negotiations, Be Nice!
Deal example: A luxury kitchen adds tremendous value when attracting tenants.
Taxes. Know them well by having the right people in your team. Most international buyers are clueless when it comes to tax implications. For example, there are tax abatements, capital gains tax, income tax, estate tax, withholding tax, stamp duty (called something else in New York). Very important to have the right tax advisor who is experienced with international clients.
Our clients have all become very well versed with Manhattan tax implications. Most people spend a lot of time and energy on a few thousand here and there, but just let it go when it comes to tax strategizing, which entails much larger sums.
Weimin’s article, Legal and tax tips when buying Manhattan property
Hope the 3 considerations helped in focusing the research a little by putting context into what is important. There is too much information out there. Our challenge today is needing less of the right kind of information.
What We Do
We focus on global investors buying Manhattan condos for portfolio diversification and long term return-on-investment.
1) Identify the right buy based on objectives
2) Manage the buy process
3) Rent out the property
4) Manage tenants
5) Market the property at the eventual sale
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