Strategy: Investing in a full-service, high demand building
Posted by Wei Min Tan on August 22, 2019
When the investment objective is rental income, a full service, high demand building is important. Full service means amenities such as building staff (concierge, doormen, porters), residents’ lounge, roof deck, fitness center. Tenants are attracted to amenities and rents are higher as well.
There are two ways to achieving this as described below:
Contact: tan@castle-avenue.com
Deal example: Client’s “value buy” investment condo in FiDi with double height ceiling close to World Trade Center. Always rented to high quality tenants.
Value buy
A value buy means buying in a full service building that is underpriced relative to similar buildings in other neighborhoods. Quality is the same. Price is lower. This may be because of oversupply, neighborhood is not as developed etc.
There should be an upcoming anchor that would bring up property prices. Financial District is an example of a value buy neighborhood. Prices are lower because of oversupply during the 2009 recession and the neighborhood infrastructure is not as developed. It used to be that during weekends, the neighborhood became empty. This is no longer the case as new buildings were built and restaurants opened.
Within FiDi, the key then is to select the right building with the full service, high demand profile.
Blue chip buy
This means buying in a neighborhood that is already expensive and in high demand. For example, Tribeca and West Village. Neighborhood infrastructure (nice restaurants) are all there. In West Village, the trees make the neighborhood feel like a village and you forget you’re in Manhattan.
Deal example: Client’s “blue chip” condo in Tribeca. Premium prices but rents are also at a premium.
The buyer is paying a premium relative to Manhattan prices because the demand is already strong. There is no anxiety about when prices will appreciate to market. Prices may be 30 percent higher than with a value buy but rents are higher as well. Vacancy period would be lower.
Our role as a buyer’s broker is to recommend the 3 to 5 apartments that makes sense as an investment depending on strategy. This will be based on the (i) neighborhood, (ii) building and (iii) apartment line within the building. Knowing just the neighborhood or building is insufficient. For example, the strategy would not work if buying in a good neighborhood and building but an apartment line that has an inferior exposure.
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
Notes: This article was updated August 22, 2019
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