Best real estate investment options in Manhattan, New York
Posted by Wei Min Tan on June 3, 2021
Manhattan, New York real estate is definitely one of the world’s most secure and reliable asset classes. Our clients globally buy Manhattan real estate as a means of diversifying their portfolio and as hedge against uncertainty. This tangible asset class provides stable appreciation and also rental income to investors.
So what are the investment options with Manhattan real estate?
Contact: tan@castle-avenue.com
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Real estate investment trust (REITs)
A real estate investment trust is similar to buying a stock. In this case, it’s stock in a company that invests in commercial Manhattan real estate. With a REIT, the majority of income needs to be distributed back to investors. This makes it similar to owning real estate directly compared to merely investing in stock of a Fortune 500 company. REITs is the easiest way to invest in Manhattan real estate and the most liquid as well.
Downside is the investor doesn’t benefit from the leverage opportunity as with direct investment. ie the investor doesn’t get to put down 25 percent equity and borrow 75 percent, which effectively leverages the investment.
Hotel condos
A hotel condo is where the investor buys an apartment within a hotel. The hotel then acts as property manager and rents out the condo and manages the rental on behalf of the owner. Investors like this because it solves the main operational concern which is, “Who is going to manage the property?”
Management fees of a hotel operator are quite high. The daily rates charged to guests are high as well, much higher than the equivalent daily rate of someone renting a regular apartment.
Deal example: Our investor client’s dual exposure corner apartment with water views and only 1 block from the World Trade Center. This will benefit from the upcoming Whole Foods in Financial District as well.
Residential condos
Residential condos is where most of our clients invest. This is similar to buying a condo in any other country where the owner owns the property outright and is free to rent it out to renters. The appreciation of residential condos is the most stable and secure. One reason is that people always need a place to live and residential condos are only about 10 percent of Manhattan’s real estate inventory.
The investor benefits from leveraging through a mortgage, and owning a condo is very simple (when compared to owning a building).
Weimin’s article, Historical price trend of Manhattan condos.
Deal example: A high end kitchen with Subzero fridge and stone countertops is attractive to tenants. When selecting a condo, these wow factors are important.
Small buildings
Small buildings refer to mixed use or multifamily buildings with 2-4 walk up apartments. A mixed use building means there is a storefront at the ground level and apartments above. Multifamily means every unit is an apartment with no storefront on the ground level.
With a building, the owner is responsible for the roof, facade, mechanicals and therefore a lot more responsibilities. There is diversification of rental income because there are multiple tenants paying rent. Downsides are the much higher entry point (starts at around $7 million in Manhattan) and the many more repairs needed relating to the structure of the building.
In summary, there are many options when investing in Manhattan real estate, and each has its upsides and downsides. With the popularity of Amazon where people don’t shop at retail stores anymore and working from home, we feel that commercial real estate is having a tougher time. Residential still has very strong demand. Manhattan residential property is currently a seller’s market because of the very low interest rates and pent up demand.
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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