How to Buy New Launch Property in Manhattan
Posted by Wei Min Tan on May 11, 2020
Manhattan, New York is a top destination for high net worth individuals globally seeking asset diversification through property investment. As a buyer’s broker, we represent foreign clients who are business owners, professionals and corporate executives who all have the same goal – investment stability from property in a top tier global city.
New launch properties are Condominiums
New launch property in Manhattan comprise a very small segment of the overall inventory. In this island of Manhattan, about 70 percent of inventory are rental buildings (where one cannot buy an individual apartment). 20 percent are Cooperative apartments that require board approval to buy/sell. The remaining 10 percent are Condominiums. 99 percent of new launch properties are Condominiums, the preferred property type for investors because there is no board approval required and the investor can rent out the property without restriction.
How are new launch properties sold
In Manhattan, new launch condominiums are marketed about 2 years before the property is ready to be occupied. The buyer visits a sales office (usually very nice), and looks at models of the kitchen, bathroom and living room. The key is to examine the quality of material used. To book a unit, the buyer puts down between 15 to 20 percent of the purchase price. The balance is only due at closing in 2 years’ time when the condominium is ready to be occupied.
There is no concept of “progressive payment” where the buyer pays and funds the construction process.
How to make money from new launch properties
The buyer of a new launch is getting a discount to the price of the completed property. The earlier the buyer books, the larger the discount. Prices increase as more units are sold and these increases are called Price Amendments. The very initial pricing is called Schedule A pricing. The reason for the discount for the earliest buyers is that the earliest buyers take on the most risk.
Depending on building and location, the discount to completed product is between 10 to 25 percent. This booking discount is a key reason why buyers get into new launch condominiums.
New launch condominiums have higher price per square foot but rent per square foot is also higher. The end result is that the rental yield is higher than Resale property.
Searching For New Launch Condominiums Yourself
The inventory in Manhattan (and rest of the U.S.) is public information. Websites like Streeteasy.com and Zillow.com will have information on all new launch property for sale. Keep in mind that the information on these websites are furnished by the seller’s agents which means you only see the good and never the bad/downsides. Nevertheless, these websites are a good way to get an idea of the prices and amenities of various new launch projects.
Working With A Buyer’s Agent To Filter Out the Good and The Bad
Retaining a buyer’s agent is the better approach. It is impossible for a buyer to determine what is a good deal from browsing photos online especially when these photos and videos are posted by the seller’s agents. As a buyer’s agent, we let clients know what are the upsides and downsides of each new launch condominium. For example, why a certain project sells out so fast while others linger on the market forever, how to capitalize by getting into the next hot neighborhood, what are the amenities that future renters will want… etc.
In Manhattan, the seller pays the entire agent commission covering both buyer’s and seller’s agents. The buyer’s agent still represents the interest of the buyer while the seller’s agent represents the interest of the seller. If a buyer doesn’t have a buyer’s agent, then the seller’s agent keeps the entire commission because it doesn’t have to be split with a buyer’s agent.
A good buyer’s agent will also bring in all the players and coordinate the entire process. This means bringing in an experienced mortgage banker, a lawyer and an accountant. When the time comes to rent out the property, we help investor clients market to renters, screen and manage the whole renter relationship on behalf of the investor client. And at time of eventual sale, we manage the whole sale process as well.
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
What Are The Downsides Of New Launches?
The main downside we observe is that at completion, the amenities are usually still not complete. This means the new residents are usually without a swimming pool or resident’s lounge for several months after move in.
For investors, there will be a large supply of similar investor units being put on the market for rent. Hence there will be competition for renters with other investor condominiums. For those intending to flip the property, there will be similar competition as well.
Ultimately, new launch condominiums are a good way to get into the Manhattan market. They are more expensive than resales, but the appeal of appreciation during construction, fancy amenities and higher rental yield can make this a great way to invest in Manhattan property.
1) 60 Riverside Blvd in Upper West Side. Negotiated phenomenal concessions from developer for client’s $3.2 million, three-bedroom purchase, earning a cover story in the New York Times, “Developers Cease Condo Incentives.” The development has 40,000 square feet of amenities and new projects in the area will increase entertainment and shopping options for residents.
2) The Sutton. Represented multiple buyers immediately after sales started, gaining most favorable pricing. Large casement windows, high ceilings and location close to top Fortune 500 companies.
3) 91 Leonard by Toll Brothers. Project was launched during a slow market but priced commensurate to market, gaining lots of interest. Brought client into sales office at the earliest and got the most favorable pricing and unit.
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Updated May 11, 2020