How to Invest in Manhattan Property
Posted by Wei Min Tan on August 18, 2020
How to invest in Manhattan property as a foreigner is a niche segment. This is because high net worth people globally see Manhattan as a way to diversify their asset portfolio. Meanwhile, few property agents in Manhattan, New York actually focus on foreign buyers.
Manhattan, New York is the world’s top investment property destination for investors looking to diversity their assets. In this article we summary key points on how to invest in Manhattan property. This covers whether it’s possible for foreigners to invest in Manhattan, how to view property for sale, property prices and investing in new development vs resale apartments.
Can foreigners invest in Manhattan property?
Yes, foreigners from all over the world invest in Manhattan because of the price stability. Manhattan and London are the world’s only two Alpha++ global cities. Given Brexit and political uncertainty in the U.K., Manhattan has a slight advantage as an investment destination compared to London.
Apart from banks requiring higher down payment from a foreign buyer, the requirements for foreigners are basically the same as for local buyers. There is no extra stamp duty or expenses imposed on foreigners, unlike in certain countries trying to curb inflow of foreign property investors.
Deal example: Client’s condo in Midtown East. We decided on this condo because of proximity to the United Nations and to top companies like Citigroup, Blackstone, Blackrock. Always rented out at premium rents.
Property for sale is openly available
In the U.S., all property for sale is openly available. Here in Manhattan, this is enforced through brokers’ membership with the Real Estate Board of New York (REBNY). REBNY’s requirement is that new property for sale needs to be uploaded onto the broker system, which feeds the various property websites, within 24 hours of getting the signed sale mandate from the seller. This means public property websites such as streeteasy.com, trulia.com will have all the inventory for sale.
Given this system of transparent property availability, there are usually two brokers in a transaction. The seller’s broker makes the property available on the website, markets the property and aims to get the highest price for the seller. The buyer’s broker helps the buyer navigate through the inventory, pick the right property and negotiate with the best interest of the buyer in mind. The roles of the seller’s and buyer’s brokers are covered in an agency disclosure form which brokers have to give potential clients.
What are prices of Manhattan property
For investment purposes, buyers tend to buy condominiums, which (i) does not require board approval, (ii) allows the owner to rent out as needed. Only about 10 percent of property inventory in Manhattan are condominiums. Condo prices average $600,000 for a studio, $1.2 million for a one-bedroom, $2.2 million for a two-bedroom, $3.8 million for a three-bedroom, $8.2 million for four-bedroom and up.
While condos make up 10 percent of the inventory, cooperatives are about 20 percent of inventory. Prices of coops are less than condos because (i) each transaction requires board approval, (ii) the owner does not have flexibility in renting out the apartment as needed. For comparison, coop prices average $425,000 for a studio, $720,000 for a one-bedroom, $1.3 million for a two-bedroom, $2.4 million for a three-bedroom, $5 million for four-bedroom and up.
The remaining 70 percent of inventory comprise rental and mixed use buildings. An investor cannot buy an individual apartment in these. Rather, the investor needs to buy the entire building. The entry point for a small building is around $6 million and goes up from there.
Read more: Manhattan property review
Deal example: Client’s condo at 111 Murray, green building opposite is the Goldman Sachs headquarters. Excellent Tribeca location with strong rental demand.
Buying new development vs resale property
Investors can buy new development or resale property. With a new development, a buyer typically books the apartment at the pre-construction stage. It takes 2 years to build and the finished property is delivered when the project is complete. Obviously, new development will be more expensive than resale because of higher construction costs, newer material and better amenities. Since Manhattan island is totally built up, there is very few new development projects relative to existing resale property.
Resale property means buying from another owner. The ratio between resale to new development transactions is about 5:1. There are upsides and downsides to both. New development property is brand new and have nice amenities. Downside is the 2 year waiting period and buyer usually needs to pay higher closing expenses. A resale property has lower price than a new development hence better value. But amenities are not as nice as that of a brand new building.
Deal example: Our foreign client booked this new development condo at the pre-construction stage and waited 2 years for completion. Prices appreciated at completion and that’s the driver for investing in new developments.
What We Do
Manhattan property broker focusing 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
Article updated Aug 18, 2020
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