Best Places to Invest in Real Estate in New York for 2019
“But investing in New York real estate is always a good idea.”
I hear this time and time again from new investors, and then I try to talk them out of a particularly risky investment opportunity. As an investor, this myth is dangerous. Yes, your New York investment property may increase in value indefinitely, unless something catastrophic happens, but there’s a big difference between buying a single retirement property and running a real estate investment business.
When it comes to investing as a business, every new investment always comes with an opportunity cost. You could have invested that money elsewhere into a different property that may have brought better returns or offered scalability for the future. That means, for investors at least, there is such a thing as a bad New York property investment. Knowing the best places to invest in real estate in New York and what to look for can be the difference between success and failure in 2019.
Should You Invest in New York Real Estate: Market Forces to Consider
A recent report by one of New York’s leading real estate agencies sees the city’s slumping market picking up again around midyear. In the meantime, it’s a buyer’s market, with prices and performance determined by the neighborhood. How do I see my investing business looking this year? Just fine. According to the facts and figures I’m seeing, it’s time to buy—and plan to sell later. Here’s what’s going on so far in 2019:
Apartments continue to flood the market.
There are 20,000 new apartments expected to reach the market this year, and the market is already sluggish. But, that’s only part of the story. While the luxury segment is struggling with ever-longer selling times and continuing concessions, the market looks quite different in the more affordable segments. Most of the construction is outside Manhattan and far away from its Billionaires’ Row. There is stable demand for affordable housing, and even with the new apartments coming onto the market, that demand is likely to stay strong.
Landlord concessions are becoming rare.
The use of concessions is down throughout the city, with only 9% of rentals offering them in Manhattan and a similar proportion in Brooklyn and Queens at the end of 2018. This is a drastic change, considering that nearly half of all rental agreements had concessions as recently as April 2018. So, if you buy a rental property now, it looks like you’ll have it rented fast and at full price.
Rents are rising again.
In Manhattan, they’re not just rising, they’re setting new records. But, the biggest increases are occurring in the highest-priced neighborhoods. Elsewhere, rents have increased more moderately, again, varying strongly by neighborhood. Some more modest neighborhoods are seeing good price growth too. In Queens, for example, rents in Corona were up 25.5% year-on-year in January 2019.
Real estate prices are continuing to slide as this is going on. While these statistics might be a cause for concern for many investors-turned-landlords, they shouldn’t be. Quite to the contrary, with property prices falling and rents rising, it’s a great time to acquire rental properties. If the market turns around later this year as predicted, it’ll be a good time to sell too. Opportunities abound for residential investors looking to acquire and rent out affordable family housing in much of New York. For me, the following neighborhoods and boroughs are high up on my investment priority list as we go into 2019.
Betting Big in Brooklyn
Brooklyn has long been the trendy cousin to Manhattan, drawing in students, Millennials, and hipsters who either can’t afford to or don’t want to rent in Manhattan. Naturally, as the biggest borough by population and the second biggest by land mass, there are a lot of neighborhoods to choose from when it comes to investing here. In many ways, there has never been a better time since the housing crash to start investing in the Borough of Trees.
The coming L-train shutdown is likely to force new arrivals to the city to consider newer, up-and-coming Brooklyn neighborhoods. The formerly industrial Gowanus neighborhood is getting hipper all the time. It will undoubtedly see a continuing influx of new residents due to the L-train situation, and it has the perfect mix of people, restaurants and housing units to make it an investment hotspot. These are the perfect properties for investors of any experience to get their teeth into. With a tipping point of 6 years, if you get in now, you should see some real growth.
While you are looking for up-and-coming neighborhoods in Brooklyn, keep Bay Ridge in mind, too. It is another area that has the right kind of properties to get started investing with. Rather than luxury condos, Bay Ridge has a great mix of Colonials, Tudors and apartment buildings that appeal to both Millennials and families. In fact, the entire neighborhood feels more like a small town than part of a big city. With a short tipping point, it seems like the perfect time to dive in.
Quickly Finding Returns in Queens
The final quarter of 2018, the inventory of homes for sale in New York City rose to levels not seen since 2010, with an increase of 30.8% in Queens. This is good news for investors, who can practice their negotiating skills here. Because of the limited affordable housing options in many of New York’s other boroughs, many families and Millennials are turning to Queens. In many ways, it’s the perfect compromise. Queens is close enough to Manhattan to still feel connected to the city but offers residents a chance to raise families in a less urban environment. Great schools, fantastic transport links, and an ethnically-diverse community make living in Queens even more palatable.
Growing popularity is causing prices and competition to spike in some Queens neighborhoods. This is good news if you are positioned to capitalize on affordable properties in a previously underappreciated borough. Despite recent rises in price and the speed at which listings disappear from the market, investment properties can still be found for well under $500,000.
There’s no shortage of suitable neighborhoods in Queens, either. Maspeth, Middle Village, and Ridgewood were ranked among the city’s most affordable neighborhoods in a RentHop study. For fans of fixer-uppers, Queens has no shortage of distressed properties. It was hit hardest of all the New York boroughs by the 2008 financial crash and still has over 5,000 homes in foreclosure. As demand for affordable housing grows in the city, we can expect to see more and more people moving to Queens. In the meantime, when flipping houses in NYC, you can have a choice of distressed properties in up-and-coming neighborhoods in this borough.
Hitting it up in Harlem
Harlem is experiencing its own property renaissance. It is the least expensive Manhattan submarket but has some of the highest growth rates in the city. Because of its value, Harlem is a hotspot for renting. In fact, renters outnumber homeowners by four to one. Like all of Manhattan, Harlem has also seen year-on-year growth in average rent prices. I’d expect this growth to continue into 2019.
Even if you aren’t looking to rent out your investment property, Harlem has a lot to offer. Harlem’s enjoying a resurgence in popularity, particularly amongst Millennials. With a selection of great restaurants and an easy downtown commute, buyers and renters are flocking in numbers. I’d start my search for a Central Harlem investment property before branching out to the rest of the neighborhood. Price growth rates of 11.2% make Central Harlem very favorable if you’re looking to rejuvenate a distressed property and sell it one or two years down the line. So if you’re interested in finding real estate deals in NYC, this is an essential place to look. You should see significant home price appreciation on top of the value you add from your renovations.
Getting Investment Leads in the Right Places
This is shaping up to be a good year in New York for the real estate investor. Falling real estate prices give you more leverage in negotiations on purchases, and rising rents provide better income from properties you are holding. Knowing the best places to invest in real estate in New York is just one part of the equation. To be successful in this business, you’ll need to be able to get leads on good investment deals in these hot areas. As an independently owned and operated HomeVestors® franchisee, you can leverage the nationally-recognized “We Buy Ugly Houses®” marketing power to attract the attention of homeowners who need to sell fast.
Talk to HomeVestors today so that you’re ready to hit the ground running in 2019.
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