Among my investment pursuits, I truly enjoy trading stocks. For me, it’s become more about doing my own research lately since the last moronic broker I trusted let most of my IRA sit in cash while the stock market roared off to new highs. As a lot of my friends and family touted their gains at a recent gathering I sat there lamenting and feeling stupid about putting my money with an idiot who couldn’t pick a winner in a one-horse race. It’s just as well. Digging into the fundamentals and competitive advantages of companies put matters in my own hands. If I make some poor decisions, the blame rests with me and no one else.
That’s the way it started out with my investment properties. I relied solely on my own instincts to find the most promising deals. Real estate investor opportunities in New York City can sometimes get a bit complex. I sifted through a few different methods to access one of the largest markets in the world. It took some trial and error before I finally found the best bang for my buck.
Which New York City Real Estate Investor Opportunities Are Winners?
I’ve tried my hand at three different methods to make money in the Big Apple. At times I felt intimidated but I never backed down. Solid return on investment hinged on my ability to educate myself and seek out some sage advice. Like the Beatles and Joe Cocker said: I got by with a little help from my friends. Let me share the pros and cons of the three real estate investment opportunities that I tried.
Real Estate Investment Trusts (REIT) Approach
If you don’t have a lot of cash but want to jump in the fire with the big guns, choosing REITs over private real estate investment allows an easy path to inexpensively take advantage of the burgeoning Big Apple property market. The great thing about these investments is the ability for anyone to participate in the buying, leasing, and selling of a vast number of office buildings or multi-unit condominiums, among other properties. REITs are available for purchase by qualified investors who can trade these securities on the New York Stock Exchange.
With REITs, you’re relying on the expertise of professional money managers who research and select what they feel are the best properties for investment. In return for outlays as low as $1,000, you’re receiving the guidance of seasoned pros. Yields on these pooled trusts are often quite competitive but the chance at significant ROI often pales in comparison to buying and holding or selling individual properties. However, if you’re looking to start small, REITs may just be the way to go.
You can certainly buy an apartment anywhere in NYC or individual homes in places like Manhattan or Brooklyn—but be sure to have a significant amount of cash to get started. Properties in these locales don’t come cheaply. Median home prices in Brooklyn approach $775,000 and you’ll likely need anywhere from 5%-20% of the purchase price for a down payment. If you have the resources, buy rental homes in established neighborhoods to achieve the best cap rate in NYC. With high demand and buyers entering the market from all over the world, the competition is formidable but the rewards can be significant.
With prices continuing to grow rapidly in Manhattan and its surrounds, you must realize that the chance always exists for a bubble. This phenomenon occurs when demand and investor confidence drives up home values to a point where supply begins to exceed demand and those values subsequently drop precipitously. Thus, buy-and-hold proponents must be prepared to weather market downturns while perhaps extending their target dates for selling a property. And, in the meantime, you’ll need to carefully adhere to the ever-changing local tenant’s rights laws, or risk losing potential capital to fines, fees, or worse—legal costs.
You might liken a rehab-to-sell strategy to a visit to your doctor. Get in fast, start the treatment plan, and get out faster. The less time you can spend on buying, renovating, and selling a home, the higher your return on investment could be. By finding an undervalued property and flipping it quickly, you may bear less risk of facing a pullback in the real estate market. The key is to secure the right deal at the right price point.
With the hottest neighborhoods in New York City filling up fast and climbing in value, you should explore purchases in NYC’s up-and-coming neighborhoods where anxious sellers may be looking to unload distressed properties quickly. East New York and the Bronx stand out as two locales where median home values register about half the price of what their high-end counterparts command. You can expect a smaller financial outlay upfront, preserving funds to use in the renovation process. Since you’re buying low into a rising tide, you’ll bear less risk of a poor outcome.
Finding the Best Investment Opportunity to Achieve Solid Results
After rolling the dice on these three options, I stuck to the buy-and-renovate route when building my real estate portfolio. With a decent sample size under my belt, I realized my highest ROI through buying and selling distressed homes. The difficulty I faced was finding hot deals in the first place. I couldn’t gamble on overpaying for blighted properties so I became an independently owned and operated HomeVestors® franchisee. Perhaps you’ve seen the nationally-known “We Buy Ugly Houses®” campaign in print, on billboards, and on the web. Distressed NYC homeowners have too. When they need to get out of an “ugly” situation, they know who to call: me. As a result, there’s no shortage of opportunity for me to invest in NYC real estate.
Contact HomeVestors today to see how you can get some of the best leads for buying the right investment homes at the right price.
Each franchise is independently owned and operated.
Prior to joining HomeVestors, I spent 20+ years as a senior corporate executive. The money was good but I just no longer enjoyed what I was doing. I had been looking at HomeVestors for a couple of years but they were not offering franchises in N.J at that time. I had zero experience in real estate investing and was impressed with the training and support HomeVestors offered. HomeVestors opened up the NJ market in February 2007 and I started in July. Best decision I ever made. We got off to a fast start and have purchased a couple hundred properties since. We could not have done this without the training, systems, marketing and support HomeVestors provides. We haven’t looked back since. We became Development Agents in 2010 and really enjoy working with new franchisees when they come on-board and helping them build a successful business.