Stereotypes are like old habits, they die hard. It didn’t come as a surprise, then, that my old man was up in arms during a recent family gathering when my niece mentioned that she was moving to Harlem. It took a lot of explaining from the Millennials at the table to make Pops understand that Harlem isn’t what it used to be. As it turns out, many of my niece’s friends had already made the move north of Central Park and were loving their new community. It got me thinking: If these twenty-somethings were making the move to Harlem, are other Manhattanites too? Should I seriously consider investing in Harlem real estate in the year ahead? That’s when I did a little digging, and here’s what I found.
REASONS FOR INVESTING IN HARLEM REAL ESTATE
The market has calmed down since its meteoric takeoff a decade ago, but Harlem remains Manhattan’s most undervalued neighborhood. The average price per square foot for townhouses shot up by 171% between 2009 and 2017 and the neighborhood also boasted a 15% average growth rate in that time, according to industry research. The retail sector took notice, too, led by the much-hyped opening of Whole Foods. As other retail outlets continue to move into the area and the middle- class looks toward Harlem to escape Manhattan’s crazy housing prices, demand in Harlem remains poised for growth.
From my point of view, Harlem’s real estate investing potential looks very promising for 2019. Here’s how I see it:
- Rental income potential. When I look at the stats, I see long-term potential for rental income in Harlem. Unlike some other Manhattan neighborhoods, Harlem’s rent prices have mainly remained steady this year. But, that is set to change. You may have already noticed some of the ‘mom and pop’ grocery stores already shuttered as trendy brands like Trader Joe’s and Fairway move in. The biggest changes coming will be near Lexington and 125th Street where recent rezoning will allow new housing developments and the train station is getting revamped. Both will inevitably drive up rental prices, making Harlem the place to look for distressed properties to buy and hold this year—before you are priced out.
- Job growth spurs housing demand. Let’s face it, commuting is a drag for New Yorkers. But, soon residents in Harlem may not have to because new jobs are coming to the neighborhood. Developers are building 1.7 million feet of retail, office and commercial units in East Harlem, and that will be complemented by 30,000-square-foot of East Harlem Media Entertainment and Cultural Center. Thanks to rezoning, new construction can rise much higher than in the past, so we can expect the concentration of workplaces to continue to rise as well. More jobs mean more demand for housing, and you can be the fill to fill that need.
- The foreclosure rate remains high. The foreclosure rate is declining city-wide, after peaking in 2017, but Harlem has the highest foreclosure rate in Manhattan, and the northern section of East Harlem has one of the highest rates in the city. As the property tax burden increases due to progressively rising assessments, a spike in foreclosures is possible again. Property taxes in New York are rising faster than wages can keep up, potentially putting homeowners—especially at the lower end of the salary spectrum—at risk of losing their home.
But you shouldn’t be looking at the foreclosure market to find an NYC real estate investment deal. This is an opportunity to buy off-market properties at even lower prices, put in some sweat equity, and hold them as rentals until the market evens out. There’s one problem I can’t look past, however. With rentals currently comprising such a large percentage of the housing stock, getting a foot on the ladder could prove difficult. Lucky for me, I have a trick up my sleeve.
GAINING AN INVESTMENT FOOTHOLD IN HARLEM
With the low number of resident-owned homes, many investors could struggle to find the right opportunities in Harlem. Thankfully, I don’t see it being a problem for me. As an independently owned and operated HomeVestors® franchise owner, I’m able to leverage the nationally-recognized “We Buy Ugly Houses®” brand and marketing campaigns to promote my business. The upshot is that homeowners who are ready to sell come to me. In the coming year, I’m confident about finding suitable investment opportunities that offer the best potential returns.
If you’re thinking of investing in Harlem real estate, consider giving HomeVestors® a call to find out what the brand can do for your business too.
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