I believe investing in the New York City property market is a bit like raising a child. It always seems to be growing quicker than you realize, you need to invest hundreds of thousands of dollars before you see any kind of return, and it demands constant attention. As the father of three, I like to think that understanding this analogy gives me an upper hand.
But while it’s true that I’ve been a pretty successful New York City investor, my success has nothing to do with my abilities as a parent. I’ve been able to gain and retain an advantage by keeping my finger on the pulse of the market at all times. If I know what’s happening in the market right now, I have a shot at predicting what will happen in the future. Based on what I’m seeing at the moment, here are three principles I’ll be using when buying investment property in New York City in 2020.
The 3 Most Important Things to Remember When Buying Investment Property in NYC
For the past decade, property prices in every borough of New York City have dropped significantly. This gives investors more opportunities to buy foreclosures and other distressed properties at an absolute bargain. Breaking into the NYC housing market is pretty easy right now and you can still find plenty of deals on properties, if you know where to look.
However, one of the biggest challenges of buying investment property in NYC in 2020 is navigating the buyers’ market. If you buy property in boroughs or neighborhoods that don’t have a high housing demand, you may get stuck maintaining a low-profit rental property that bleeds your savings dry.
To avoid this problem, I recommend following these three basic NYC investment principles in 2020:
1.) Avoid buying investment property in Manhattan.
2.) Familiarize yourself with the best up-and-coming NYC boroughs.
3.) Focus on the neighborhoods that offer the best possible ROI.
Once you know which neighborhoods have the greatest investment potential, you can start looking for distressed and fixer-upper properties to turn a fast profit.
Investing in NYC Property? Forget About Manhattan If You You Want to Grow
In 2020, I’ll be looking thoroughly at all of the other NYC boroughs before I think about turning my attention to buying investment property in Manhattan. While it may be fine for luxury developers backed by multi-million dollar companies, it’s certainly out of the reach of every independent investor I know.
Manhattan resale properties are currently at the lowest price they’ve been in many years. This means that, for the first time in ages, Manhattan is a buyers’ market. But, before you start buying properties in this luxe borough, you have to remember that a buyers’ market isn’t necessarily a good thing for independent investors like yourself.
In a buyers’ market, luxury developers can afford to invest in high-end properties at a relatively low price and hold the properties as rentals until the sellers’ market picks back up. Because they have a diverse investment portfolio and savings to fall back on, they usually make just enough money to stay afloat while they wait for the sellers’ market to come around again.
However, you don’t have this luxury. For first-time investors, buying property in Manhattan could be a costly and time-consuming mistake. Even if you can get a distressed property into fine rental shape within a few months without going over budget, the low rental income that comes from this property will probably never be enough to live on. You likely won’t even make enough to take out a mortgage to expand your inventory. In short, you’ll be stuck with a property that you can’t resell for quite a long time—perhaps even years—and that won’t make you a lot of money in the interim.
If you’re new to the investment game, 2020 should be about growing your real estate investing business. Focus on turning your investments from a sideshow to the main event. To do this, you need to look beyond Manhattan.
The Best Investment Bet: Look for Fixer-Uppers in Outlying Boroughs
As confidence in the housing market grows, the number of buyers increases. So too, then, does your competition. To avoid competing with deeper investor pockets while still achieving solid potential returns, I recommend looking towards Queens, the Bronx, Staten Island or some areas of Brooklyn for a property that has yet to peak in price. Nearby, buying investment property in New Jersey also offers a much more affordable market in which to find investment opportunities.
While you can still find some investment opportunities in the best emerging Brooklyn neighborhoods, the borough is becoming increasingly expensive to live in. Many first-time investors are being pushed out of the market as more experienced investors snap up the best properties. This is why independent investors are looking to Queens neighborhoods like Woodside, Jackson Heights, Sunnyside, Long Island City, and Astoria.
Northwestern Queens neighborhoods have especially great potential because buyers are eyeing properties that are close to Manhattan. More people are realizing that it’s cheaper to commute between Queens and Manhattan than it is to buy property in New York’s most notoriously expensive zip code. That said, property prices in northwestern Queens are already beginning to increase due to this housing demand, so now is the time to invest. Get in before the prices skyrocket and rent the property out until the market changes. Then, when it’s time to sell, you can still be fairly confident of getting a decent return.
You don’t need any extra competition. More competition leads to higher prices. That’s why I’d turn my attention to properties the bigger players aren’t interested in—”ugly” homes and fixer-uppers for sale. Whether you buy from a foreclosure auction, search online, or approach distressed owners directly, securing a distressed home and renovating it will help you to add value to the property for resale.
The Best NYC Neighborhoods for Buying Fixer-Uppers
Buying low and selling high or creating passive income in the interim will always be the name of the real estate investing game here in NYC and everywhere. While established neighborhoods such as SoHo and Tribeca have limited downside volatility, you’ll need deep pockets to buy, and you may have to hold the property longer than expected to optimize ROI. That’s why you shouldn’t discount the opportunities in surrounding up and coming New York neighborhoods that may offer more value.
Here are a few neighborhoods that are currently on my radar for buying NYC investment property:
LONG ISLAND CITY
Sometimes you have to follow the folks in the know. With the number of new construction projects cropping up in Long Island City, it’s apparent that developers feel this Queens neighborhood merits attention and investment. This neighborhood is close to Manhattan and has the same spectacular skyline views. Moreover, based on forecasts of cash flows from rents, net of taxes, maintenance, and insurance, Long Island City has great potential to enhance your ROI.
This neighborhood in north Brooklyn is one of the greatest success stories of 2020. Early last year, property prices and housing demand dropped in this area due to a proposed L train shutdown. However, after that project was canceled, demand for housing in Williamsburg increased dramatically. With a buzzing arts district and plenty of distressed residential properties to choose from, this is a neighborhood to watch this year.
We’re seeing more multi-family properties open up in this Brooklyn neighborhood in 2020. Many of these properties need to be rehabilitated, so you can find some incredible deals on properties other investors refuse to touch. What’s great about investing in multi-family properties is that if you choose to rent out the property until the sellers’ market improves, you can often make a decent ROI. Accepting rent from two or three families at a time helps you offset the cost of the property and the rehab work you put into it. Then, when the NYC sellers’ market is on the upswing, you can resell the property outright if you no longer wish to maintain the rental.
There are millions of people in the city that never sleeps. You can be sure that a number of them have their collective ears to the ground in search of somewhere to rest their head at night. To corner this market, however, you need to be able to source the leads in NYC on great houses to buy, renovate and sell or hold as your real estate investing business grows.
Invest in Yourself in 2020
In the same way that many parents read parenting books to help them successfully raise a child, the best investors spend time and money investing in themselves. If you can improve the tools and knowledge that you have at your disposal, you’ll gain an edge over your competitors. By far the best investment I ever made in my real estate business was becoming an independently owned and operated HomeVestors® franchisee. Joining the HomeVestors® franchise network gave me access to the nationally-known “We Buy Ugly Houses®” brand for marketing. Thanks to this, distressed owners come and find me.
If you are ready to find qualified leads on New York City investment property, give HomeVestors a call today.
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