When my foray into the real estate arena began, I never thought I’d be doing homework on the best New York City neighborhoods to invest in. Back then, my mind whirred with all sorts of excitement, ideas, and concerns. My primary worry revolved around affordability: What could I spend without tapping into the slush funds I’d accumulated for retirement and the unexpected curveballs that life invariably threw at me? But I was also worried about figuring out where to buy. I suddenly remembered advice from my father-in-law, a seasoned real estate investor himself: “Everything will fall into place if you put enough elbow grease into it. The first rule of this game is location—just like the old saying goes.”
How true it was then, and how true it still is to this day. I learned quickly through my 20 years in the business that I struck my best deals in desirable neighborhoods. I got burned a few times trying to find value where it didn’t exist—areas with little economic opportunity, underperforming schools, and subpar restaurants, shops, and entertainment venues. After those missteps, I stuck to one basic tenet: buy homes in neighborhoods where I would want to live myself. My focus then leaned toward finding homes that needed a little tender loving care and were priced substantially below market value.
I’d always been mesmerized by New York City. It was 90 minutes from home—a great place to visit but I really didn’t think I could live there. There was one thing I was sure of, however. From what I’d gathered, the Big Apple’s real estate market continually blossomed. I’ve had some success with my small-town buys, rehabs, and sales, and I now wanted to stop swimming in the same puddle and jump into the ocean. I had the financial resources but didn’t know where to start. So I recalled the words of my father-in-law, which basically amounted to the guideline that location is everything and started doing some digging on market conditions. Here is what I’ve found: these five best New York City neighborhoods to invest in present some great opportunities to yield an optimal return on investment. Let me share where they are.
The Best New York City Neighborhoods for Investment
There are lots of ways to formulate a real estate investment strategy; I can play it safe or I can take a chance. In Manhattan and its surrounding locales, playing it safe means shelling out big bucks for prime properties in high-rent, high-value neighborhoods. If I want a little more risk, I can buy in neighborhoods on the rise but, in the most expensive city in the United States, that strategy will still cost me. In what follows, I’ll share both scenarios with you: established neighborhoods and those with a ton of potential.
As values and rents in Manhattan were skyrocketing, many city dwellers found refuge a few miles north, in the Bronx. Prior to the financial crisis in 2009, the Bronx had a reputation for unsafe streets and urban blight. However, as pricey Manhattan housing projects shooed away some would-be homeowners, they turned an eye toward Brooklyn, Queens, and now the Bronx. Median home values remain some of the lowest in the five boroughs. Compare the median list price per square foot to Manhattan and it’s apparent that significant buying opportunities rest on the horizon.
But home values don’t paint the entire picture of Kingsbridge’s draw. The neighborhood offers quite a few amenities and attractions. The Bronx Zoo and New York Botanical Gardens sit a stone’s throw away, and America’s national pastime takes shape at the home of the New York Yankees, arguably one of the world’s most recognizable pro sports franchises. For families who are focused on finding a good school, there are ten public and private schools within the 15-block area bordered by W. 225th St. to the south and W. 240th St. to the north. And, for those who travel to Manhattan for work, a 30-minute commute via subway connects Bronx commuters to the W. 96th St. station, on the edge of the Upper West Side. If you can find a good rehabber here, you likely won’t have a problem selling it for solid returns.
A perennial favorite neighborhood for the hip and well-heeled is Chelsea. It has some of the most expensive real estate on the island of Manhattan. Most of the homes for sale in the neighborhood are two-bedroom, and the average two-bedroom apartment in the area has seen a 24.1% increase over the past five years. If you can find an undervalued property in this area, you’d be near certain to garner solid returns upon rehabbing and selling at these fair market values.
The appeal of Chelsea is easy to see. Chelsea offers peaceful residential pockets with a variety of architectural styles, from historic brownstones to sleek, modern high-rises, surrounded by an equally broad array of culinary and shopping experiences. With its abundance of transit options, it is a popular evening and weekend destination for residents of all parts of the city and an easy area to commute from. It is home to High Line Park, created from an elevated railroad line, the festive Chelsea Market emporium and Chelsea flower district, art galleries and the Chelsea Piers sports complex. It is also an easy walk to the West Village for more entertainment options. If you’re pockets are deep enough to buy here, you won’t likely have any trouble on the sale-side.
A bit east of Midtown between Park Ave. and the East River, Murray Hill has witnessed a growth spurt of its own but still represents one of the better values in Manhattan. Despite an increase in median price of 66% in the past five years, one-bedroom homes in the neighborhood list for about $972,200 on average, somewhat less than the median for Manhattan. Average rental prices for properties in Murray Hill come in at $4,022 monthly, sandwiched between comparably priced areas such as Kips Bay and Stuyvesant Town. Renters hold a price advantage over buyers as the average mortgage payment for a similar unit registers at $6,845. That means a buy-and-hold strategy makes sense here.
If there’s one thing to be said about real estate trends, developers typically spend a lot of time researching which neighborhoods merit the next target for new construction. Thus, if one follows the dollars spent by these developers, Murray Hill might represent a future boom in value. The area between First and Third Avenues looks to be the hottest spot for new luxury units. The Lindley, completed in mid-2018, features 74 units ranging from studios to three-bedrooms. The American Copper project on First Ave. features a three-story skybridge that connects the 48- and 41-story towers, with a 75-foot long pool at residents’ disposal. Finding an undervalued property in these areas—if you can afford it—holds the potential to bring good returns.
Manhattanites who seek to escape the escalating prices on the island have already started their exodus across the bridge to Brooklyn. Williamsburg continues to be a popular destination but Bushwick remains a competing locale, perhaps owing to the spillover effect from its neighbor to the northwest. Bushwick’s median listing price, according to Realtor.com, is $1.2 million, in contrast to Williamsburg’s $1.4 million. Renters also get a better deal in Bushwick, which is mostly made up of two- and three-family row homes. The average rental price in the Brooklyn neighborhood fetches $2,470, about $330 less than New York City and about $530 less per month than bordering Williamsburg. Here’s another opportunity for a buy-and-hold strategy.
Once an industrial beehive, many of Bushwick’s former distribution centers and factories have been transformed into spaces for artisans and partygoers. One of the village’s centerpieces, The Bushwick Collective, houses a sprawling outdoor display of graffiti and street art. Many other art galleries call Bushwick home, and bars and restaurants dot the Knickerbocker Avenue thoroughfare. Many other independently owned boutique businesses fill the spectrum while a number of parks and playgrounds round out the appeal for families. Consequently, residents really don’t need to make the trip across the Brooklyn Bridge for entertainment but commuters do take advantage of the “L” line for work in Manhattan.
Upper East Side
Some spots in Manhattan might be on the upswing but the Upper East Side has already reached a pinnacle of sorts. Of the properties listed for sale in February 2019, you can scout out a one-bedroom co-op for under $300,000 on E. 74th St. or you can tilt the scales the other way and spend near $70 million on a seven-bedroom. However, if your niche involves the purchase of properties in the under-$750,000 range, the most recent changes to the tax code may create a buying opportunity, as homeowners look to unload unaffordable properties that may also be decreasing in value. Prior to 2018, interest on indebtedness up to $1 million could be deducted from taxable income and that threshold has now been lowered to $750,000. Homeowners using the deduction to help offset the cost of borrowing in the $750,000 to $1 million slot, could be looking elsewhere.
On the Upper East Side, there is lots to choose from in that range. Inventory is high and prices recently dropped to the lowest they’ve been in a decade. If your timing is right, you have the financial wherewithal, and you have the time to buy and hold, an excellent chance may exist to benefit from a price decline and the inevitable growth historically seen in the Manhattan market.
A quick view of the recent news on Upper East Side real estate reflects the neighborhood’s incomparable desirability. A veritable Who’s Who of entertainment, business, and cultural luminaries live in this exclusive locale. Naturally, if names of this magnitude seek to live here, it speaks to the quality of amenities and attractions in the locale. Museums, upscale shops, nightlife, Central Park—all there for the taking. However, don’t let the exclusivity suggest that a purchase may be out of reach. The inventory is stuffed with homes for sale that are priced between $250,000 and $500,000. The sales activity moves at a frenzied pace, though. The deals are out there. You just need to find them.
Navigating the Manhattan Real Estate Market
Speaking of finding deals, you may not want to fly solo when ferreting out property leads. When I purchased my first property in New York City, the nuances of knowing where to buy and how to develop a strategy made me dizzy. Even though I had experience buying, renovating, and selling properties, I needed help. Location was one thing, but understanding concepts such as how to evaluate rehab costs and potential returns required further education. I turned to HomeVestors®—Now, I can leverage the proprietary property valuation software, ValueChek™, and nationally-recognized “We Buy Ugly Houses®” marketing that has helped independently owned and operated HomeVestors® franchisees like me buy over 100,000 houses since 1996.
Contact HomeVestors today to see how you can land a first-class seat in one of the premier real estate markets around the globe.
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