After a year of real estate activity unlike anything witnessed in this generation, all eyes are on property investment as a potentially lucrative way to enhance one’s portfolio. Have you perhaps been considering this very thing? Let Kobi Lahav give you an overview of investment in the heart of New York City, and then he invites you to reach out to him with any additional questions and specific needs you may have.
What exactly is an investment property?
Regardless of the methodology you choose to employ, the end goal is always the same- to see profitability from your investment. And for this reason, choosing the right property in the right place at the right time can mean the difference in achieving your investment goals or having to write off the property as a loss.
The right place
Clearly, in order for an investment property to be profitable, it must be in a desirable location. Therefore, it is important to take a look at the demographics of the area, the current housing situation, and rental costs.
Tribeca, perhaps best known for the annual Tribeca Film Festival, also attracts visitors from around the world. This borough has transformed itself completely in recent years, from once being an industrial zone in order to have easy access to the Hudson River to now boasting some of the most luxurious waterfront apartments in the city. Even with this touch of glamor, Tribeca lofts are sought after by families, as this community is considered one of the best places in New York to raise a family. Similarly to Soho, the majority of Tribeca residents rent their homes, and do so at prices three times the national average. Mixed-use properties are popular here, as both companies and families alike want to be a part of this vibrant and growing community.
As you are considering which of these neighborhoods is most favorable for your investment, look also at the accessibility to everyday resources from that property. Is it located near a subway station? Are there grocery stores, pharmacies, post offices, and other frequently utilized businesses nearby? How are the schools in the neighborhood? Depending on your desire to attract residents or tourists, you’ll need to ask some probing questions about the property and all it has to offer. Make your decisions with the ideal tenants in mind.
The right time
The housing sales market seems to be slowing down in response to the interest rate hikes the Fed has imposed over the course of 2022. This has led and will continue to lead, to some predictable results. Fewer people are willing (or able) to purchase homes as the rates continue to rise. This will force sellers to lower their asking prices and come to the negotiation table ready to make concessions in order to see their property sold. Those who are unable to purchase property right now will remain in the rental market, where increasing demand will drive rental prices up even further. If you find yourself in the fortunate position of being able to purchase investment property right now for the purpose of renting it out, you will benefit in two ways. First, you will receive generous monthly rent from your tenants, and second, your property will continue to appreciate, so if you do choose to sell it at some point in the future, you can anticipate impressive returns.
Beyond the timing of the housing market, consider the timing of your personal life. Have you consulted with your financial advisor about your readiness to make this investment? Are there life-stage considerations or expenses that need to be taken into account first, such as a child starting college, a wedding, large medical bills, or imminent retirement? Seek the advice of your financial advisor to weigh the impact your investment could have on each of these aspects of your life. Finally, how does purchasing an investment property, along with the tasks associated with maintaining and managing it, fit into your lifestyle and overall financial goals? Take the time you need to consider each of these questions carefully.
The right property
Investment properties fit into three broad categories, residential, commercial, and mixed-use.
Residential properties are rented out to tenants who will call your property “home” on a monthly or annual basis. These are typically condos, apartments, townhouses, and any variety of residential buildings. They can also be used for short-term vacation rentals when located in a popular tourist area.
Commercial properties, used by businesses for shops, offices, entertainment venues, and more, may require more investment in repair, maintenance, and improvements but typically generate greater returns for the investor than residential properties.
Mixed-use spaces are very popular throughout New York. These buildings have commercial properties, typically storefronts on the ground floor, suites of offices above, and residential apartments on the top floors. Purchasing a mixed-use space broadens the scope of your potential tenants and diversifies your earning potential.